theThe Pros and Cons of Setting Separate private company accounting standards With the development of world economy, U.S.GAAP becomes more and more complex to meet public companies’ needs. Private companies cost a great fortune to compliance with U.S.GAAP. So, setting public-private accounting standards is a different issue debated for decades. it goes without saying that setting new separate accounting standards have its advantages and disadvantages. Background
In USA, there are a large number of nonpublic companies, much more than public companies. As time goes, deficiencies exist in current GAAP to meet nonpublic companies to make financial reporting. GAAP is extremely complex and onerous to nonpublic companies. Those private companies frustrated with being forced to spend a great amount of money on valuating intangible property, or spending hours on disclosures that users may not read. Therefore, private companies’ owners cry for a sufficient and appropriate accounting standards meet their needs. In Jun 2006, The AICPA advocated for the need for setting a differential private company standards. Then, the Private Company Financial Reporting Committee ( PCFRC ), overseen by FASB, was formed to modify private accounting rules for private company. However, FASB overruled the PCFRC’s recommendations numerous times. In this way, in early 2011, Blue Ribbon Panel ( a joint committee of the Financial Accounting Foundation ) recommended to establish an autonomous board, directly overseen by FAF, to set new accounting standards for private companies, instead of oversight by FASB. Later in the year, the FAF overruled blue ribbon panel recommendation and proposed a new ”Private Company Standards Improvements Council”(PCSIC), which can recommend changes and exceptions to standards FASB issued for private companies. But FASB still have final say by ratifying The PCSIC suggests. After that, the AICPA have announced its disappointment about FAF disallowed establish Separate...
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