The American Institute of CPAs has launched a new letter-writing campaign aimed at pressuring the Financial Accounting Foundation to set up a separate standard-setting board for private company accounting.
The new campaign came in response to the Financial Accounting Foundation’s recent proposal this month to establish a Private Company Standards Improvement Council that would be able to identify, propose and vote on improvements to U.S. accounting standards for private companies (see FAF Proposes New Council for Private Company Accounting Standards). But any of the recommended changes would still be subject to ratification by the Financial Accounting Standards Board, which is overseen by the FAF. The AICPA instead wants the FAF to set up a separate board for private standards, in keeping with the recommendations of a Blue-Ribbon Panel report.
Paul Stahlin, the outgoing chairman of the AICPA, said the new council would be subject to the “veto powers” of FASB under the FAF’s proposal. During the AICPA’s Fall Meeting of Council in Phoenix on Monday, he urged AICPA members to continue to push for a separate board for private company standards in their comments to the FAF on the proposal.
The AICPA has been spearheading a letter-writing campaign to the FAF in support of a separate board since the Spring Meeting of Council in May, during which AICPA president and CEO Barry Melancon predicted that the FAF would propose something similar to the Private Company Standards Improvement Council (see Melancon Urges Fight for Private Standards Board). That letter-writing campaign commented on the Blue-Ribbon Panel report. Now the AICPA plans a new campaign to comment on the FAF trustees’ proposal.
“Again we begin a significant campaign to make sure FAF sees the depth of support for an autonomous board,” said Stahlin. “As leaders of the profession, please help write the last chapter of this book. We call upon you to send a comment letter to FAF expressing your disappointment that it does not propose an authoritative standard-setter for private companies.”
AICPA director of accounting standards Dan Noll compared the proposed council to FASB’s Private Company Financial Reporting Committee, which is chaired by Judy O’Dell. “If you strip away the bells and whistles on this, what we’re looking at is a redo of the Judy O’Dell committee,” he said. He noted that according to the proposal the council would have 11 to 15 members and would be chaired by a FASB board member, while the PCFRC has 12 members and is chaired by a FASB staff member.
Noll contended that the FAF proposal “rejects” what the Blue-Ribbon Panel called for: to set up a separate, independent board to set differences in GAAP for private companies. Noll noted that the FAF trustees only include two people from the private company world, and he added that the proposal did not contain any suggestions for restructuring the FAF to provide more private company representation among its own trustees.
He discussed how the ratification process for changes in private company accounting would work under the proposal. “The way [FAF] thinks about this proposal is that FASB will be involved in the process from soup to nuts,” said Noll. “If FASB is involved in the process, chances are the process isn’t going to be so quick as it otherwise could be.”
Noll and incoming AICPA vice chairman Richard Caturano, the managing partner of McGladrey’s Boston office, presented a “point-counterpoint” rebuttal to the FAF proposal. “Everybody I’ve talked to in the private company world thinks that we should have a separate board,” said Caturano.
They dismissed the FAF argument that having a bifurcated board would create two separate sets of accounting standards, with a “Little GAAP” versus a “Big GAAP.” Caturano dismissed this as a “cheap shot.”
“Who would want to be on the Little GAAP end of that?” he asked. “I don’t know of any of our clients who would want to say, ‘We use Little GAAP.’”
He noted that the Blue-Ribbon Panel wanted one set of GAAP with differences for private companies. Caturano also dismissed arguments that having a separate board would create confusion in the profession, and that it would take years to achieve differences for private companies. He argued that “not having FASB’s involvement be the biggest time-saver of all.”
Caturano also deprecated FASB’s recent efforts at greater outreach toward private company constituents. “A lot of that is recent and it’s just not enough,” he said. “The FASB is still not representative enough of the private company financial reporting constituency. The public company pressures are not going to go away. They’re only going to increase, especially as we push toward IFRS convergence.”
Caturano said the AICPA and the state CPA societies would continue their campaign for a separate board to address the concerns of the smaller private companies, asking members to voice their support. The AICPA plans to use its Web site, publications, social media, video webcasts and an online petition to push for the changes. There will be laptops at all the AICPA conferences to make it easier for members to send their comments to the FAF in support of the AICPA position. “It’s a big issue for us and a big issue for our members,” he said.
Caturano also disagreed with arguments that the AICPA wants to gain control of standard-setting for private companies. “We do not want to control private company financial reporting,” said Caturano. “We want FAF to control it through a separate board without FASB involvement. If you hear that it’s just the AICPA’s way of gaining control of private company financial reporting, we’ve got enough on our plate.”
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access