New York - A blue ribbon panel lookingto improve the accounting standards for private companies wants to find out why so many are not strictly complying with GAAP.

The 18-member panel, sponsored by the American Institute of CPAs, the Financial Accounting Foundation and the National Association of State Boards of Accountancy, recently held its inaugural meeting at the AICPA's offices in New York.

"The question at the end of the day that we have to address is whether or not the process is giving the right answers for private companies, and if the answer is no, then what would be a better solution to get to the better answer?" said Moss Adams chairman and CEO Rick Anderson, who is chairing the panel. "That's what this is about."

Judy O'Dell, who chairs the joint AICPA-FASB Private Company Financial Reporting Committee, noted that previous studies and task forces had identified a need for GAAP of some variety, but not necessarily a strict form of it. "Users of private company financial reports want GAAP," she said. "They see that as the Good Housekeeping Seal of Approval. The auditors and accountants' report says, 'Prepared in accordance with GAAP.' The users don't necessarily always care what GAAP is. They just want the words 'GAAP' on those financial statements."

O'Dell said that her committee has succeeded in getting some disclosure relief for uncertain tax positions in FIN 48, and extra guidance for nonprofits and passthrough entities, "but not a lot of traction on the other standards." The move to International Financial Reporting Standards has also led to anxiety among private companies.

Jim Castellano, the chairman of St. Louis-based RubinBrown, noted that a task force he chaired in 2005 on private company standards found that GAAP reporting had a high value to all constituents because users like having a generally accepted body of accounting knowledge, but that too many GAAP-specific requirements lacked relevance and "decision-usefulness" for private companies. Many believed that it would be useful for private company standards to be different from public company reporting.

Castellano's task force also found that it was becoming commonplace for private companies to issue statements with exceptions to GAAP, principally related to consolidation standards, oftentimes in consultation with their lenders. The trend has spread even more widely in the intervening five years.

"What I'm hearing from firms that are opining or compiling or reviewing GAAP departures is that has ratcheted way up," said AICPA president and CEO Barry Melancon. "GAAP is supposed to mean generally accepted, but when you start to have all these variances and departures, then you no longer have a generally accepted notion. The fundamental question here is, is there a way to have a set of private company GAAP that is relevant and cost-effective for these millions of private businesses so there is a common standard set and you don't have all these GAAP departures that are occurring. That's the fundamental reason why we're here."

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