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Focus on Private Company Financial Reporting: FASB And PCC Issue Private Company Framework

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As part of their ongoing commitment to consider the needs of users and preparers of private company financial statements, the Financial Accounting Standards Board (FASB) and the Private Company Council (PCC) have issued the Private Company Decision-Making Framework (Guide). Such a framework was a recommendation of the Blue-Ribbon Panel on Standard Setting for Private Companies in January 2011. As part of the process of establishing the PCC, the Financial Accounting Foundation had determined that one of the responsibilities of the PCC would be to develop, jointly with the FASB, criteria for determining whether and in what circumstances alternatives within U.S. generally accepted accounting principles (GAAP) are warranted for private companies.
January 13, 2014
As part of their ongoing commitment to consider the needs of users and preparers of private company financial statements, the Financial Accounting Standards Board (FASB) and the Private Company Council (PCC) have issued the Private Company Decision-Making Framework (Guide). Such a framework was a recommendation of the Blue-Ribbon Panel on Standard Setting for Private Companies in January 2011. As part of the process of establishing the PCC, the Financial Accounting Foundation had determined that one of the responsibilities of the PCC would be to develop, jointly with the FASB, criteria for determining whether and in what circumstances alternatives within U.S. generally accepted accounting principles (GAAP) are warranted for private companies.

The Private Company Decision-Making Framework is intended to assist the FASB and the PCC in determining whether and when to provide alternative recognition, measurement, disclosure, display, effective date, or transition guidance for private companies reporting under GAAP. The Guide will be used by the FASB and the PCC, along with the existing FASB conceptual framework for financial reporting, in making user-relevance and cost-benefit evaluations for private companies.

The Guide describes the following five significant factors that differentiate the financial reporting considerations of private companies from public companies:
  • The number of primary financial statement users and their access to management
  • The investment strategies of primary users
  • The ownership and capital structures
  • Accounting resources, and
  • The manner in which preparers learn about new financial reporting guidance.
PCC Chairman Billy Atkinson stated, “The Guide is intended to assist the PCC in identifying alternatives to U.S. GAAP based on the needs of users and preparers of private company financial statements. It should ensure that the quality of reported information remains high for the benefit of all private company stakeholders and our capital markets.”

The full text of the Private Company Decision-Making Framework can be viewed here.

 

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