This week, NVCA sent a letter signed by more than 70 of its member firms to the chairman and president of the Financial Accounting Foundation (FAF) supporting the recommendations of its Blue Ribbon Panel on Private Company Financial Reporting.   Two of the significant recommendations are 1) the development of more relevant and useful private company accounting standards and 2) the creation of a separate board to develop and maintain them. Currently, private company and public company accounting principles and standards are under the purview of the Financial Accounting Standards Board (FASB).

The letter comments that through this independent board, appropriate modifications to existing U.S. GAAP (Generally Accepted Accounting Principles) for private companies would be driven to reflect their financial statement users’ unique needs. Past efforts by FAF and FASB have not adequately addressed issues faced by private companies. Under current standards, areas of financial reporting such as FAS 157 and consolidation have proven to be extremely problematic. Applying accounting standards designed for public entities diverts precious private company resources to meet standards which result in statements which are not relevant, reliable, nor comparable. A private company board comprised of members with constituent experience would be best positioned to recognize the important needs of private company reporting. Such a group would also be able to ensure an effective and useful path to public company accounting principles as a company moves toward becoming public.

NVCA board member Jason Mendelson of Foundry Group served on the BRP along with a number of senior industry officials.

FAF is the parent organization of the Financial Accounting Standards Board (FASB) and the Government Accounting Standards Board (GASB). The Blue Ribbon Panel approved these recommendations in October 2010 and issued its final report in January 2011. On March 4, 2011, FAF announced an outreach effort by a working group of the trustees. NVCA felt it was important to state its viewpoint while the Working Group was actively seeking input and recommendations.