Financial Accounting Foundation Establishes New Council to Improve Standard Setting for Private Companies

Washington DC, May 23, 2012—After seeking and considering extensive public comment, the Financial Accounting Foundation (FAF) Board of Trustees today established a new body to improve the process of setting accounting standards for private companies.

The new group, the Private Company Council (PCC), will have two principal responsibilities. Based on criteria mutually developed and agreed to with the Financial Accounting Standards Board (FASB), the PCC will determine whether exceptions or modifications to existing nongovernmental U.S. Generally Accepted Accounting Principles (U.S. GAAP) are necessary to address the needs of users of private company financial statements. The PCC will identify, deliberate, and vote on any proposed changes, which will be subject to endorsement by the FASB and submitted for public comment before being incorporated into GAAP. The PCC also will serve as the primary advisory body to the FASB on the appropriate treatment for private companies for items under active consideration on the FASB’s technical agenda.

“The Trustees believe that the plan approved today will improve the standard-setting process and give private company stakeholders additional assurance that their concerns will be thoroughly considered and addressed,” said FAF Board of Trustees Chairman John J. Brennan following a meeting of the Trustees in Washington DC. “This structure represents a significant improvement over our original proposal because of the very valuable suggestions we received from a broad cross section of concerned and interested constituents.”

FAF President and CEO Teresa S. Polley said: “The plan approved by the Trustees strikes an important balance. On one hand, the plan recognizes that the needs of public and private company financial statement users, preparers, and auditors are not always aligned. But at the same time, the plan ensures comparability of financial reporting among disparate companies by putting in place a system for recognizing differences that will avoid creation of a ‘two-GAAP’ system.”

The private company plan approved today generally follows the outline of the initial Trustee proposal announced last October, but includes several significant changes and improvements. In response to stakeholder concerns, the Trustees changed the process through which FASB considers Council recommendations for private company exceptions or modifications to GAAP from one of ratification to one of endorsement. The final plan stipulates that the Council Chair will not be a FASB member; that the Council will hold meetings more frequently than originally proposed; and that its size will be smaller than initially suggested.

“The establishment of the PCC will help the FASB improve upon the efforts already under way to better serve the needs of private company financial statement users, preparers, and practitioners,” said FASB Chairman Leslie F. Seidman.

Key elements of the Private Company Council responsibilities and operating procedures include:

The complete report establishing the PCC, including background materials, key discussion issues considered by the Trustees, and PCC responsibilities and operating procedures, will be available on the FAF website next week. The FAF Board of Trustees will issue a call for nominations for members of the PCC via the FAF website in the next few weeks.

About the Financial Accounting Foundation

The FAF is responsible for the oversight, administration, and finances of both the Financial Accounting Standards Board (FASB) and its counterpart for state and local government, the Governmental Accounting Standards Board (GASB). The Foundation is also responsible for selecting the members of both Boards and their respective Advisory Councils.

About the Financial Accounting Standards Board

Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at