Final report on establishing the new Private Company Council
The Financial Accounting Foundation has issued its final report on establishing the new Private Company Council (PCC) that will determine whether exceptions or modifications to existing US GAAP are necessary to address the needs of users of private company financial statements. The final report spells out the details on the new council.
As reported earlier, the United States Financial Accounting Foundation (FAF) Board of Trustees have announced the establishment of a new body (Private Company Council, PCC) to improve the process of setting accounting standards for private companies. The final report published yesterday gives all the details concerning the role and the responsibilities of the new PCC (the summary below is based on extracts from the final report).
- Authority and Critical Responsibilities - The PCC will have two principal responsibilities: (1) determine whether exceptions or modifications to existing non-governmental U.S. Generally Accepted Accounting Principles (U.S. GAAP) are required to address the needs of users of private company financial statements; (2) serve as the primary advisory body to the Financial Accounting Standards Board (FASB) on the appropriate treatment for private companies for items under active consideration on the FASB’s technical agenda.
- Membership and Terms - The PCC will comprise 9 to 12 members, including a Chair, all of whom will be selected and appointed by the Board of Trustees. The PCC Chair will not be affiliated with the FASB and will have had substantial experience with and exposure to private companies during the course of his or her career. PCC members will include users, preparers, and practitioners who have significant experience using, preparing, and auditing (and/or compiling and reviewing) private company financial statements. Members will be appointed for a three-year term and may be reappointed for an additional term of two years.
- FASB Liaison and Staff Support - A FASB board member will be assigned as a liaison to the PCC. FASB technical and administrative staff will be assigned to support and work closely with the PCC to leverage the FASB’s resources and avoid duplication of efforts.
- Meetings - During its first three years of operation, the PCC will hold at least five meetings each year, with additional meetings if determined necessary by the PCC Chair. The meetings of the PCC will be open to the
- PCC Agenda Setting and Due Process for existing U.S. GAAP - The PCC will determine its agenda in consultation with the FASB and with input from stakeholders. Based on agreed-upon decision-making criteria, the PCC will conduct a review of existing U.S. GAAP and identify standards that it will
consider for possible exceptions or modifications. Proposed modifications or exceptions to U.S. GAAP approved by the PCC will be provided to the FASB for a decision on endorsement.
- PCC Role in Projects on FASB Agenda - For projects under active consideration on the FASB’s technical agenda, the PCC is the primary advisory body to the FASB about the implications for private companies.
Recommendations of the PCC will be considered by the FASB in its deliberations, and the FASB will be responsible for documenting, in the basis for conclusions of its proposed and final Accounting Standards Updates, how
it separately considered the needs of private companies and the recommendations from the PCC.
- Oversight - The FAF Board of Trustees will create a special-purpose
committee of Trustees, the Private Company Review Committee (Review Committee), which will have primary oversight responsibilities for the PCC for its first three years of operation. The Review Committee will hold both the PCC and the FASB accountable for achieving the objective of ensuring
adequate consideration of private company issues in the standard-setting process.
- FAF Trustees’ Three -Year Assessment - Following its first three years of operation, the FAF Trustees will conduct an overall assessment of the PCC
to determine whether its mission is being met and whether further changes to the standard-setting process for private companies are warranted.
Please click for access to the full report on the FASB website.