The AICPA Council passed a resolution in late May that announced the profession’s intent to work with the Financial Accounting Standards Board (FASB) to evaluate potential changes to generally accepted accounting principles (GAAP) for privately-held, for-profit companies, as recommended by one of its task forces.

“This is a noteworthy milestone for the constituents of private company financial reporting who argue their needs are significantly different from those of users of public company financial reporting,” Robert Bunting, chair of the AICPA said.

The resolution adopted by the AICPA Council directed AICPA management to work with the Financial Accounting Foundation (FAF) and the FASB to identify and implement a process that would evaluate, where appropriate, potential changes in recognition, measurement and disclosure from current GAAP as applied by public companies.

The vote follows the March release of the report by the AICPA’s Private Company Financial Reporting Task Force that unanimously recommended that a process be established to improve the usefulness of private company financial reporting.

The Task Force began its work more than a year ago in response to concerns expressed by some interested parties about the relevance, benefits and related costs of certain financial reporting requirements for privately held, for-profit entities.

“Overall, the response from those surveyed rated the value of GAAP financial statements of private companies quite highly on consistency, providing comparability among companies, and on their use as a tool in credit and investment decisions,” said James G. Castellano, CPA, and former chair of the AICPA, who headed the Task Force. “However, through our discussions, focus groups and research, we learned that constituents rated certain GAAP requirements as providing relatively low relevance and decision usefulness to constituents of private company financial reporting.”

The Task Force was comprised of key constituents of private company financial reporting. The report’s conclusions were based on input from more than 3,700 lenders, investors, sureties, business owners, financial managers and public accounting practitioners.

FASB Chairman Robert Herz said, “Private companies are a vital force in the nation’s economy and it is, therefore, critical that their financial reporting be conceptually sound, cost effective and provide relevant, reliable and useful information. The FASB has taken a number of steps in recent years to increase the voice and participation of private company users, preparers and auditors in FASB activities, and to codify and simplify the GAAP literature. We are very open to exploring ways to further enhance the overall value of private company financial reporting.”

The AICPA, FAF and FASB agree that any proposed changes that might result from this effort would need to be fully exposed for public comment and debate.

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