Private Company Council Case

1. The establishment of Public Company Council (PCC) targets to determine whether and when exceptions or modifications to US GAAP are warranted for private companies and to act as a primary advisory body to the FASB on private company issues. In this case, private company needs can be addressed as thoroughly or directly as had been intended.

2. In my point of view, I think there should only be one set of standards that focuses on the economics of business transactions for both public and private companies. First, the recognition and measurement of an economic event is the same for both public and private companies. Second, establishing an independent private company standard would affect the accounting practices of the majority of the U.S. corporations today, while limiting the applicability of GAAP to the comparatively small universe of publically traded companies. Also, establishing two sets of US GAAP is not a desired outcome. Creation of a separate standard-setting board would likely lead to that outcome over time. Last but not least, a single set of standards would sustain the comparability and consistency of companies. In fact, PCC is private company standard improvement council. It modifies and exempts standards which addressed private companies needs based on US GAAP, hence it’s not an independent body under the FAF, equal to the FASB.

3. Single set of accounting standards

Advantages

* Sustain consistency and comparability between companies

* Follow the GAAP regime, less conflicts with IFRS

* Decision-useful information is comparatively efficient

Disadvantages

* US GAAP was largely aimed at meeting the needs for public-traded companies and their dispersed shareholders, the engagement between the FASB and private company constituents is not effective as desired

* US GAAP is increasingly complex for private companies to apply, application cost is too high to afford by some private companies

Benefits of having a separate set of...