With the issuance of the Blue Ribbon Panel’s final report of its recommendations to the Financial Accounting Foundation (FAF), another step towards significantly changing the manner in which accounting standards are established for private companies has been taken. Among the Blue Ribbon Panel’s recommendations is the creation of a new board, to be overseen by the FAF, which would focus on making exceptions and modifications to U.S. GAAP for private companies in order to better respond to the needs of the private companies. In addition to the creation of a new board, the report recommends the creation of a differential framework (e.g., a set of decision criteria to assist the standard setter’s ability to make appropriate, justifiable exceptions and
modifications).The accounting profession has debated this issue for decades, but the possibility for change is closer to reality than at any time in the past.
What This Means
Although the changes recommended by the Blue Ribbon Panel are both significant and historic, the report does not suggest or advocate the establishment of separate, stand-alone accounting guidance for private companies. Instead, the recommendations are primarily focused on identifying and allowing exceptions and/or modifications to U.S. accounting standards that would provide relief from certain standards that may not be aligned with the needs of private companies. The changes that ultimately result from the recommendations of the Blue Ribbon Panel will depend in large part on the actions of the FAF Board of Trustees. The FAF Board of Trustees will consider the Blue Ribbon Panel’s recommendations as it deliberates improvements to the standard-setting process. It is expected that the FAF Trustees’ final plan related to the standard-setting process will solicit further input from various constituencies, including exposing for public comment any significant changes to the standard-setting process.
The MHM Professional Standards Group will continue to monitor developments at the FAF and provide further updates as additional information becomes available. You can also learn more about the proposed changes by visiting the American Institute of Certified Public Accountants website. The AICPA has created a dedicated online resource at aicpa.org/privateGAAP.
The information in this post is a brief summary and may not include all the details relevant to your situation. Please contact your MHM service provider to further discuss the impact on your financial statements.