Article Analysis

Article Analysis

In this analysis, I summarize the article “FAF Creates Private Company Council” written by Ken Tysiac and offer conclusions on this article.

Article Summary

At the beginning of this article, Ken states that Financial Accounting Foundation (FAF), FASB’s parent organization, voted to establish Private Company Council (PCC) for creating differences in U.S. GAAP for private companies on May 23. As a result, FASB will be responsible for “endorsement” rather than “ratification” of PCC decisions. Then he discusses three changes from the recommendations FAF made in October:

1. The PCC chair will not be a FASB member.

2. FASB will have 60 days to act on PCC decisions. It must provide public, written reasons when failing to endorse a PCC decision.

3. The PCC will identify and vote on exceptions and modifications to U.S. GAAP for private companies.

Then Ken discusses the steps to process the differences in U.S GAAP advanced by the PCC. If the majority members of FASB endorse the differences, the PCC decision will go public for comments. After the comment process, the PCC will redeliberate the proposed exceptions or modifications and send final decisions to FASB, which will be incorporated into U.S. GAAP. In addition, he also mentions that a FAF committee will oversee the interaction between the PCC and FASB when responding to the needs of private companies.

At last, Ken talks about the response of the AICPA and states that AICPA also supports the PCC and is planning to create an “other comprehensive basis of accounting” (OCBOC) to fulfill the needs of small and medium-size private companies that are not qualified to file U.S. GAAP financial statements.

Conclusions

From this article, I can see the importance of establishing the PCC. It will identify and vote on exceptions and modifications to U.S GAAP for private companies and it will reduce FASB’s roles. FAF “has taken solid steps in the right direction” by establishing the PCC. The PCC and...