NASBA FAF & Private Company Issues Terri Polley, President & CEO Financial Accounting Foundation Anchorage, Alaska June 29, 2012 1
The Definition of an Accountant Someone who solves a problem you did not know you had in a way you don t understand 2
Program Agenda FAF An Overview Private Company Standard Setting 3
Financial Accounting Foundation 4
FAF Mission Objectivity Broad participation Oversight HIGH QUALITY STANDARDS 5
FAF Trustees Leadership Promote & protect independence & integrity of standardsetting Oversee & hold accountable standardsetting boards due process Stewardship in carrying out organization s mission 6
FAF Oversight Timeline of Key Events FAF forms Standard- Setting Process Oversight Committee FAF Announces Post- Implementation Review (PIR) Process 2008 2009 2010 2011 FAF Trustee Listening Tour FAF commissions study on role of GASB standards in assessing accountability of reporting governments 7
Financial Accounting Foundation 8
The Challenge Globalization Comparability Complexity User needs 9
Private Company Key Events FASB creates Private Company Financial Reporting Committee (PCFRC) FAF works with AICPA & NASBA to create Blue- Ribbon Panel FAF appoints several Trustees and senior FAF staff members to a Working Group FAF releases and seeks public comment on plan to create PCSIC 2006 2009 2010 Jan. 2011 Oct. 2011 May 2012 FAF creates Standard- Setting Process Oversight Committee FAF undertakes nationwide listening tour Blue-Ribbon Panel submits report to FAF Trustees FAF establishes the Private Company Council (PCC) 10
Lessons Learned PCFRC Trustee Listening Tour Trustee Working Group 11
Oct. 2011 FAF Issues Initial Plan Goals of the initial plan: Establish a strong body with agenda-setting authority and voting rights - Trustee oversight Prevent development of a two GAAP system - Retain FASB as the sole U.S. standard setter 12
Plan Input/Outreach 7,367 Comment Letters from 9 types of respondents Four roundtable discussions, nationwide 60 roundtable (stakeholder) participants 316 webcast participants 13
Key Issues: What Stakeholders Told Us FASB influence Structure: Chair, Size, Agenda, Meetings Ratification process Staffing Private Company Framework Oversight 14
The Private Company Council May 30, 2012 FAF Trustees issue Establishment of the Private Company Council 15
The Private Company Council Responsibilities Based on criteria agreed on with FASB, PCC identifies, deliberates and votes on proposed modifications to existing U.S. GAAP for private companies - Recommendations subject to FASB process PCC is primary advisory body to FASB on private companies for active technical agenda issues 16
The Private Company Council Membership and Terms 9-12 members, including chair, appointed by FAF Chair is not FASB member Initial 3-year term Members & chair to have considerable experience with private company issues Serve without compensation 17
The Private Company Council Meetings and Agenda Agenda set by supermajority vote of PCC PCC to meet at least five times annually All deliberative meetings open to public FASB expected to attend 18
The Private Company Council Endorsement Process and Voting PCC uses agreed upon criteria to identify, deliberate and vote on GAAP exceptions - Two-thirds (supermajority) vote required FASB endorsement process for PCC recommendations by simple majority FASB expected to act within 60 days 19
The Private Company Council Endorsement Process and Voting If FASB endorses: - Public comment/due process - PCC redeliberates and votes supermajority - FASB makes final endorsement simple majority - FASB issues Accounting Standards Update 20
The Private Company Council Endorsement Process and Voting If FASB does not endorse: - FASB chair to provide PCC with written notice - FASB to outline changes that could result in endorsement 21
The Private Company Council Oversight FAF Private Company Review Committee has primary oversight duties for first three years Review Committee to hold PCC and FASB accountable for achieving goals Ongoing monitoring, regular reporting Overall PCC assessment after three years 22
The Private Company Council Nominations accepted until June 30 Selection Criteria - Background and interest in private company financial reporting - Understand and respect conflicting views - Consider all evidence and analyze objectively - Communicate effectively 23
FASB Private Company Activities Decision-making Framework for Private Companies Definition of a Nonpublic Entity To be used by the PCC and the FASB in evaluating potential differences Sets entity scope for Framework (and potentially for PCC membership) Not-for-profit (NFP) organizations scoped out / FASB working separately with its NAC on NFP matters Sets definition for Codification (for private companies and NFPs) 24
FASB Private Company Activities FASB expects to issue draft decision-making framework for comment as a staff document in June/July PCC will evaluate comments with FASB Draft likely to be re-exposed before comment before finalizing 25
PCC Next Steps June 1-30: PCC call for nominations (members and chair) Late August: Chair and most members selected September: Member selection process complete 4Q 2012: PCC hosts first meeting 26
The Private Company Council Nominations accepted until June 30 Submit nominations to: PCCNominations@f-a-f.org or: Robert Kalina, VP Human Resources Financial Accounting Foundation 401 Merritt 7; P.O. Box 5116 Norwalk, CT 06856-5241 27
Talk to Us! www.accountingfoundation.org tspolley@f-a-f.org twitter.com/fafnorwalk 28
The FAF and Private Company Issues 29