Comments Requested on Private Company Financial Statement Reporting

10/27/2011

By Michelle Steinbronn, CPA

As the end of 2011 approaches, it is time to start gathering information and preparing schedules for the newest allowance for loan loss financial statement disclosures. Each year, it seems, the Financial Accounting Standards Board imposes new, more extensive disclosures on all companies, both public and private, to satisfy the voracious appetite of the public company financial statement analyst.

Since December 2009 the AICPA has been working in conjunction with the Financial Accounting Foundation (FAF), the FASB’s parent organization, to address the needs of private company financial statement users.

On October 4, 2011, the FAF issued a request for comment on their “Plan to Establish the Private Company Standards Improvement Council” (the Council). This plan does not include the establishment of a separate standard-setting board complete with its own authority as was recommended by the AICPA's Blue Ribbon Panel on Standard Setting for Private Companies in January 2011. Under the FAF’s proposed plan, the Council (made up of individuals with extensive experience in the use, preparation, or audit of private company financial statements) would research and propose changes to US GAAP to the FASB. The proposed changes would then undergo rigorous due process before ratification.

Barry Melancon, AICPA’s President and CEO, issued a statement in response to FAF’s decision to not create an independent board to set standards for private company financial reporting. In his response, he expressed his disappointment, saying, in part, that “the pleas of private companies to have differences in standards for private companies that are most cost effective and relevant for their users have too often been ignored.”

The FAF received responses from more than 3,000 private company constituents and from state CPA societies that represent more than 250,000 CPAs, and there was 99 percent support for the AICPA's Blue Ribbon Panel’s recommendation. “The FAF has proposed a solution that continues to miss the mark,” he said. To read the full response, click here.

If you would like to comment on this proposal, please send a letter to the FAF. The deadline for comments is January 14, 2012. If you agree with the AICPA’s stance, you may use the pre-formed letter on the AICPA’s website by clicking here.

To read the entire FAF plan, click here and to read the Blue Ribbon Panel’s January 2011 report, click here.