Accounting & Auditing

Financial statement users have long debated the differing information needed for users of private company financial statements as opposed to those prepared for public companies. In December 2009, the Financial Accounting Foundation (FAF), the parent organization of the Financial Accounting Standards Board (FASB), formed a trustee working group to study whether changes to the standard-setting process would offer substantial benefit to the users of private company financial statements. The trustee working group formed the Blue-Ribbon Panel on Standard Setting for Private Companies, sponsored jointly by the American Institute of Certified Public Accountants and National Association of State Boards of Accountancy. The panel included stakeholders from all major user groups, including investors, bankers, auditors, owners, CFOs and others.

The panel issued its report in January 2011, detailing the findings of its review of the standard-setting process. The panel did not review individual accounting standards to determine how useful they are to private company financial statement users. Instead, the panel focused on the needs of private company financial statement users and how modifying the current standard-setting process could better meet those needs.

The panel recommended forming a separate board under FAF to work alongside FASB in setting accounting standards. FASB would continue to promulgate generally accepted accounting principles for public companies, but the new board would determine whether newly issued pronouncements would apply to private entities. The new board also would be charged with reviewing existing accounting standards to identify accounting principles placing undue burden on private companies and to mitigate the impact of those standards.

The panel’s full report can be found at the FAF website.

FAF has reviewed the panel’s report and is currently deliberating its recommendations. As part of the deliberation process, FAF has sought additional input from key user groups in the form of roundtable discussions. While not everyone can participate directly in these discussions, you can submit your comments on the panel report directly to the FAF. Comment letters should be addressed to:

Board of Trustees
Financial Accounting Foundation
401 Merritt 7, P.O. Box 5116
Norwalk, CT 06856-5116

Comments also can be emailed to FAF at presidentsdesk@f-a-f.org.

Accounting standards provide a common set of criteria for providing comparable, useful information for financial statement readers. Changes to these standards can have dramatic effects, not only on accounting but also on operations, lending and investment. In the coming months, FAF will be making decisions that could radically affect your business and the environment in which it operates. Clearly articulating your needs in a letter to the Board of Trustees is a great way to have your voice heard.