Private company stakeholders have never been in a better position to have their concerns addressed in the standard-setting process, according to Billy Atkinson, the chair of the new Private Company Council: “We have the wind in our sails.”
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The council was created by the Financial Accounting Foundation last year to work with the Financial Accounting Standards Board to recommend exceptions or modifications to U.S. GAAP for private entities. “Just the existence of the PCC -- and, hopefully, its credibility -- will be a cultural change that will affect all of the FASB’s technical agenda processes,” Atkinson said in an interview with Accounting Today. “It’s a cultural change within the FASB organization, to which we appertain. That is a big difference today. It puts a little wind in our sails, as opposed to wind in our face.“
“The change is greater or more formal attention to the private company domain of stakeholders, emphasizing users as well as preparers and auditors,” Atkinson continued. “The way the PCC is constructed now really will help us work toward the same goal, and will prevent us from being too far back in the shadows, if you will, of the issues as they evolve, as well as issues from a look-back standpoint.”
The PCC met for the first time in December 2012, and will meet five more times this year, in February, May, July, September and November. As part of its process, the council will identify issues that it wants to focus on, ask the FASB staff to gather information and canvas the latest thinking on the issues, and then use that information to determine whether to proceed to issuing recommendations for exceptions or modifications to GAAP. It has already identified four areas for consideration in its first meeting. (See “Private Company Council Holds First Meeting.”) It will also serve as a resource for FASB and the Emerging Issues Task Force on a forward-looking basis.
“You know, the auditor has to explain to the client what the standard is and what it means, and the ‘why’ of a standard, and over the years, particularly the more recent 15 years of so, it became hard to explain the why. Hence the frustration,” said Atkinson, who worked with private companies for four decades as public accountant, and has served both on the Texas State Board of Public Accountancy and as chair of the National Association of State Boards of Accountancy. “I have become accustomed to the growing angst in the private company marketplace with the inability of auditors, or preparers as they talk with their boards or with their users, often having difficulty in explaining the why for an accounting standard.”
That said, he does not see a need for a separate set of standards for private companies. “I believe that we owe it to ourselves to try to keep standards uniform, so that in the education process, we don’t have to have this side of the room and that side of the room when it comes to accounting education,” he said. “By that, I mean I don’t subscribe to the bifurcation of standards between public and private. I do recognize that there have to be differences, there will be some differences, some modifications, some exceptions for private companies -- as we have had in the past -- but they’ve got to each be individually evaluated and determined.”