Private Company Financial Reporting In The Spotlight
March 24, 2010
The future of financial reporting could change significantly for private companies, as a result of deliberations that will take place by the Blue Ribbon Panel on Private Company Accounting. Founded by the Financial Accounting Foundation (which oversees the Financial Accounting Standards Board), the American Institute of CPAs and the National Association of State Boards of Accountancy, the Blue Ribbon Panel is set to hold its first meeting on April 12.
The 18-member Blue Ribbon Panel includes three FEI members: Bill Knese, Teri Yohn and Daryl Buck. Buck is vice chair of FEI’s Committee on Private Companies-Standards (CPC-S) and will share with the Blue Ribbon Panel insights and recommendations from CPC-S.
Formation of the Blue Ribbon Panel followed on a Nov. 2009 recommendation of the FASB-AICPA’s Private Company Financial Reporting Committee (PCFRC):
“The Committee believes that a separate, stand-alone set of accounting standards for U.S. private companies tailored to the needs of the users of those statements is the preferred approach. However the Committee realizes there could be other major alternatives for private company accounting that should be explored. In establishing standards for private company financial reporting, the needs of financial statement users balanced against the costs of complying with the standards must be an overriding principle”.
More recently, Grant Thornton LLC released a paper titled “Private Company Financial Reporting,” available at www.grantthornton.com/PCreporting. The paper, authored by GT partners John Hepp and Gary Illiano, concludes:
“While the best outcome perhaps would be a single objective and a single set of standards for all entities, the unique needs of the global capital markets and their importance may indicate that a different set of standards for investors and creditors in those markets may be the best solution to meet their needs. Other standards, more reflective of accountability and local legal considerations, may better address the needs of private companies and not-for-profit organizations.”
For additional background, see also the recent article authored by Andy Thrower, past chair of FEI’s Committee on Private Companies-Standards, which appeared in the March issue of Financial Executive magazine: "Should It Be Big GAAP or Little GAAP For Private Companies?”
Watch for updates on this important issue in FEI’s bi-weekly electronic newsletter, FEI Express – Private Company Edition, and on FEI’s website.
Prepared March 24, 2010 by Edith Orenstein, director of Accounting Policy Analysis and Communications, Financial Executives International. This summary does not represent FEI opinion unless specifically noted above.