Comments on Private Company guidance highlight broad concerns
Volume 2010 / Issue 8
September 21, 2010
Summary: Accountants have begun to submit comments to a group backed by the FASB's oversight body and the AICPA about the issues private companies have dealing with complex U.S. GAAP. Many of the letters submitted to date back the efforts to simplify accounting standards as they apply to public companies.
When the Blue Ribbon Panel on Standard Setting for Private Companies was formed in 2009, its backers knew they were dealing with one of the accounting profession's more troublesome issues—the growing complexity of accounting literature and how that is weighing on non-public companies. Judging from the early round of comments, there is a lot of support for solving that problem. But if the committee thought that the answers would clearly present themselves, it may be in for a surprise.
The 26 comment letters submitted by August 20, 2010, are only the first wave of statements. The comment period announced earlier in August remains open until September 15. The comments generally supported the effort to produce a simplified book of guidance for private entities, but a few raised some other points that hadn't been brought up yet. One letter writer said that if a set of private company GAAP is written that accounting students will face even more difficulty pursuing their education. Another said that companies that use the private entity guidance may be forced to hurriedly generate proforma GAAP financials as they prepare a prospectus for an initial public offering. The writer of that letter, former Financial Accounting Foundation (FAF) trustee Frank Minter, also wondered would be willing to financially support the standard-setting activity. “Certainly not the public companies that fund the FASB,” he wrote.
The panel is backed by the FAF, AICPA, and National Association of State Boards of Accountancy (NASBA). The comments will be considered by the panel when it meets in New York in October, the FAF said. The groups said they formed the panel because so many private companies find themselves under an increasing strain to keep up with the growing complexity of financial reporting. Much of the guidance that has been added to U.S. GAAP has been written to satisfy investors in public companies.