FASB responds to stakeholder feedback

US accounting standard-setters have issued a second invitation to comment on a proposed framework for private company accounting rules.

This week the Financial Accounting Standards Board (FASB), along with the Private Company Council (PCC), issued follow-up proposals to its Private Company Decision-Making Framework that addresses stakeholder feedback solicited last year. 

The two groups met in February to discuss responses received to a consultation period on its original proposals circulated in July. Stakeholders now have until 21 June to respond to the revised framework.

The framework is intended to serve as a guide for the FASB and the recently created PCC in determining whether and in what circumstances to provide alternative recognition, measurement, disclosure, display, effective date or transition guidance for private companies reporting under US Generally Accepted Accounting Principles (GAAP).

Many chief financial officers of both private equity firms and their underlying portfolio companies argue private entities have different needs in how they present financial information, less resources to do it and need more time to keep pace with changing accounting rules.

In their invitation to comment, the FASB and PCC revised their framework to consider:

· Removing the industry-specific presumption by having FASB and the PCC consider whether the same industry-specific guidance is relevant to users of the financial statements of both public companies and private companies, and

· Allowing a private company to select the alternatives within US GAAP for recognition or measurement guidance that it deems appropriate, without having to apply all the alternatives within US GAAP for recognition and measurement.

“Many private companies issue financial statements in accordance with US GAAP for the benefit of their investors and lenders,” said FASB chair Leslie Seidman in a statement. “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.”