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The paper, Private Company Decision-Making Framework: A Framework for Evaluating Financial Accounting and Reporting Guidance for Private Companies, contains initial FASB staff recommendations for criteria to determine whether and in what circumstances it is appropriate to adjust financial reporting requirements for private companies following US GAAP.
The decision-making framework would help the FASB and the newly created Private Company Council (PCC) identify the unique needs of users of private company financial statements as well as opportunities to reduce the complexity and cost of preparing private company financial statements in accordance with US GAAP.
Many private companies issue financial statements in accordance with US GAAP for the benefit of their investors and lenders. The FASB is the private-sector, independent, organisation that sets US GAAP standards used by private companies, public companies, and not-for-profit organisations.
Before it is implemented, the proposed decision-making framework must be agreed upon jointly by the FASB and the PCC. The PCC is a new body created by the Financial Accounting Foundation (FAF) to identify issues in US GAAP related to private companies and advise the FASB on ongoing private company issues. Working with the FASB, and guided by the framework, the PCC will determine whether exceptions or modifications to existing non-governmental US GAAP are necessary to address the needs of users of private company financial statements. The PCC then will identify, deliberate, and vote on any proposed changes, which will be subject to endorsement by the FASB and submitted for public comment before being incorporated into GAAP.
The recommendations contained in the Invitation to Comment reflect what stakeholders told the FASB staff about their experiences using, preparing, auditing, reviewing, and compiling private company financial statements. Individuals and organisations are asked to provide comments on six significant factors the staff identified that differentiate the financial reporting considerations of private companies, specifically:
The Invitation to Comment also seeks stakeholder feedback on five areas where financial accounting and reporting guidance might differ for private and public companies: