NEW YORK (Oct. 4) - We are profoundly disappointed that the Financial
Accounting Foundation (FAF) is not proposing to create a new independent board
to set differences in U.S. GAAP standards, where appropriate, for privately held
companies. This was the cornerstone of the Blue
Ribbon Panel on Standard Setting for Private Companies' report. The
Panel consisted of a cross-section of leaders from financial reporting
constituencies, including lenders, investors, owners, preparers and public
accountants.
"Three thousand private company constituents and a majority of
the state CPA societies, representing more than a quarter million
CPAs, have spoken. They want a separate independent standard setting board
and they have sent letters to FAF asking for change," said Barry Melancon,
American Institute of Certified Public Accountants
president and CEO. "Over the years, FASB´s main focus has understandably
been on the needs of constituents of publicly traded companies. The pent
up frustration we are witnessing by the private company constituency is a
direct result of that public company focus and not seeing that differences
can be and are appropriate for private companies and their financial statement
users."Â Â
For many years, the pleas of private companies to have differences in
standards for private companies that are more cost effective and relevant for
their users have too often been ignored.  We understand and
appreciate FASB´s need to focus on public company issues and emerging capital
market concerns. And as we move forward, FASB´s focus will need to
continue to be on the public market and on the convergence of U.S. Standards
with IFRS, which themselves are focused on public companies. This clearly
underscores the need for a separate independent board focused solely on the
right standards for private company GAAP. Â
In essence the Panel´s report stated: The supermajority view of
the BRP members is that the current FASB and even a restructured FASB cannot
produce the needed exceptions and modifications to GAAP for private company
financial reporting. Those BRP members believe that throughout its
history, the FASB has been very heavily geared, in its composition and its
processes, toward public companies. As a result, GAAP exceptions and
modifications in recognition, measurement and presentation have been too rare
and extremely difficult to achieve. Members of a board with authority to
set accounting standards for private companies must possess the perspective of
those stakeholders, and the FASB cannot be sufficiently restructured or possess
enough of the essential private company representation needed to set GAAP
differences for private companies.
"Unfortunately, FAF´s proposal has failed to accept the views of the
many voices of the private company constituency asking for a separate board.
 We don´t think the concerns of smaller private companies can be fully
appreciated until there is an independent board dedicated and focused solely on
the needs of private companies. Therefore, we will continue to ask
our members and others who support more relevant, more cost beneficial standards
for private companies to make their voices heard loud and clear that the best
answer is an independent private company board," commented Paul Stahlin,
AICPA chair.
The Blue Ribbon Panel and its diverse membership recommended the independent board for a reason. Without the addition of a separate board, the goal of true private company financial reporting differences will not be consistently achieved. Unfortunately now nine months after the Panel issued its report and after receiving more than 3,000 letters with 99 percent support for the Panel´s recommendations, the FAF has proposed a solution that continues to miss the mark.