separate standard-setting board for privately
held companies.
However, the overhaul actually dates back
prior to the establishment of the Blue Ribbon
Panel last year by the FAF, the American Institute of CPAs and the National Association
of State Boards of Accountancy. When John
Brennan was elected chairman of the FAF in
February 2009, according to Polley, the trustees began doing more outreach to private
companies and their stakeholders.
“The private company issue has been dis-
cussed for decades,” Polley said. “When Jack
Brennan was appointed, we conducted a lis-
tening tour. We went all around the country
and listened to various constituents about
what do they think of the FASB, what do they
think of the GASB, and also what do they
think of the FAF, which frankly most of them
had never heard of. But one of the things we
did hear was that private companies felt they
were not getting enough consideration in the
standard-setting process. So the first step in
the process was to create the Blue Ribbon
Panel in conjunction with the AICPA and
NASBA. They went through the process,
which took approximately a year. They gave
their findings to the board of trustees at their
February meeting. Following that, the trust-
ees created a working group of about half a
dozen or so trustees and some senior staff at
the FAF, and we’ve been conducting outreach
since then.”
Polley noted that the FAF working group
met with representatives from small CPA
firms and the Big Four, along with preparer
groups, investor representatives, large and
small banks, and all of the FASB advisory
groups. “The trustees are now pulling all
of this input together, doing their own
thought process, and what I would antici-
pate is that by the end of this month or early
next month will be coming out with their
proposal on potential structural changes,
process changes, to the standard-setting
process, to more fully consider non-public-
entity issues,” she explained.
She noted that the recommendations will
encompass not only standards for private
companies, but also for not-for-profits, and
that the possibilities under consideration run
a wide range, from leaving FASB the way it is
to creating a separate standard-setting body
under the FAF.
“Remember, the Blue Ribbon Panel focused on private companies, but the trustees focused on getting information both on
private companies and on not-for-profit organizations,” said Polley. “So their proposal
was going to look at both. Once they issue
that, I would anticipate a comment period
FAF
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1
would be very helpful,” she explained. “It’s
been a seamless transition, and all returns
would say that it’s been a success and what
we wanted to accomplish.”
Adding private company and investor per-
spectives is particularly useful, as those are
the two constituencies that the standard-set-
ters hear the least from. “Getting investors
and users of financial statements to weigh in
is always a challenge, and we’re always look-
ing for ways to improve that,” Polley said. “We
have a team on the FASB who’s charged with
user outreach, and they’ve been doing a great
job over the last several years in trying to in-
crease that.” Trustees and board members
with backgrounds in investment and state-
ment use have also been very helpful in get-
ting investors to talk, she added.
Feedback from private companies and
small public companies is also difficult to
elicit. “At the SEC roundtable in early July,
the small public companies basically said, ‘If
you think I’m going to write a comment letter, you’ve got to be kidding, because I don’t
have the time,’” Polley said. “I think that’s the
challenge we have with small public companies and with private companies. We’ve
tried to create an easier method for private
companies to weigh in on various proposals
by just going to the Web site, and there’s a
portal you can go to where you don’t have to
write a formal comment letter, but you can
still weigh in in a formal way without writing
a formal comment letter.”
On the government front, Polley discussed
a recent initiative of the FAF to have a group
of independent academics do some research
on the scope of GASB’s mission.
The project, which was spurred on by the
trustees, as well as some controversies over
certain recent GASB projects, will involve
talking with all kinds of constituents and
putting out a survey, with the goal, according to Polley, of finding out, “What are the
guardrails of financial reporting, and where
within those guardrails does the GASB’s
mission fall? If you think about the basic financial statements and notes, some people
would say that’s clearly within the GASB’s
mission, and then to the extent that they’re
putting out other guidance — for example,
the guidance on Service Efforts and Accomplishments, and the project underway on
fiscal projections, which has caused some
controversy — so the researchers are trying
to find out what type of information users
want, and do you need standards, and if there
should be standards or guidelines, who is the
best source of setting those guidelines?”
The researchers will report their findings
— but no recommendations — to the FAF
trustees by the end of the year. The trustees
will then look at GASB’s mission in light of the
researchers’ report. AT
‘If changes
are made,
they will be
implemented
some time
in 2012.’
of at least 60 days, and possibly longer than
that to enable constituents to have the time
to comment.”
Polley indicated that if the changes are
made, they wouldn’t happen until next year.
“The trustees will consider the comments that
they have received and then make a decision
as to whether they will implement or make
changes, and that would be the final step, ob-
viously,” she said. “If changes are made, they
will be implemented some time in 2012.”
BETTER BOARDS
Speaking more broadly, Polley pointed out
some of the things that the foundation has
been doing to improve its operations, and
those of the boards it oversees.
She noted, for instance, that the decision
late last year to expand FASB’s board from five
members to seven — reversing a reduction
made in 2007 — has achieved its purpose.
