“private company GAAP.” Summarize the interaction between this group and FASB in addition to arguments for and against the new group
The Financial Accounting Foundation (FAF), in May of 2012, has established The Private Company Council (PCC) to serve as the primary advisory body to the Financial Accounting Standards Board (FASB) for private company matters. Using the U.S. Generally Accepted Accounting Principles (U.S. GAAP) as a guide, the PCC will recommend modifications to FASB to create a “private company GAAP.” FASB will then have the opportunity to endorse the recommendations or require changes. The purpose of such a council is to address the needs of privately-held companies and not-for-profit organizations. Some have argued that the needs of public company and private company users of financial statements have moved further apart over the past 10 years. FAF’s original proposal was to create a Private Company Standards Improvement Council (PCSIC). The details of this council were submitted for public comment and of the comment letters received, overall, 63% of the respondents opposed the FAF’s plan. The opposition indicated that the plan did not “sufficiently address the significant changes that are necessary to improve the standard-setting process for the private companies.” Of those opposed, it appears that they believe the FASB has not recognized the needs of private companies in the past, and with a FASB member as chair, the PCSIC would be controlled by FASB and would hinder the PCSIC’s ability to make changes. Some respondents noted that they were not concerned with having two sets of U.S. GAAP’s because “Financial reporting differences already exist for private companies and public companies under U.S. GAAP and there are incremental financial statement reporting requirements for companies registered with the SEC.” and a “significant number of private companies prepare financial statements with departures from one or more accounting...
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