Filling the GAAP

In recent months, the Financial Accounting Foundation (FAF) has taken steps that may provide benefit and relief to CPAs who serve private business clients. Only time will tell for sure.

A few months ago, FAF (the oversight body for FASB) issued a final report and recommended the establishment of a Private Company Council (PCC). This came on the heels of a multi-year review and report by a Blue-Ribbon Panel created to study this issue. (See my blog “One Size Syndrome” from 10/10/11.)

The purpose of this new PCC is to identify and vote on GAAP modifications and exceptions for private companies, which would be subject to “endorsement” by FASB. If FASB fails to endorse a PCC decision, it must provide public, written notice of the reasons and give PCC an opportunity to resolve the matter. The PCC will also serve as the primary advisory body to FASB on the appropriate treatment for private companies for items under active consideration on FASB’s technical agenda.

While FAF did not go as far as many in the profession wanted (including TSCPA) by establishing a separate standard-setting body authorized to make exceptions to GAAP where appropriate for private companies, this new PCC is at least a step in the right direction and provides hope that definitive action on this front may soon be coming. The members of PCC were recently appointed by FAF and the group will hold its first meeting on December 6, 2012. While it would be hyperbole to say the whole world is watching, you can rest assured that a whole lot of CPAs will be anxiously
awaiting to see what tangible change comes out of this new PCC.

A member of the TSCPA Board of Directors – Billy Atkinson of Houston – was selected to chair the new PCC. The TSCPA Executive Board had nominated Billy to serve on PCC, so we were pleased with his selection. A past chairman of the Texas State Board of Public Accountancy (TSBPA) and the National Association of State Boards of Accountancy (NASBA), Billy has demonstrated his ability to lead a group with a task that must focus on both the public and the profession, and do it in a fair and even handed manner. He also has the technical background and know-how to support his role.

Not everyone felt good about Billy’s selection though, and at the recent AICPA Council meeting he was grilled fairly well by a number of AICPA leaders who questioned his commitment to providing exceptions to GAAP for private companies. As a member of the Blue-Ribbon Panel that reported to FAF, Billy was in the minority in opposing a separate standard-setting body for this purpose. (See the Journal of Accountancy article.)

While I understand the concerns these AICPA folks have, I also think from a credibility standpoint that the new PCC must be viewed as independent and free from undue influence from the CPA profession. If you will remember, AICPA used to set accounting standards up until the early 1970s when its special “Wheat Committee” recommended the creation of FAF and FASB, due in part to credibility problems with how accounting standards were being developed by AICPA. (You can view the AICPA video on the Wheat Committee here.)

So in Texas terms, it is probably a little early to be yelling “get a rope” for Billy Atkinson as the chair  of the new PCC. Let’s say we give this group a chance to actually hold a few meetings and see what they may produce. And to Billy and the new PCC, remember, you never get a second chance to make a first impression, so make it a good one.

Comments

[Telephony Systems]

Your work has always been a great source of inspiration for me. I refer you blog to many of my friends as well.

[Samuel @Personalcapital]

Accounting regulations in the United States are moving from rules based to the European style principles based. This means that there will be less material for accountants to abide by, but there will be a set of principles which can be interpreted and followed. This reduces the burden on small practitioners and there is also pressure to incentivize these small practitioners to combine together and form more big companies in order to break the monopoly of the current Big Four firms.