FASB Releases Paper for Adjusting GAAP Reporting Needs of Private Entities
FASB has released a paper recommending the circumstances and criteria that must be utilized for determining the appropriate time for adjusting Generally Accepted Accounting Principles reporting related needs for privately owned entities.
The recommended criteria will serve as a system for making decisions that will further support FASB as well as the all new Private Company Council in identifying the requirements of the private entity financial statements’ users in addition to opportunities for reducing cost and complexity associated with preparation of financial statements with respect to Generally Accepted Accounting Principles.
FASB’s paper consists of initial recommendations made by its staff with regard to the criteria that needs to be followed. FASB has also requested for a feedback statement on ‘Invitation to Comment’ by 31st of October from the constituents. Before being implemented the proposed system should get an approval from the Private Company Council and FASB. PCC has been newly formed by Financial Accounting Foundation for the purpose of identifying issues in the area of Generally Accepted Accounting Principles with regard to privately owned entities as well as to advise Financial Accounting Standards Board on matters related to private entity issues. Financial Accounting Foundation resolved to establish Private Company Council in the month of May after going through the Blue-Ribbon Panel’s report on Accounting Standard Framing for private entities. The private entities had recommended that Financial Accounting Foundation should set up a unique and separate accounting standard setter for them. Even before FASB took the decision of setting up Private Company Council, it had been looking at procedures for framing a different accounting framework for private entities.
PCC will work with FASB and will also seek guidance from the system and determine if modifications or expectations to current Generally Accepted Accounting Principles are required for addressing the requirements of the statement users. The Private Company Council will then identify and vote for any changes that have been proposed that will further be endorsed by FASB and later submitted for feedback from public before its inclusion into GAAP.
The paper contains recommendations that have been made after consulting stakeholders with regard to their experiences of preparing, using, reviewing, compiling and auditing private entity financial statements.