FAF reevaluates role of PCC

The Financial Accounting Council is reviewing the effectiveness of the Private Company Council, the group that advises the Financial Accounting Standards Board about the perspective of privately held companies.

The PCC emerged in 2012 after the FAF, which oversees both FASB and the Government Accounting Standards Board, heard feedback from private companies that they would like more of a voice in standard-setting at FASB.

Previously, FASB and the American Institute of CPAs had operated a joint committee known as the Private Company Financial Reporting Committee. The FAF, the AICPA and the National Association of State Boards of Accountancy set up a Blue-Ribbon Panel on Standard Setting for Private Companies in 2009 to study the problem of allowing greater input private companies, and the panel issued a plan in 2011 calling for establishment of a separate council under the oversight of the FAF that would hold its own votes.

FASB, GASB and FAF logos on the wall at headquarters in Norwalk, Connecticut

However, within a few years, it became more of an advisory committee to FASB, much like the Financial Accounting Standards Advisory Council, but not a standard-setter in its own right. The PCC still meets regularly, most recently in December, and FASB continues to report on its meetings.

The PCC uses a Private Company Decision-Making Framework to advise FASB on the appropriate accounting treatment for private companies for items under active consideration on FASB’s technical agenda. The PCC also advises FASB on possible alternatives within U.S. GAAP to address the needs of users of private company financial statements. But any proposed changes to GAAP are subject to endorsement by FASB.

The Financial Accounting Foundation released on Thursday a request for public comment as part of its effectiveness review of the PCC. It said its trustees periodically review the effectiveness of the PCC, including soliciting public input from stakeholders. However, the last such review occurred nearly a decade ago, in 2015, only three years after the PCC was established, and the trustees decided last year it was time to conduct a second full review of the PCC.

Among other questions, the FAF trustees are now asking for stakeholder thoughts on the effectiveness of the PCC in proposing alternatives within GAAP to help users of private company financial statements, as well as its effectiveness in providing private company perspectives to the FASB as FASB considers modifications to GAAP. Stakeholders can find the full request for public input here. Comments should be sent by May 31.

“We are pleased to open the public comment period of our PCC review and look forward to hearing directly from stakeholders about opportunities to make the PCC even more effective in fulfilling its mission,” said FAF trustee and PwC U.S. chair and senior partner Timothy Ryan, in a statement Thursday.

“Stakeholder views are critical to the success of our PCC review and a vital part of the review process,” added FAF trustee and former Virginia treasurer Manju Ganeriwala in a statement. “We are eager to receive and carefully review their input.”