AICPA president and CEO Barry Melancon is calling for the Financial Accounting Foundation to set up a separate standards board for private company accounting.
The Blue Ribbon Panel on Private Company Standard Setting will meet in the AICPAs offices in New York on Oct. 8 and we anticipate based on the preliminary conclusions during prior meetings it will vote to recommend a new model of financial reporting that will generate truly differentiated standards for private companies, Melancon said in a statement Monday. Crucial to the effective implementation of that recommendation is establishing a separate standard setting board under the Financial Accounting Foundation to provide a comprehensive solution to the problem of private company accounting. This has been a long time coming and I believe the case for a separate private company standards board under the oversight of the FAF is stronger than ever.
The FAF currently oversees the Financial Accounting Standards Board, which sets standards for nongovernmental entities such as publicly traded and privately held companies, and the Governmental Accounting Standards Board, which handles the standards for state and local governmental accounting and financial reporting. However, much of FASBs work has been devoted to the needs of public companies and their auditors. It has largely left work on private company standards to groups like the Private Company Financial Reporting Committee, which is a joint committee of the AICPA and FASB. However, the Blue Ribbon Panel, which includes members of the AICPA, FASB, and the National Association of State Boards of Accountancy, has been meeting in the past year to examine whether standards need to be better tailored toward the users of financial statements of private companies.
One of the original goals of the panel was to provide recommendations on the future of standard-setting for private companies, including whether separate, standalone accounting standards for private companies are needed (see Panel to Deliberate on Private Company Standards).
The International Accounting Standards Board has produced its own streamlined set of standards that can be used by private companies, International Financial Reporting Standards for Small and Midsized Enterprises, or IFRS for SMEs. However, the standards are not widely used in the U.S., as IFRS has not yet been approved by the SEC for use by U.S. public companies.
While many private companies in the U.S. do not strictly adhere to U.S. GAAP, the idea of having a separate set of standards for private companies is not overwhelmingly popular. In a WebCPA poll last month asking readers whether private companies should have their own set of accounting standards, 55 percent said no, 42 percent said yes, and 3 percent were not sure.
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