Accountants and finance executives are lobbying hard for the Financial Accounting Foundation (FAF) to appoint a separate board, independent of the Financial Accounting Standards Board, to tailor accounting standards for private companies.
At least 15 state CPA societies, including those in Alabama, Illinois, New Jersey, and New York, have sent letters to the FAF urging a separate board, according to Maryland Association of CPAs CEO Tom Hood, who also penned a letter. Hood says his group is sending out an alert to encourage members to voice their opinions individually and soon. The FAF plans to release its conclusions this autumn, according to its most-recent press release on the topic.
“This issue has been around for 30 years, and this is a once-in-a-lifetime chance to get it right,” says Hood. “If it doesn’t happen now, it will never happen.”
The FAF, which oversees FASB, is charged with responding to the recommendations made by a blue-ribbon panel on private-company GAAP earlier this year. The core recommendation — to have an optional set of modifications and exceptions to standard GAAP for private companies — has broad support. The question of who should do the modifying, however, has erupted into a controversy. FASB maintains it should have control; CPAs, CFOs, and others note that FASB has so far vetoed key recommendations from the existing Private Company Financial Reporting Committee under its auspices.
Without an independent board, “our forecast is that it’s more of the same, which is no change,” said American Institute of Certified Public Accountants president and CEO Barry Melancon in a Webcast on the topic earlier this summer. The AICPA spearheaded the blue-ribbon panel and has the most invested in seeing its recommendations come to fruition.
The FAF has so far received more than 1,500 unsolicited comment letters on the topic, albeit with multiple submissions from many CPA firms and predominantly in boilerplate language. Most appear to be in favor of a separate board, for various reasons. “Given the public company reporting pressures placed upon FASB, the board cannot adequately respond to the competing needs of the private company sector,” wrote Susan O’Leary, CFO of privately held sports-equipment retailer Total Hockey. (Other writers used the same language; the AICPA provides a Mad Libs–style letter template with phrases and sentences for commenters to plug in.)
Notably, however, Finance Executives International’s Committee on Private Company Standards submitted the first letter, in April, opposing the idea. “Working within. . .the FASB would avoid some of the implementation issues that would require state recognition of a new standard setting body” and would also be less expensive, the letter noted.
According to the blue-ribbon panel recommendations, such a board should be reviewed within five years for possible changes to its structure or mission. Meanwhile, funding sources are still unclear.