The Financial Accounting Foundation's Board of Trustees has voted to restructure several of its own committees, along with oversight of the Private Company Council, disbanding the Private Company Review Committee that has been overseeing it.
The restructuring will take effect in January 1 of next year. It aims to improve their overall effectiveness and efficiency, based on recommendations from a FAF Trustee working group along with the management of the foundation, which oversees the Financial Accounting Standards Board, the Governmental Accounting Standards Board and the Private Company Council.
In 2017, there will be a new Appointments committee, which includes the same appointments responsibilities (for the FAF Trustees, Financial Accounting Standards Board, Governmental Accounting Standards Board, Private Company Council, Financial Accounting Standards Advisory Council, and Governmental Accounting Standards Advisory Council) as the current Appointments and Evaluations Committee.
The Audit and Finance committee will retain all the responsibilities of the current Audit and Compliance Committee and assume all finance responsibilities from the current Finance and Compensation Committee.
A new Human Resources committee will assumes all evaluations responsibilities from the current Appointments and Evaluations Committee, along with all the compensation responsibilities of the current Finance and Compensation Committee. The Finance and Compensation Committee will be disbanded at the end of this year.
The existing Standard-Setting Process Oversight Committee will retains all its responsibilities, plus it will assume all the responsibilities of the current Private Company Review Committee, including oversight of the Private Company Council. The Private Company Review Committee will be disbanded on Dec. 31, 2016.
The current Executive Committee will keep all its responsibilities, including governance, by-laws, personal activities/conflict of interest policies, and Board of Trustees assessment. The Board of Trustees approved the initial charters of each of the committees at a meeting Tuesday and all the charters will be available on the FAF website on Jan. 1, 2017.
Private Company Council Oversight Changing
In addition, the FAF Board of Trustees approved the transition of oversight responsibility for the Private Company Council from the Trustees’ Private Company Review Committee to its Standard-Setting Process Oversight Committee. The SSPOC will assume PCC oversight responsibilities starting Jan. 1, 2017. At that time, the PCRC will be disbanded.
The FAF Trustees established the PCC in 2012 and it acts serves as the main advisory body to the Financial Accounting Standards Board on the treatment of private companies for accounting standards that FASB is considering for its technical agenda. The PCC also proposes to the FASB alternatives to existing GAAP to address the needs of private companies if they are needed.
The FAF created the PCRC as a special-purpose committee to oversee creation of the council, along with the initial interactions and activities between the PCC and FASB, and to ensure FASB engages in adequate consideration of private company financial reporting issues throughout the cycle of its standard-setting process.
Last November, after a three-year review of the PCC, the FAF Trustees decided the PCRC would begin transition of its oversight responsibility this year to the SSPOC, and the SSPOC would assume oversight responsibility of the PCC no later than the end of 2017.
“The PCRC has had a critical role in fostering the PCC’s success, and in facilitating its positive working relationship with the FASB to help make private company financial reporting more useful and relevant for users of private company financial statements,” said FAF chairman Charles H. Noski in a statement. “In the past year, the PCRC and SSPOC worked closely together to ensure a smooth transition of oversight. The FAF Trustees believe that the SSPOC is ready for the responsibility to evaluate the adequacy, transparency, independence, and efficiency of the processes employed by the PCC and the FASB in establishing and improving financial accounting and reporting standards for private companies.”
To ease the transition, three members of the PCRC (Diane M. Rubin, Eugene Flood, Jr. and Terry Warfield) also serve on the SSPOC. Other SSPOC members also bring private company experience, affiliation, or perspectives to the process. The FAF Trustees plan to look to maintain this SSPOC composition on an ongoing basis.
The FAF Trustees took several other steps on the transition. They modified the SSPOC charter (effective Jan. 1, 2017) to include the PCC oversight responsibilities currently contained within the PCRC charter. They also added activities that are typically performed by the PCRC related to PCC oversight to the 2017 SSPOC Workplan. In addition, PCC-related information and materials will be included in FASB’s materials and reporting at SSPOC meetings starting next year.
Members of the SSPOC have already begun attending some important private-company related meetings. For example, SSPOC members attended all the 2016 PCRC meetings, and each SSPOC member observed at least one PCC meeting/Town Hall in 2016.
FASB Chairman Russell G. Golden began to report on private company and PCC-related activities at SSPOC meetings this year, and he plans to continue to do so on an ongoing basis.
The FASB’s current liaison to the PCC, FASB member Daryl E. Buck, met with the SSPOC in October of this year and gave his observations and perspectives on the PCC's progress, activities, and interactions. A new FASB member, Harold L. Monk Jr., will become FASB's new liaison to the PCC in January and he will continue to meet with the SSPOC on an ongoing basis.
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