Separate Accounting Rules for Private Firms?

04.10.2011
Should private companies that report financial results to lenders or investors do so under the current set of Generally Accepted Accounting Principles, which is more oriented to public companies? Or does it make sense to develop a set of standards, independent of GAAP, specifically for private firms?

And one more thing: What body should develop the standards? The FASB as it currently stands, or a new entity focused on private companies?

It's hardly a new are of debate. Indeed, while it's captured more attention the last year or two, the issue has provoked of discussion for about four decades, says Barry Melancon, president and chief executive officer with the American Institute of Certified Public Accountants. "Every time we've debated it," he says, "there have been roadblocks and nothing happened."

Since its formation in 2007, has met with, and made several recommendations to, the Financial Accounting Standards Board. Key proposals from the commission -- a FASB-sponsored technical advisory group made up of accountants, bankers as well as financial professionals with private companies -- included one to exempt private companies from FIN-48, which covers accounting for uncertainty in income taxes, have been rejected.

Then, in late 2009, the AICPA; the , which provides oversight to FASB; and the National Association of State Boards of Accountancy established a on Standard Setting for Private Companies. The goal of the panel, formed to look at the issue of standards from a policy level, has been to address how U.S. accounting standards can best meet the needs of users of private company financial statements.