Private Company Financial Reporting

Video - Call To Action - AICPA President and CEO urges CPAs and others to write to FAF
In this excerpt from the AICPA's spring 2011 governing Council meeting, CPAs hear why their participation is important and action must be taken now

The Financial Accounting Foundation currently is conducting outreach on, among other things, the two major recommendations of the Blue Ribbon Panel on Private Company Financial Reporting: differential standards and a separate board with standard-setting authority. It is critically important for CPAs to write to FAF now to make sure it hears the profession's support (ahead of a possible proposal).

CPAs also should engage other stakeholders -- such as private company clients or employers, bankers/lenders, sureties and insurers, and venture capitalists -- to voice their support.

To help accomplish this, the AICPA has developed an online letter-writing tool  to make the task very simple and quick. It also was prepared as a widget for placement on your firm's or company's website, blog or social media accounts. In addition, the AICPA has prepared a PowerPoint presentation  and a handout  that CPAs can use to educate others and generate letters from them.

Background

A Blue Ribbon Panel on Private Company Financial Reporting was formed by the AICPA, the Financial Accounting Foundation (FAF, the oversight body of the Financial Accounting Standards Board) and the National Association of State Boards of Accountancy to provide recommendations on the future of standard setting for private companies. A report containing the panel's recommendations for significant changes and modifications to U.S. GAAP, where appropriate, to recognize private company financial statement users' needs, and a new, separate standard-setting board to achieve that was submitted to FAF earlier this year. FAF formed a working group to gather public input on the panel's recommendations and other issues related to nonpublic entities with the goal of releasing an action plan in fall 2011. Now is the time for CPAs, lenders, investors and other users, private companies and small business owners to let FAF know of their support for the much-needed historic changes in private company financial reporting.

Issue Paper
Read this backgrounder and learn why differential standards and a separate, autonomous standard-setting body are essential for effective private company reporting.

Video  of AICPA President & CEO Explaining the Panel's Proposals and Why They Are Necessary.

Private Company GAAP: A Banker's Perspective
AICPA Chair of the Board of Directors Paul V. Stahlin, CPA, is regional president of a community bank in New Jersey. Watch  this video as he shares his thoughts about U.S. GAAP needing to be more relevant and useful to private company financial statement users.

Journal of Accountancy articles on panel and private company financial reporting

Recommendations from Private Company Financial Reporting Panel
Several members of the Blue Ribbon Panel on Private Company Financial Reporting discuss issues at the fall meeting of AICPA Council (Oct. 2010). Watch highlights or view the full video on AICPA TV.

AICPA Governing Council Adopts Resolution Supporting Blue Ribbon Panel on Private Company Accounting Standards

CPA Profession Stands Ready to Implement Differential GAAP for Private Companies

Oct. 19, 2010 - The governing Council of the American Institute of Certified Public Accountants adopted a resolution supporting the work of the Blue Ribbon Panel on Private Company Standards.

"The CPA profession stands ready to help implement a differential GAAP model for private companies, as determined by a separate private company accounting standards board," according to the resolution which passed by an overwhelming voice vote.

The 265-member Council is the governing body of the U.S. accounting profession. Representatives of CPA societies from all 50 states and 4 U.S. jurisdictions meet twice a year to address current issues in the profession and provide governance for the AICPA on behalf of its 369,000 members worldwide.

The Blue Ribbon Panel is a joint committee of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board (FASB) in Norwalk, Conn., the National Association of State Boards of Accountancy (NASBA) and the AICPA. GAAP, or Generally Accepted Accounting Principles, are established by the FASB. At its Oct. 8 meeting in New York, a majority of the Blue Ribbon Panel members voted to recommend the FAF establish a new standard setting board to address the needs of private company financial statement users.

There are 29 million privately held companies in the U.S.,7.6 million of which have paid employees, representing half of the nation's GDP according to the U.S. Census Bureau. Many are small- and medium-sized organizations that report to a narrower range of financial statement users, such as lenders, venture capitalists, and insurers.

The resolution expressed appreciation of the work for the Blue Ribbon Panel and expressed thanks to the co-sponsoring organizations and the panel members, official observers and staff. It was drafted to support the work of the Blue Ribbon Panel, recognizing that the panel will adopt final recommendations to the FAF which would then consider the recommendations for future public discussion.

In October 2009, Council had expressed overwhelming support for having GAAP recognition, measurement, and disclosure differences for private companies where appropriate.

AICPA & The FAF Foundation form "Blue-Ribbon Panel"

Dec. 17, 2009 - The American Institute of Certified Public Accountants (AICPA) and the Financial Accounting Foundation (FAF) announced the establishment of a "blue-ribbon panel" to address how U.S. accounting standards can best meet the needs of users of private company financial statements.

The panel will provide recommendations on the future of standard setting for private companies, including whether separate, standalone accounting standards for private companies are needed. Members of the panel will represent a cross-section of financial reporting constituencies, including lenders, investors and owners as well as preparers, auditors, and regulators. Joining the FAF and AICPA as sponsors of the panel is the National Association of State Boards of Accountancy (NASBA).

"The time has come for a new look at the policy issues of how U.S. generally accepted accounting principles (GAAP) are established for private companies," said AICPA CEO and President Barry Melancon. "The agreement between the AICPA and FAF to collaborate on this endeavor demonstrates our joint commitment to this issue. We are pleased that NASBA will be supporting this important effort."

FAF President Terri Polley said: "The FAF heard from the Private Company Financial Reporting Committee and many others during its recent nationwide outreach meetings about the need to consider the issue of GAAP for private companies. We look forward to working with the AICPA and NASBA as we consider the future of standard setting for this constituency."

David Costello, President and Chief Executive Officer of NASBA, said, "On behalf of state boards of accountancy and the public which they represent and serve, NASBA is pleased to join the AICPA and FAF in a comprehensive review of the process for setting accounting standards for private companies."

The chairman and members of the panel will be named in January.

There are 29 million privately held companies in the U.S according to the U.S. Census Bureau. Many are small- and medium-sized organizations that report to a narrower range of financial statement users, such as lenders, venture capitalists, and insurers.

In October, the AICPA's governing Council overwhelmingly supported exploring different accounting standards for private companies. The AICPA Board and the FAF Board of Trustees approved resolutions to form the panel in November.