Blue Ribbon Panel Weighs In on Private Company Financial Reporting
Focusing on the need for privately held companies to obtain their own accounting standards board and the type of standards best suited to meet the needs of these companies, the Blue Ribbon Panel (BRP) weighed in on seven alternative models for private company financial reporting during its second meeting, which took place in Chicago on July 19.
Established in December 2009 by the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Foundation (FAF) and the National Association of State Boards of Accountancy (NASBA), the 18-member Blue Ribbon Panel is tasked with addressing how accounting standards can best meet the needs of U.S. users of private company financial statements.
During the meeting, panelists expressed discontent with the current makeup of the Financial Accounting Standards Board (FASB), in particular its heavy, albeit appropriate, focus on public companies. They also discussed what body should set accounting standards for private companies. They also noted their belief that, regardless of the standard-setting body, if changes are relevant and reasonable and users get the information they need, separate bodies of public and private U.S. Generally Accepted Accounting Principles (GAAP) standards would benefit businesses.
The 18-member panel also dissected seven proposed models, eliminating options based on International Financial Reporting Standards (IFRS) and those that would effectively maintain the status quo. Staff was then directed to narrow the list to three models, based on U.S. GAAP.
These models, all of which would result in differences between GAAP for private companies and GAAP for public companies, include:
- U.S. GAAP with exclusions for private companies and with enhancements
- Baseline U.S. GAAP with public company add-ons
- Separate, standalone GAAP based on current U.S. GAAP
From these three models, members of the panel agreed that two or three more detailed and focused hybrid models will be developed. Regardless of the model that is eventually selected, panelists expressed that it would be important for the group that sets those standards to understand the needs of the users for whom they are designing them.
Further, they believe that organizations will be open to a new set of standards, noting that many take financial statements in accordance with U.S. GAAP and make adjustments. While some panelists expressed concern over the fact that users aren’t demanding change, others believe organizations would be open to it as long as there are legitimate reasons for different standards.
To ensure that no critical elements have been overlooked, the panel recommended exposing a series of questions related to the potential standard-setting models for public comment. This forum is now available on the FASB website. The panel plans to summarize and present all comments during its October 8 meeting at the AICPA’s New York office.
Panel chairman Rick Anderson said he would like any recommendations to the proposed standard to be ironed out by the December 10 meeting.
Also in this month's issue:
Service Organizations to Receive New Standard with SSAE 16
Consultant of the Quarter: Estela Moshos