Changes in Private Company Financial Reporting on the Way?
If you are a private business owner, are you aware that financial accounting changes may be on the way?
In 2010, the Blue Ribbon Panel on Private Company Financial Reporting explored changes that would best meet the needs of users of private company financial statements. This panel was sponsored by several organizations including the AICPA, the Financial Accounting Foundation (FAF), and the National Association of State Boards of Accountancy.
Two significant recommendations from the Panel signal that changes are on the way. First, they recommended a new, separate board with standard-setting authority under the oversight of the FAF. Second, there will be changes and modifications to existing and future GAAP that reflects the unique needs of users of private company financial statements.
These recommendations arise from the long-standing criticism that what drives accounting standards is driven primarily by issues affecting public companies. Lenders, investors, and business owners regularly question the relevance and usefulness of GAAP as it relates to private companies.
We hope these changes will provide some relief to private companies. There will, however, be a transition period where private business owners, CFOs, and accountants will re-educate themselves on the changes. Keep your ears open on changes that may affect you in the near future.