Differential Factors Between Private Companies and Public Companies
Yaqi Qiu
MAC-501
Professor Beckman
December 10, 2012
Differential Factors Between Private Companies and Public Companies Generally speaking Financial Accounting Standard Board (FASB)’s primary purpose is to develop General Accepted Accounting Principles (GAAP). GAAP might not concern the whole areas of accounting criteria, FASB look up and adjust accounting standard to make sure standards have been updated to follow current situation. On July 31, 2012, FASB issued an Invitation to Comment, which reviewed key areas of the Private Company Decision-Making Framework - A Framework for Evaluating Financial Accounting and Reporting Guidance for Private Companies staff paper. This project was to gather comment from stakeholders about how they evaluate this private company decision-making framework. Therefore, FASB was able to decide carry the new concept into execution. The project provided serious of questions for respondents, in this paper we focus on the differential factors between private companies and public companies, and elaborate the necessity of adjustment. A private company denotes a company of two or more persons, but not exceeding fifty excluding the employees and shareholder. A private company is nothing but the extension counter a partnership with limited liability. It prohibits any invitation to the public to subscribe for shares and restriction the right to transfer its shares. Private company is desirable in those cases where it is intended to take the advantage of corporate life, limited liability and the control of the business over the hands of few persons. Public companies are any company whose securities trade in a public market on either of the following: a. A stock exchange (domestic or foreign) b. In the over-the-counter market (including securities quoted only locally or regionally), or any company that is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or
MAC-501
Professor Beckman
December 10, 2012
Differential Factors Between Private Companies and Public Companies Generally speaking Financial Accounting Standard Board (FASB)’s primary purpose is to develop General Accepted Accounting Principles (GAAP). GAAP might not concern the whole areas of accounting criteria, FASB look up and adjust accounting standard to make sure standards have been updated to follow current situation. On July 31, 2012, FASB issued an Invitation to Comment, which reviewed key areas of the Private Company Decision-Making Framework - A Framework for Evaluating Financial Accounting and Reporting Guidance for Private Companies staff paper. This project was to gather comment from stakeholders about how they evaluate this private company decision-making framework. Therefore, FASB was able to decide carry the new concept into execution. The project provided serious of questions for respondents, in this paper we focus on the differential factors between private companies and public companies, and elaborate the necessity of adjustment. A private company denotes a company of two or more persons, but not exceeding fifty excluding the employees and shareholder. A private company is nothing but the extension counter a partnership with limited liability. It prohibits any invitation to the public to subscribe for shares and restriction the right to transfer its shares. Private company is desirable in those cases where it is intended to take the advantage of corporate life, limited liability and the control of the business over the hands of few persons. Public companies are any company whose securities trade in a public market on either of the following: a. A stock exchange (domestic or foreign) b. In the over-the-counter market (including securities quoted only locally or regionally), or any company that is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or