A total of 33 state CPA societies representing over 275,000 CPAs have written letters so far to the Financial Accounting Foundation or passed resolutions urging the FAF to create a new accounting standard-setting board for privately held companies, according to the American Institute of CPAs.
A trustee working group at the FAF has been studying the recommendations in a Blue-Ribbon Panel report on standard-setting for private companies and is expected to release its proposals for changes in the standard-setting process and structure in the next few weeks (see Terri Polley on Private Standards, IFRS, and Changes at FASB and GASB and FAF Group Plans Changes in Accounting Standard-Setting).
The AICPA has been pushing for a separate board for private company accounting standards independent of the Financial Accounting Standards Board, under the oversight of the FAF, which is the parent organization for FASB and the Governmental Accounting Standards Board.
“In today’s business world it is extremely rare to get an overwhelming consensus supporting one idea,” said AICPA president and CEO Barry Melancon in a statement. “However, the responses from the state societies are another example of the CPA profession's overwhelming support for an independent board to set differential standards for private businesses. The message is clear: FAF must do this now or run the risk of missing our best opportunity to make GAAP relevant for private companies.”
The following states have sent letters to the FAF or passed resolutions in support of the creation of a separate board: Alabama, Arkansas, Colorado, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Wyoming.
The FAF noted that it has been talking to practitioners as well as other stakeholders.
“The FAF Board of Trustees has made a concerted effort to seek out the opinions of a wide variety of constituents—users, preparers and practitioners—on the best way to improve the standard-setting process for private companies," said FAF spokesman Robert Stewart. "Frankly, those constituents have expressed opinions that are remarkably diverse. The Trustees are committed to making a decision that ultimately will produce the best results for financial reporting in the United States."
In 2009, the AICPA, the FAF and the National Association of State Boards of Accountancy created the Blue-Ribbon Panel on Standard Setting for Private Companies. In January, a majority on the panel voted to present a report to the FAF calling for the creation of an independent board, not subject to veto power by the FASB, to create standards for privately held businesses.
Nearly 3,000 letters have been sent to FAF from the private company constituency, supporting the creation of a separate board to develop differential standards for privately held companies. Many of the letters, however, were generated from a “toolkit” on the AICPA Web site.
FASB has begun developing a differential framework for private company accounting standards in response to the report, and created a special Web portal for private company users and nonprofits to give them easier access to relevant information. FASB has also expanded its outreach to private company constituents by dedicating staff members to meet with them at roundtables around the country, and it added a member to its board from the private company world, Daryl Buck, CFO of grocery retailer Reasor’s Holding Company (see FASB Chair Seidman Expands Private Company Outreach).
Nevertheless, the AICPA is pressing on with its efforts to establish a separate board ahead of the release of the FAF’s proposals.
“The boards of more than half of the country’s state CPA societies, representing more than a quarter of a million CPAs, agree that a systemic problem exists,” said AICPA chairman Paul Stahlin. “After over 30 years of research by numerous diverse and independent groups, the only conclusion is that an autonomous standard-setting body under FAF to set differential standards for privately held companies must be created.”