The letter, signed by CPC-S Chairman George Beckwith, continued:
The new group’s [e.g., PCTF] opinions and proposals would have to be taken seriously. If over time, the majority of its proposals are denied or not acted upon, the group will not have achieved its objectives and its structure would have to be re-evaluated. However, if over time the new group’s proposals were seriously considered and private company constituents were provided some relief from standards they feel add cost without enhancing relevant information, the group will have achieved its goal and the new group would be part of the FASB process.
CPC-S’ letter was sent in response to the FAF’s request for input as it considers the recommendations of the Blue Ribbon Panel (BRP) on Standard Setting for Private Companies and other possible actions relating to improving the FASB’s responsiveness to the needs of private companies and the users of their financial statements.
Earlier this year, the BRP (cosponsored by the FAF, the AICPA, and NASBA) made a recommendation that, in the long-term, a new board be formed under the oversight of the FAF – at a peer level to the FASB and GASB which operate under the FAF – to focus on private company accounting.
Reflecting on the BRP’s long-term recommendation, and on more recent actions taken by the FASB to be responsive to the needs of its private company constituents (preparers, auditors and users of private company financial statements), FEI’s CPC-S concluded (reformatted to bullets),
- There seems to be a credibility gap that may have caused some people to question whether the FASB as an organization can produce high quality standards for private companies.
- In our opinion, the FASB processes are good, the board members are smart and focused on high quality standard setting for all companies.
- We believe there may be a combination of process and structural changes short of a full FASB peer board that would result in high quality standards for both public and private companies.
- Working within the existing governance framework and the FASB would avoid some of the implementation issues that would require state recognition of a new standard setting body.
- A group working under the authority of the existing FASB would also insure a greater level of coordination between public and private company standards and be less expensive than a separate peer board.
- We feel that a separate board may create an us vs. them mentality in standards setting and a perception of inferior standards in the users’ minds to a greater extent than if the process were all under the authority of the FASB with significantly enhanced focus on private company issues.
- For these reasons, we believe that the establishment of a new group with standards proposing ability may be a viable alternative to a separate peer board. In our view, this new group could be modeled after the Emerging Issues Task Force (“EITF”) in that it will have the ability to propose changes which are approved, adjusted or denied by the FASB. This group, which we will call the Private Company Task Force (“PCTF”), would enhance the standard setting process by focusing entirely on private company issues and addressing their unique concerns.
- The PCTF would be able to set its own agenda, suggest exceptions to existing standards and participate in the FASB’s existing due process on proposed standards."
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