The AICPA governing Council approved a resolution on Tuesday to voice its significant concerns about a Financial Accounting Foundation (FAF) proposal released Oct. 4 that rejected a blue-ribbon panel’s recommendation for a separate board to set private company GAAP.
The Blue-Ribbon Panel on Standard Setting for Private Companies was a broad-based group representing private company constituents, including bankers, sureties, venture capitalists, CEOs, preparers, CPA practitioners and regulators. In January 2011, the panel recommended establishing a private company standards board under FAF to set differences in U.S. GAAP.
The resolution approved Tuesday “instructs AICPA’s Board of Directors to submit to the [FAF] a comment letter setting forth AICPA’s disagreement with the [FAF] proposal and restating AICPA’s support for the recommendations made by the Blue Ribbon Panel.”
The resolution further instructs that “if the [FAF] proposal is not modified to include such a board ... this Council directs the AICPA Board of Directors to consider all options, including consideration of other established independent standard-setting bodies as the standard setter for U.S. GAAP for private companies, the creation of a committee or board within the AICPA or a standard-setting body as a separate entity, to develop private company generally accepted accounting principles (PCGAAP) or a comprehensive private company-specific basis of accounting that would deliver meaningful, lasting improvement to private company financial reporting consistent with the Blue Ribbon Panel recommendations.”
“The FASB has proven over many years that it cannot deliver meaningful improvement to private company reporting standards,” said AICPA President and CEO Barry Melancon in a press release. “FASB’s primary focus has been and should be on the public company sector and on international convergence. Fifty percent of the U.S. economy comprises private companies. This critical sector of our economy deserves a board focused solely on their specific needs.”
A FAF spokesman defended the organization’s proposal.
“The trustees’ proposal for a new Private Company Standards Improvement Council, which incorporates nearly all the recommendations made by the Blue-Ribbon Panel, represents a significant improvement over and departure from past practice,” said Robert Stewart, FAF’s vice president–communications.
“The plan strikes the right balance by creating an independent, deliberative body that would, in effect, set the agenda for modifying accounting standards for private companies–without creating a ‘two GAAP’ system that would most likely result from the establishment of a second standard-setting board,” Stewart said.
“We believe that there should be one GAAP, but that GAAP must be modified as needed to reflect the unique circumstances of private companies,” said Paul V. Stahlin, CPA, outgoing AICPA chairman.
—Matthew G. Lamoreaux (email@example.com) is a freelance writer.
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