Members of the ruling Council of the American Institute of CPAs at their meeting here passed a resolution supporting the development of generally accepted accounting principles for privately held, for-profit entities and instructing the institute's management to work with accounting rule makers to develop a process for developing such standards.
Following a discussion Monday morning that reviewed the findings of a task force on the issue of GAAP for private, for-profit entities, Council members overwhelmingly passed the motion supporting the development of GAAP for those entities "based on concepts and accounting that are appropriate for the distinctly different needs of the constituents of private company financial reporting." The motion also instructs AICPA management "to work with the Financial Accounting Foundation and the Financial Accounting Standards Board to identify and implement a process to develop GAAP for privately held, for-profit entities that would result in recognition measurement and disclosure differences, where appropriate, from current GAAP as applied by public companies."
"This is not the end of the process, it is merely the beginning," AICPA Chairman Bob Bunting told Council members after the vote. "You have voted to begin what may be a very historic and very important process."
Noting that there would be "some urgency in the process," AICPA chief executive Barry Melancon said that the board will give Council members a "significant update" at the Fall meeting as to where the process stands.
Task force chairman James Castellano noted that any standards that might result would not be a requirement for all private companies. "This would be market-driven," he said.
Findings of the task force that studied the issue over the past year showed that while the attributes of GAAP reporting had high value to all constituents surveyed (users, business owners and financial managers, and practitioners who work with private, for-profit entities), "too many GAAP-specific requirements lack relevance or decision usefulness."
The majority of all of those groups that had an opinion believed that it would be "useful if the underlying accounting in GAAP reporting were different in certain circumstances for public versus private companies," task force research found.
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