"[W]e anticipate based on the preliminary conclusions during prior meetings [the Blue Ribbon Panel] will vote to recommend a new model of financial reporting that will generate truly differentiated standards for private companies."
Melancon continued by calling for the formation of a separate board from FASB - to focus on setting private company standards - to be formed under the aegis of the FAF, adding:
"Crucial to the effective implementation of that recommendation is establishing a separate standard setting board under the Financial Accounting Foundation to provide a comprehensive solution to the problem of private company accounting. This has been a long time coming and I believe the case for a separate private company standards board under the oversight of the FAF is stronger than ever."Hat-tip to WebCPA which reported Meloncon's statement earlier today in: AICPA Wants New Standards Board For Private Companies.
Why Different Standards?
The debate over "Big GAAP/Little GAAP" or "differentiated accounting standards" - aka whether there should be a separate set of simplified accounting standards that are more directed to the needs of users of private company financial statements (such as owners, lenders and sureties) - has been going on for decades, as can be seen in this historical slide deck, PCFRC Brief History of Efforts in U.S., (2nd item on this PCFRC webpage).
The PCFRC was jointly formed by the AICPA and FASB in 2007 to advise FASB on private company accounting issues and how to improve accounting standards and disclosures to better meet the needs of private company users of financial statements, vs. what some perceive to be the driving force of general GAAP developed by FASB - that being users of public company financial statements, including public company regulators (SEC), public company analysts, in particular.
For example, issues about fair value sensitivity analysis on certain assets or broad swaths of assets appear to some to be driven by public company analysts, whereas some private companies say their banks are not interested in having the company going through that type of exercise, or certain other GAAP exercises, which the user may in essense ignore or have to 'undo.'
Additional Information About Blue Ribbon Panel
The Blue Ribbon Panel was jointly formed this year, cosponsored by the AICPA, the Financial Accounting Foundation (FAF, parent of FASB and GASB) and the National Association of State Boards of Accountancy (NASBA).
Read more info about the Blue Ribbon Panel (including minutes of prior meetings, the agenda for the upcoming Oct. 8 meeting, comment letters/responses, and related meeting materials, on the Blue Ribbon Panel webage located on the FAF website.
FEI Committee on Private Co's Responds
FEI's Committee on Private Company Standards (CPC-S) filed a comment letter on Sept. 15 i n response to the Blue Ribbon Panel's questions for comment. A total of 148 comment letters have been filed on the Blue Ribbon Panel's general questionnaire to date.
Additionally, on Sept. 30, FEI's CPC-S sent a document to the Blue Ribbon Panel entitled: Responses to Arguments Against Separate Private Company Accounting Standards. (As noted on the cover page of the 15-page document: "This draft has been prepared for discussion purposes by FEI‟s Committee on Private Companies-Standards (“CPC-S”). CPC-S is a technical committee of FEI which formulates private company positions for FEI in line with the views of its membership. This document represents the views of CPC-S and not necessarily the views of FEI." See also the introduction and background to the paper, which notes the methodology by which the Sept. 30 paper was prepared, in relation to the draft paper released by CPC-S earlier this year on private company standards.
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In a subsequent interview with Anne Rosivach of AccountingWEB ( http://www.accountingweb.com ) published today, Melancon added: “FASB will still drive the train. It would set standards. The new board would review the standards and would have the power to decide whether or not they were appropriate for private companies, or whether they should be modified for private companies. The board would also be empowered to make modification to existing standards."
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