If private companies should have different accounting standards, the Financial Accounting Standards Board is looking for ideas on how those differences should be established. FASB published some early ideas for how financial reporting requirements should be differentiated for private companies, and it is looking for feedback on that preliminary thinking before moving to the next step.
The “invitation to comment” published by FASB maps out six critical issues that differentiate private companies from public companies, leading to the conclusion that accounting requirements for private companies should differ as a result. FASB says the type and number of users for financial statements are different for private companies than public companies, and they have more direct access to management to ask questions. Private companies have different investment strategies, and different ownership and capital structures. They have thinner resources than public companies to manage the accounting function, and as a result it takes them longer to get up to speed on new accounting pronouncements.
As a result of those differences, FASB says, the accounting rules for private companies might logically differ in some key areas, including recognition and measurement, disclosures, and presentation. It might also be reasonable to give private companies longer lead times to adopt new standards as they are issued, FASB says. That's a broad view of the framework FASB is considering, but the board looking for feedback on that line of thinking before proceeding with a final framework.
In the meantime, the Financial Accounting Foundation is forming the Private Company Council to help identify where differences in accounting standards might be appropriate for private companies to reduce the cost and complexity of preparing financial statements that comply with U.S. Generally Accepted Accounting Principles. FASB and PCC will consider feedback to the invitation to comment and finalize the framework before they begin writing any new standards for private companies. FASB is looking for feedback by Oct. 31.
In a separate project to gather feedback on business combination rules, FAF also is looking for users of financial statements, preparers, auditors, academics, and regulators to participate in a survey that willassess the effectiveness of Financial Accounting Statement No. 141R: Business Combinations. FAF is conducting its latest post-implementation review of FAS 141R, now contained in the Accounting Standards Codification, to determine whether the standard achieved what was intended. FAF is asking those interested in participating to register online.
http://www.complianceweek.com/fasb-floats-early-ideas-on-private-company-accounting/article/253288/
