The Financial Accounting Standards Board is still aiming to preserve its job as the standard-setter for private company accounting, while expanding its outreach and consultation with representatives of privately held businesses.
The board met last Thursday and Friday with the Private Company Financial Reporting Committee at FASB’s offices in Norwalk, Conn. The PCFRC is a joint committee of FASB and the American Institute of CPAs. At the meeting, they discussed issues such as the recently released exposure draft on goodwill impairment testing (see FASB Proposes New Rules on Goodwill Impairment Testing).
“We were highly complimentary of the board for taking on this project and completing it in a short period of time,” said PCFRC chair Judy O’Dell. “We believe that it will be definitely be of advantage to private companies if this goes through the way it’s currently written.”
Her committee also had a long conversation with some of the private company staff on FASB’s various initiatives related to private company accounting. O’Dell noted that there are now staff mebers embedded within each of the various projects who are supposed to present the private company viewpoint. The PCFRC has been having conference calls approximately every two weeks with these FASB staff members on some of the detailed issues, such as the discount rate on leases, in several of the ongoing projects.
“That’s working very well in terms of giving the staff the input they need and keeping us up to date on what’s going on with these very fast-paced projects,” said O’Dell. “They’re doing a lot of outreach to constituents to try to get some input.”
She noted that FASB is trying out a new way to solicit input on its exposure drafts so people don’t have to write a long comment letter with answers to various questions posed in the exposure draft. For the exposure draft on goodwill impairment testing, there is now an online feedback form where constituents can briefly say what they like or don’t like about the proposed standard. Their feedback will automatically be routed back to FASB.
“We’re really encouraging people to try this out,” said O’Dell. “This particular exposure draft is not particularly long. Even if you’re in favor of the [proposal], just send a comment letter like, ‘Hey great, we really appreciate this.’ That would be all they needed to do. This is the first one they’ve done as kind of a test to see how well people respond to it. We’re going to do a push out to the state societies so we would just encourage people to go on and try it out and make their comments. If it’s working well, FASB will continue it for all of the projects. The problem is that most of the private company constituents are not following these projects in great detail. They don’t have the time to sit down and write a long thoughtful comment letter when there are six or seven questions involved, and this way it’s a quick ‘I agree with this, I don’t agree with this. Here are some comments and so forth.’”
The PCFRC also had a lengthy conversation with FASB on leases. “The board has not addressed related-party leases, and we were just discussing how those might be handled,” said O’Dell. “We wanted to make staff aware that there might be problems in implementing the standard the way it is now when you have related-party leases.”
The PCFRC also met with the Financial Accounting Foundation representatives on Friday to talk about their private company working group. Some of the trustees were on the phone and they updated the PCFRC on some of the outreach they have been doing to follow-up on the recommendations of the Blue-Ribbon Panel on Standard Setting for Private Companies on setting up a separate standards board for private company accounting. The committee also had a two-hour session with most of the board members to discuss certain aspects of the major projects, including goodwill, leases, financial instruments, and revenue recognition, along with the transition and effective dates.
“Each of our task force leaders briefed the board on our thinking on some very narrow-scope issues of these various projects as they move them to completion,” said O’Dell.
The FAF trustees told the committee about how they are proceeding with the Blue-Ribbon Panel recommendations, but no decisions have been made yet (see Blue-Ribbon Panel Recommends Private Company Board). They talked about some of the changes that have been made internally and the fact that the FAF trustees have been doing outreach to constituents before they meet and issue any exposure draft to the public. O’Dell noted that the staff has also been doing much more outreach to private company constituents lately in response to the Blue-Ribbon Panel report.
“The changes made in the internal processes of FASB have been nothing short of amazing,” said O’Dell. “We were highly complimentary of the board and staff on how well this is working out.”
At a conference on financial reporting at Baruch College last Thursday, FASB chair Leslie Seidman also said the board is trying to be more responsive to private companies. She noted that the FAF has been evaluating the structural changes recommended in the Blue-Ribbon Panel report, while the board itself moves ahead with implementing some of the short-term recommendations for taking into account private company concerns.
“Regardless of the outcome of that structural recommendation that has been made, the FASB is moving forward with a number of specific process changes that are all designed to be more responsive to our private company stakeholders and get a better handle on what are the unique needs of the users of private company financial statements and the preparers of their financial statements, and see if we can have some common ground that we can use to move forward on and be better able to address those concerns,” said Seidman. “For example, we have dedicated a number of staff members whose sole focus at this point is to understand the concerns that are being expressed by the private companies and the users of their financial statements, and make sure those views are brought to the board on a real-time basis for us to consider as we make decisions about various technical matters.”
Seidman noted that FASB has also held a number of roundtables designed to elicit the views of private companies and the users of their financial statements. “We’re trying to hold those around the country to make sure it’s easy for people to participate,” she added.
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