FASB exposes its new standards-setting process for private companies

Just last week, the board of trustees of the Financial Accounting Foundation (FAF) issued a request for public comment on a new plan intended to improve the standard-setting process for private companies, according to a recent release:

The plan proposes the establishment of a new Private Company Standards Improvement Council (PCSIC). Working jointly with the Financial Accounting Standards Board (FASB), the PCSIC would develop criteria for determining whether and when exceptions or modifications to US GAAP are warranted for private companies. Based on those criteria, the PCSIC would conduct a review of existing US GAAP and identify standards that require reconsideration and vote on possible exceptions or modifications for private companies. Any proposed changes to existing US GAAP would be subject to ratification by the FASB and undergo thorough due process, including public comment.

The FAF board of trustees would oversee the PCSIC, replacing the Private Company Financial Reporting Committee (PCFRC), a FASB advisory-only body formed in 2006. At least one financial organization has endorsed the proposal. George W. Beckwith, chairman of FEI’s Committee on Private Co. Standards, says he is pleased with the exposure draft and believes that “the basic theme of the FAF’s proposal” is a “big step” and shows that the “FAF has been listening to the concerns of its private company constituents.”

The complete FAF plan and press release are now available. “We encourage you to visit the FAF web site to review and offer comments on the plan,” says the FAF. Public comments are due by Jan. 14, 2012.