Accounting standard-setters are making strides toward a flexible new process designed to carve out exceptions or modifications of US GAAP for private companies. Major steps taken include:
- a decision by the FASB’s parent organization, the Financial Accounting Foundation (FAF), to establish a Private Company Council (PCC),
- the development of a prototype of a decision-making framework to guide the Council’s thinking and help set expectations, and
- the initiation of a project to agree on a definition of the entities to which the Council’s decisions will apply.
Although PCC members have not been named and the framework and definition are still evolving, these developments are important because they send a clear signal that the FASB is determined to devote the necessary resources to private company financial statements and because they provide a glimpse into the key issues to be addressed in the coming months.
To help companies prepare for change, our latest MHM Messenger provides an introduction to the three key elements in the new process (the PCC, framework and definition) and highlights the open questions.