The board of trustees of the Financial Accounting Foundation has formed a trustee working group to address the issue of accounting standard-setting for nonpublic entities.
The FAF oversees the Financial Accounting Standards Board and the Governmental Accounting Standards Board. The establishment of the Working Group represents a major development in the FAF’s ongoing work on this key strategic priority.
As a first step in the process to look at one component of this issue, the FAF created the Blue-Ribbon Panel on Standard Setting for Private Companies, sponsored jointly with the American Institute of CPAs and the National Association of State Boards of Accountancy. The panel concluded its work in January 2011, upon issuance of its report to the trustees. The establishment of the working group is the next phase of the FAF’s review of the adequacy and effectiveness of FASB efforts in setting standards for the private company and non-profit sectors in the United States.
The working group will conduct outreach to stakeholders in various ways, including roundtable meetings, surveys, and meetings with advisory and constituent groups and others. In conjunction with obtaining input on the scope of the issues and concerns to be addressed, the trustees also will seek input on suggested improvements, including the solutions recommended by the Blue-Ribbon Panel, which recommended the establishment of a separate standard-setting board for private companies apart from FASB.
“The FASB has an enormous responsibility in setting accounting standards for all nongovernmental entities in this country,” FAF Chairman John J. Brennan said in a statement. “The FAF trustees’ initiative to review the unique needs and challenges of non-profit entities and private companies is part of our commitment to ensuring that the processes and resources are in place to meet the financial reporting needs of all providers of capital, preparers of financial statements, auditors, regulators, and others. We look forward to sharing our findings with all of the FASB’s constituents.”
The American Institute of CPAs has been pushing for the creation of a separate standard-setting board for private companies. The Institute hailed the decision by the FAF to create the trustee working group, but also hinted that the new group should not drag out the process after the Blue Ribbon Panel already handed in its report.
"We applaud the FAF for taking an initial step toward implementing the Blue Ribbon Panel’s recommendations to create a more workable system for private company standard setting," said AICPA president Barry Melancon in a statement. "While we appreciate the trustee working group must do their own due process, we urge them to move briskly in making changes to current and future accounting standards that will be more relevant and cost-effective to private company reporting constituencies by establishing a new board as was recommended by the diverse membership of the Blue Ribbon Panel.”
"As a bank president, I'm in the position to be a user of private financial statements," said AICPA chairman Paul Stahlin. "I hear regularly from other users and CPAs about the need for more useful GAAP accounting. All too often, I see business loan applications accompanied by unnecessary financial information because too many FASB standards aren't relevant for most private businesses. I strongly urge FAF to adopt the recommendations of the Blue Ribbon Panel."
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