A trustee working group at the Financial Accounting Foundation plans to release its proposals in the next few weeks for changing the structure and process of the Financial Accounting Standards Board’s oversight of standards for private companies and nonprofits.
Teresa Polley, president and CEO of the Financial Accounting Foundation, which oversees FASB and the Governmental Accounting Standards Board, indicated the proposals for structural changes at FASB should be out by the end of September or early October. There will then be a 60-day or longer comment period to give constituents a chance to provide feedback, and any changes in the structure of the board would likely happen in 2012.
The proposals come in response to recommendations from a Blue-Ribbon Panel on Standard Setting for Private Companies, which issued a report earlier this year calling for the establishment of a separate standard-setting board for privately held companies.
However, the overhaul actually dates back prior to the establishment of the Blue-Ribbon Panel last year by the FAF, the American Institute of CPAs and the National Association of State Boards of Accountancy. When John Brennan was elected chairman of the FAF in February 2009, according to Polley, the trustees began doing more outreach to private companies and their stakeholders.
“The private company issue has been discussed for decades,” Polley said in an interview with Accounting Today staff on Wednesday. “When Jack Brennan was appointed, we conducted a listening tour. We went all around the country and listened to various constituents about what do they think of the FASB, what do they think of the GASB, and also what do they think of the FAF, which frankly most of them had never heard of. But one of the things we did hear was that private companies felt they were not getting enough consideration in the standard-setting process. So the first step in the process was to create the Blue-Ribbon Panel in conjunction with the AICPA and NASBA. They went through the process, which took approximately a year. They gave their findings to the board of trustees at their February meeting. Following that, the trustees created a working group of about half a dozen or so trustees and some senior staff at the FAF, and we’ve been conducting outreach since then.”
Polley noted that the FAF working group met with representatives from small CPA firms and the Big Four, along with preparer groups, investor representatives, large and small banks, and all of the FASB advisory groups.
“The trustees are now pulling all of this input together, doing their own thought process and what I would anticipate is that by the end of this month or early next month will be coming out with their proposal on potential structural changes, process changes, to the standard-setting process, to more fully consider non-public entity issues,” said Polley.
She noted that the recommendations will encompass not only standards for private companies, but also for not-for-profits.
“Remember, the Blue-Ribbon Panel focused on private companies, but the trustees focused on getting information both on private companies and on not-for-profit organizations,” said Polley. “So their proposal was going to look at both. Once they issue that, I would anticipate a comment period of at least 60 days, and possibly longer than that to enable constituents to have the time to comment.”
Polley noted that the FAF has received a large number of unsolicited comment letters, even though it has not yet issued any proposals for comment. The letters are mostly in response to the Blue-Ribbon Panel report. The American Institute of CPAs has been encouraging its members to send in comments to the FAF supporting a private company board (see Letter-Writing Campaign Supports Private Company Accounting Standards Board). The AICPA said last week that nearly 2,500 letters have been sent to the FAF so far, most of them supporting the creation of a separate board for setting private company standards distinct from FASB. Many of the letters used a “toolkit” on the AICPA site.
Polley indicated that if the changes are made, they won’t happen until next year. “The trustees will consider the comments that they have received and then make a decision as to whether they will implement or make changes, and that would be the final step obviously,” she said. “If changes are made, they will be implemented some time in 2012.”
The prospects of setting up a separate standards board for private companies at the FAF are uncertain, however, as there are concerns about other groups gaining control over the standard-setting process.
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