Spring 2014 issue of Horizons

FEATURE

Private Company Financial Reporting Task Force In 2005, a task force sponsored by the AICPA and led by RubinBrown’s current chairman, James Castellano, unanimously recommended a process be established to evaluate changes to GAAP to improve the usefulness of private company financial reporting. That conclusion was reached based upon the input of approximately 3,700 interested parties obtained by an independent market research firm. At the time, this was believed to be the most extensive research ever conducted on this frequently studied topic. ∙ Too many GAAP-specific requirements lack relevance or decision usefulness according to all constituents. ∙ A majority of each of the constituent groups that had an opinion believed it would be useful if underlying accounting in GAAP reporting were different, in certain instances, for public vs. non-public companies. ∙ GAAP for private companies should be developed based on concepts and accounting that are appropriate for the distinctly different needs of constituents of private company financial reporting. Private Company Financial Reporting Committee (PCFRC) In 2006, the FASB created the Private Company Financial Reporting Committee (PCFRC) in an effort to improve its ability to incorporate the views of private company constituents in its standard-setting process. The mission of the This task force further concluded that:

PCFRC was to provide recommendations to the FASB on issues related to standard setting for private companies and to focus on how standard setting affects day-to-day technical activities at private companies. FAF Listening Tour As part of its responsibility for oversight of the standard-setting process, the Financial Accounting Foundation (FAF) Board of Trustees undertook a nationwide “listening tour” during 2009. During that tour, the FAF learned that many constituents continued to be concerned about the costs and complexity of standards for private companies. Those constituents were also not satisfied with the results of the collaboration between the PCFRC and the FASB. Blue Ribbon Panel In response to these continued concerns, the FAF worked with the AICPA and the National Association of State Boards of Accountancy to establish the Blue Ribbon Panel on Standard Setting for Private Companies. This panel was responsible for making recommendations about how the standard- setting process could best meet the needs of the users of private company financial statements. In January 2011, the Blue Ribbon Panel submitted its recommendations to the FAF. The most notable recommendation included in its report was the creation of a new, separate, authoritative standard-setting board, separate from the FASB that would establish modifications or exceptions to GAAP for private companies.

2005

2006

2007

2008

2009

AICPA appoints Private Company Financial Reporting Task Force (Castellano Report)

Private Company Financial Reporting Committee (PCFRC) established

Listening Tour by Financial Accounting Foundation

Blue Ribbon Panel Formed

page 24 | horizons Spring 2014