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Financial Accounting Foundation Proposes on Private Company Reporting

Posted 12:00 PM by

The Financial Accounting Foundation (FAF) released a proposal for private company accounting standards October 4, 2011. The proposal from the FAF does not create a new standard-setting body as recommended by the Blue Ribbon Panel. Instead, the proposal creates a council that would include between 11 and 15 members who would be appointed by the FAF and would remain under the authority of the Financial Accounting Standards Board (FASB). The FASB's Private Company Financial Reporting Committee will be replaced with the new council, known as the Private Company Standards Improvement Council (PCSIC).

The PCSIC will include members from various background such as accountants, auditors, lenders, investors, and other people the FAF deems to have experience in using and/or preparing private company financial statements.

The chairman of the PCSIC, who will be appointed by the FAF, will also be a member of the FASB. Any recommendations/changes to private company financial reporting will still have to be approved by the FASB before they become standard. A proposal created by the PCSIC will require a two-thirds majority vote from the PCSIC before it is submitted to FASB for approval.

If the recommendations of the PCSIC still have to be ratified by the FASB, one has to wonder how much more effective it will be than its predecessor, the Private Company Financial Reporting Committee.

The FAF has asked for all comments on the proposal to be submitted no later than January 4, 2012.

About the Author

Justin Hayes is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group as well as being a member of the Not-for-Profit and Governmental Services Groups. Justin works with clients to help them avoid risk and maximize efficiencies by keeping an eye on their bottom line and helping ensure accurate financial reporting. Connect with him on LinkedIn.

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