Closing the GAAP between FASB and Private Companies
FASB, the Financial Accounting Standard Board is the governing body in the United States that debates and decides the accounting standards which publically traded companies must use in their annual accounting reports. It is these reports that are used to meet the Sarbanes-Oxley legal requirements of company financial statements. Failure to meet FASB’s standards, commonly referred to as the Generally Accepted Accounting Principles, or GAAP can land a company in some legal entanglements that is best that they avoid.
The PCC, Private Company Council creates similar accounting standards for privately held companies. While similar, the standards created for privately held companies are different. Privately held companies do not have the strict reporting requirements that publically held companies have. Recently, FASB and the PCC started a public comment period that would discuss creating common standards between both public and private companies. A public comment period is a period of time that gives companies, accountants and CEO’s an opportunity to provide feedback on proposed changes in GAAP.
This period started on April 15th, 2013 and will end on June 21st, 2013. Among the issues to be discussed are measurement, disclosure or transition guidance for private companies that use GAAP. The benefit to private companies of introducing this ‘merger’ of standards is that the costs in providing financial statements will drop when the form is more consistent from public to private companies. Another advantage is that in certain cases of a private company wishing to go public, the accounting standards will already be in place making the transition easier.
According to FASB executives, the goal is to “improve financial reporting and to provide information that is relevant to the users of private company financial statements.” Potential investors seeking information on a private company just going public will be able to assess the financial health of the company prior to investing. The questions that FASB and the PCC are putting to those who wish to provide feedback are: What should the framework look like? What factors should differentiate a private company from a public company? And what other criteria should be included in the framework. If you have feedback concerning this framework or merger of standards, you may leave your feedback on this site: http://www.fafsurveys.org/se.ashx?s=4CA36E920044302F
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