In 2012, the Private Company Council (PCC) was formed to establish exceptions and modifications to U.S. GAAP appropriate for private companies. Such differences may include alternative recognition, measurement, disclosure, display, effective date, or transition guidance. Proposed differences for private companies must be agreed to by both the PCC and FASB and include a period for consideration of public comment prior to incorporation into U.S. GAAP.
The question arose whether companies would have to adopt “all-or-nothing” acceptance of the exceptions and modifications created for them. FASB originally proposed such an approach, while the PCC opposed it. However, the current FASB proposal is that private companies be able to employ only those items that make sense for their particular organization, an effective “buffet” of accounting treatment options. This proposal goes even further by removing the presumption that industry-specific recognition and measurement guidance applies to users of both public and private company financial statements.
“Many private companies issue financial statements in accordance with U.S. GAAP for the benefit of their investors and lenders,” said FASB Chairman Leslie F. Seidman. “This proposed guide is intended to help the FASB and the PCC identify the unique needs of users of private company statements, while also reducing the complexity and cost of preparing those statements. Stakeholders have already provided valuable input in the development of the guide, and we look forward to receiving additional feedback about its appropriateness, completeness, and cost effectiveness.”
The Invitation to Comment is available at www.fasb.org through June 21, 2013. Thereafter, FASB and the PCC will re-deliberate the proposal with the benefit of such public comments.