Members of the American Institute of CPAs heard an update from the chairman of the Blue Ribbon Panel, the task force charged with addressing how GAAP accounting standards can best meet the needs of users of private company financial statements, at the AICPAs Spring Council meeting.
Rick Anderson, chairman of Moss Adams, talked about the background and mission of the new panel as well as a brief overview of what took place at its first two meetings.
The panel was selected by the AICPA, Financial Accounting Foundation and the National Association of State Boards of Accountancy with the goal of assembling a cross representation of people interested in financial statements.
We went to organizations and said, Heres what the objective is, give us some names of the best qualified people you believe you have, Anderson said, citing the U.S. Chamber of Commerce, Financial Executives International and the American Bankers Association. We asked them for people who would be qualified in their own right. Its a very diverse group.
The scope of the work focuses on for-profit companies and will not address the not-for-profit arena. We have to carve that off and save that for another day, said Anderson.
Anderson noted that the purpose of the group was to create a process for setting standards not about a certain standard itself.
Everyone on that committee has pet peeves about a specific standard, he said. We might use that for a specific discussion, but that is not what the committee is about.
The panels objectives include understanding the current standard-setting structure and process; understanding the needs of users of private company financial statements; understanding the cost benefit considerations of GAAP financial statements for preparers; identifying alternative structures and standard-setting processes; determining if the current processes should be modified for private companies; and providing recommendations to the FAF trustees. Anderson said that by the end of the year his committee would make a recommendation to the FAF, which oversees the Financial Accounting Standards Board and the Governmental Accounting Standards Board.
This panel is different, according to Anderson, because of its make up of users, preparers and CPAs and its sponsored by FAF, the AICPA and NASBA.
Thats a huge difference, he said. This is driven by the three most influential organizations in the standard-setting process. They came together collectively, agreed upon a charter and members.
Members include lenders, business owners, those in private equity and venture capitalists.
Weve had some great work done in the past, but again these prior [committees] have been primarily CPA-driven, and the users have not been at the table to the same degree as is the case here, he said.
The Blue Ribbon Panels first meeting was April 12 (see Panel Looks to Improve GAAP for Private Companies). Panel members spent a majority of that time discussing the needs of users of private company financial statements.
They [the users] told us, It doesnt really matter what you give us in a private company. There are some things that we want that arent there, he said. They also told us that it doesnt matter what you give us. Were going to make some of our own adjustments to it.
At the committees second meeting on May 14, members heard testimony from a corporate director and a representative from a credit rating agency. Committee members agreed that there was a need to identify pros and cons for a dual set of standards, including the unintended consequences, and that there was a high level of support for change.
Three more meetings are scheduled one in July in Chicago, another in September in New York, and a third in December, also on the East Coast.
The committees next steps include compiling a position paper that will address the problems that the panel is trying to solve. The panel will also identify alternative models to U.S. GAAP, as well as address infrastructure questions such as funding. These models will be discussed at the July 19 meeting, after which, public input will be gathered.
This has to be driven by the users, Anderson said to council members. The bigger users of financial statements are third-party users. Get your clients involved in monitoring the process and providing input. Its coming together well, and I expect we will have a good recommendation at the end of the year.
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