Review confirms effectiveness of Private Company Council

The Financial Accounting Foundation (FAF) recommended in a report released Wednesday that the Private Company Council (PCC) should maintain its current mission, remit, and structure.

FAF established the PCC in 2012 to work with FASB to help improve the process of setting accounting standards for private companies that follow GAAP.

“Good governance prompts us to conduct periodic reviews of our important advisory councils,” Timothy Ryan, FAF trustee and co-chair of the Standard-Setting Process Oversight Committee, said in a news release. “I am pleased that stakeholders largely expressed support for the PCC while making excellent suggestions for potential improvements to make it an even more effective body.”

The AICPA applauded the contributions of the PCC earlier this year in response to a request for feedback related to the review.

Daniel Noll, the AICPA’s vice president–Financial Reporting, said in a statement about the report that the AICPA “appreciates the thoroughness of the Financial Accounting Foundation’s review of the Private Company Council, and we share the report’s findings that the council has been effective in its mission.”

Noll’s statement also said: “The AICPA has observed all of the PCC meetings since its inception and notes that it has fulfilled its role well, both in suggesting changes to existing GAAP and in advising on prospective GAAP. As FAF’s report notes, there are thousands of public companies in the United States but millions of private companies, so this is a critical advisory role for our capital markets.

“We look forward to more important work by the PCC and its continued advocacy for stakeholders who depend on financial reporting by private companies.”

The report stated that the PCC’s two primary responsibilities are:

• To serve as the primary advisory body to FASB on the appropriate treatment for private companies for items under active consideration on FASB’s technical agenda; and

• To determine whether exceptions or modifications to existing GAAP are required to address the needs of users of private company financial statements.

The report found that the majority of respondents supported the continued existence of the PCC in its current form and believed that:

• The PCC’s current mission, remit, and structure remain valid and appropriate.

• The PCC has been successful in fulfilling its two primary responsibilities.

• The PCC has been responsive to the needs of private company stakeholders.

“We are grateful to the many stakeholders who freely shared their diverse perspectives about the PCC,” Manju Ganeriwala, FAF trustee and co-chair of the Standard-Setting Process Oversight Committee, said in the news release. “We are confident that the PCC can sustain its excellent track record of providing thoughtful, expert advice and counsel to the FASB for many years to come.”

The report recommended that the PCC ramp up its communications activities, publish an annual report, and enhance recruiting activities to identify and select new PCC members in the future.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.