A joint initiative by FASB AND AICPA is seeking feedback on proposed enhancements to the FASB's standard-setting procedures that would determine whether the Board should consider differences in accounting standards for private companies within Generally Accepted Accounting Principles.

Under the proposal, the FASB would implement certain improvements to enhance the transparency of its standard setting process for private companies and consider input from private company constituents. To help, FASB and the AICPA are sponsoring and funding a joint committee to serve as an additional resource to ensure the views of private company constituents are incorporated into the standard-setting process.

The initiative document has some interesting language beginning with. "The objective of the change is not to create a separate, new set of GAAP requirements for private companies." That indicates there won't be two GAAPs.

It also states that, "FASB will articulate within the basis for conclusions section of standard-setting documents (both Exposure Drafts and final Statements) the basis for its decisions on whether differences should exist for recognition, measurement, disclosure, transition, or effective date for private companies." This seems to represent a departure from past practices. Previously, its seemed special rules or delayed effective dates for private companies were instituted at the end of the process, almost as an accommodation for the added burden that would be imposed on private companies. Now the implications with regard to private companies would be an important factor considered in the whole process.

In that regard, the initiative points out that this new committee's recommendations to the Board will be based on user needs and cost-benefit considerations. The noise, as of late, in part because of the added obligations imposed on smaller public companies and the tickle-down effect, has been on the "cost" side of the cost-benefit considerations, and user needs got very little attention. In order for private company to become a relevant factor in GAAP, there must be the right balance set between user needs and cost-benefit considerations. Particular care by FASB and AICPA must be taken in that regard.

Details of the initiative are at www.pcfr.org.

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