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Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
Private Company Financial Reporting Initiative, Noll
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Private Company Financial Reporting Initiative, Noll

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  • 1. Private Company Financial Reporting Committee
  • 2. Outline
    • Background of Formation of Committee
    • Committee Charter
    • Prospective Projects
    • Meeting Highlights
    • How you can participate
  • 3. Private Companies Financial Reporting Committee
    • Latest effort by the profession to address needs of private companies
    • Long history of task forces, committees and research leading to this point
    • Important because the full support of FASB is behind this effort
  • 4. 1974- AICPA Committee on GAAP for Smaller and/or Closely Held Businesses
    • Was CPA focused
    • CPAs said user needs not met and financials too complex for users.
    • Recommended differential disclosures- same measurement and recognition.
    • FASB complied in certain standards- e.g. Earnings per share
  • 5. 1981- Special Committee on Accounting Standards Overload
    • Recommended that FASB reconsider certain standards
    • FASB simplify standards by avoiding complex and detailed rules
    • Promote/elevate income tax basis as substitute for GAAP
    • Differential recognition and measurement
    • Triggered FASB research study
  • 6. 1983- FASB- Invitation to Comment: Financial Reporting by Private and Small Public Companies
    • CPAs perceive lenders’ needs differently than lenders do
    • Creditor needs and decision-making processes are basically the same for private and public companies
    • Users need complete GAAP financials that are audited or reviewed
    • Cost/benefit equation differs based on company size
  • 7. 1983 Study Findings
    • 60% of practitioners supported different measurement in certain instances, financial managers split, 9% of users supported
    • GAAP financials important tool for banks even though they can get info directly from companies
    • FASB formed Small Business Advisory Group as sounding board
  • 8. 1996- AICPA Special Task Force on Standards Overload
    • Focus group of CPA’s concluded that there was a standards overload problem
    • Recommended increased small firm involvement in standard setting process (including representation on FAF and FASB
    • Literature simplification and codification (FASB-AICPA agreement on CD-ROM licensing
    • Disclosure guidance for OCBOA financials
  • 9. 2005- Report of PCFR Task Force
    • Attributes of GAAP reporting have high value according to constituents
    • Too many GAAP-specific requirements lack relevance or decision usefulness
    • Majority of each of constituent groups who had an opinion believed it would be useful if underlying accounting in GAAP reporting were different for public vs. non public
  • 10. 2005 Report Conclusions
    • GAAP for private companies should be developed based on concepts and accounting that are appropriate for the distinctly different needs of constituents of that financial reporting
    • Fundamental changes should be made in the current GAAP standard setting process to ensure that the financial reporting needs of private company constituents are met
  • 11. May 2005 AICPA Council Resolution
    • AICPA hereby supports the development of high quality GAAP for privately-held, for-profit entities based on concepts and accounting that are appropriate for the distinctly different needs of constituents of private company financial reporting, and
    • Council instructs AICPA management to work with the FAF and FASB to identify and implement a process to develop GAAP for privately-held entities, which would result in recognition, measurement, and disclosure differences, where appropriate, from current GAAP as applied by public companies.
  • 12. FASB’s Take on Events
    • Leadership was listening to its constituents from all quarters
    • Commitment to ensuring that GAAP meets the needs of users
    • Figure out the best way forward
  • 13. Joint FASB/AICPA Proposal
    • Title: “Enhancing the Financial Accounting and Reporting Standard-Setting Process for Private Companies”
    • New dedicated Web site –
    • pcfr.org
    • Comment period ended 8/15/2006
  • 14. Focus
    • Consideration of user needs and costs/benefits to determine whether differences in GAAP for recognition, measurement, presentation, disclosure, and effective dates are needed for private companies
  • 15. Process Enhancement Elements
    • Improvements to current FASB processes
    • Private Companies Financial Reporting Committee formed January, 2007
    • Funded by FASB
  • 16. FASB Processes Related to Private Companies
    • FASB staff provides FASB Board with possible alternative solutions for private companies
    • FASB Board (and resulting basis for conclusions) explicitly addresses consideration of differences
  • 17. PCFRC
    • Chair selected by FASB
    • Chair selects committee members
    • Committee consists of 4 users, 4 preparers and 4 practitioners from various size companies/firms
    • Users are two commercial lenders, one surety and one venture capitalist
  • 18. Our Constituency
    • Limited to Private, For Profit Entities
  • 19. Committee Charter
    • Committee members as individuals serve as a resource to FASB, EITF and FASB staff during research phase before an ED is developed
    • Committee makes formal recommendations to FASB on prospective standard setting activities
    • Committee makes formal recommendations on existing standards
  • 20. Committee Charter
    • Committee sets its own agenda
    • Committee meets in public to deliberate and reach conclusions
    • Committee makes formal recommendations to FASB
    • Motion to set forth recommendations to FASB requires affirmative vote of two thirds of committee members
  • 21. Committee Meetings
    • Committee will meet 4-6 times per year
    • Meetings will be held around the country to allow constituents to observe
    • Part of each meeting set aside for observers to comment
    • Highlights of committee meetings posted to website
  • 22. Projects- FASB Pipeline
    • At May meeting PCFRC discussed the standard setting activities ongoing at the FASB and decided to address the projects listed below.
    • International Convergence
      • Certain PCFRC members will monitor this project.
    • Liabilities and Equity
      • Task force formed to address this project.
    • Financial Statement Presentation
      • Task force formed to address this project.
  • 23. Projects- FASB Pipeline
    • Leases
    • Task force formed to address this project. PCFRC will initially focus on the scope of this project.
    • FASB 133 Hedging
    • The PCFRC has an interest in this project and certain committee members will monitor this project.
    • Business Combinations
    • Task force formed to address this project.
  • 24. Projects- FASB Pipeline
    • Small- and Medium-Sized (“SME”) Entities (IASB-related)
      • The FASB can arrange an in-depth briefing on this project from the IASB. Certain PCFRC members will monitor this project.
    • Revenue Recognition
      • This project is further out on the horizon.
  • 25. Subsequent Events
    • The objective of this FASB project is to establish general standards of accounting for and reporting of events that occur subsequent to the balance sheet date
    • Existing requirements currently contained in the auditing literature- need to move to FASB
    • Project also considers whether certain minor differences between U.S. GAAP and the corresponding international financial reporting standard could be eliminated or minimized.
  • 26. Subsequent Events- PCFRC Recommendation to FASB
    • PCFRC recommends that FASB require private companies to disclose in a policy note to the financial statements the cut-off date in which subsequent events were considered by management for purposes of subsequent events analysis and disclosure.
    • PCFRC recommends that the FASB stay the course on its current tentative decision not to converge with international accounting standards related to refinancing of short-term obligations and curing breaches of borrowing covenants.
  • 27. PCFRC Recommendations on Proposed FSP-154-a
    • Considering the Effect of Prior-Year Misstatements When Quantifying Misstatements in Current-Year Financial Statements
    • 1. Extend effective date for fiscal years ending AFTER 12/15/2007
  • 28. 154-a Recommendations
    • 2. Remove requirement that provides for differing transition approaches depending on how entity previously evaluated materiality
    • 3. Remove references to SAB 99
    • 4. Disclosures to reconcile retained earnings
    • 5. FASB exercise caution in bringing public co regulations to private companies
  • 29. PCFRC’S Agenda for Existing GAAP
    • FIN 48
    • FIN 46R
    • FASB 123R
    • FIN 48 was selected first because of the upcoming effective date.
  • 30. User Needs
    • User members of the PCFRC walked the PCFRC through the processes they use to make lending, investment, and bonding decisions
    • The PCFRC discussed what the needs are of users of private company financial statements, how to identify those needs, and how those needs drive the demand for financial information.
  • 31. Next Meeting
    • July 26-27 in Denver
    • Will begin work on FIN 48 and FIN 46R
    • Meeting open to the public
    • Meeting materials posted to website three weeks prior to meeting
    • Website: www.pcfr.org
  • 32. How Can You Participate?
    • Become a member of our Resource Group- sign up on website and receive notification of meetings and meeting summaries
    • Resource Group will be tapped for special task forces and input on projects
    • Attend meetings and speak during open mike session
    • Email chair with ideas and opinions
  • 33. Your Thoughts
    • In your opinion, what are the top two existing GAAP standards that the new Committee should consider for different GAAP?
    • If you have given it any thought, what would be your different accounting for each of your top two?
  • 34. Questions? www.pcfr.org

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