The Financial Accounting Foundation has spoken, and CPAs aren't happy about it. Not one bit.

The issue at hand is the need for GAAP exceptions and modifications for private companies.

Check that. The issue isn't the need for separate private company standards. Most folks agree that the need is real. The real issue is how to create and regulate those standards.

The consensus throughout the CPA profession is that a new board, independent of oversight by the Financial Accounting Standards Board, should be created to establish private company standards.

• The AICPA, the MACPA and 32 other state CPA societies, representing more than 275,000 CPAs nationwide, said so.
• So did CPAs themselves, who wrote thousands of letters to the FAF urging the creation of differential private company standards and an independent board to oversee those standards.
• So did an MACPA task force, which released a white paper earlier this year calling for the creation of an independent private company standards board.
• So did the famed Blue-Ribbon Panel on Standard Setting for Private Companies, which called for the creation of such a board back in January.

FAF trustees, however, have something different in mind.

They've announced a plan to create what they're calling the Private Company Standards Improvement Committee. According to Accounting Today's Michael Cohn, the committee would not be independent. In fact, writes Cohn, it “could still be overruled by FASB, which is overseen by the FAF.”

“In addition,” Cohn adds, “the chairman of the group would be a member of FASB and also would be appointed by the FAF trustees. Any changes in accounting standards for private companies would need to be approved by a two-thirds majority vote of the new council and would then be forwarded to FASB for ratification.”

Reaction from the CPA profession was swift and consistent.

From the AICPA: President / CEO Barry Melancon and Chair Paul Stahlin said they were “profoundly disappointed” in the FAF proposal. FASB's focus is — and must continue to be — on public companies, they said, making the need for a separate, independent private company board all the more urgent.

“The Blue Ribbon Panel and its diverse membership recommended the independent board for a reason,” Melancon and Stahlin said in a written statement. “Without the addition of a separate board, the goal of true private company financial reporting differences will not be consistently achieved. Unfortunately now, nine months after the Panel issued its report and after receiving more than 3,000 letters with 99 percent support for the Panel’s recommendations, the FAF has proposed a solution that continues to miss the mark.”

From the MACPA: Executive Director Tom Hood also expressed disappointment with the FAF plan. 

“I commend them for an open and thorough process that generated several thousand comments, yet their solution stops short of what the majority of letters asked for — a distinct but linked private company standards board dedicated to meeting the unique needs of small businesses,” Hood told CFO.com's Alix Stuart. “The new council is substantially close to the former Private Company Standards Reporting Committee (PCFRC), which was unsuccessful in getting any exceptions for private companies through FASB. The only difference I see is the new council reports to the FAF instead of FASB.

“I know our CPAs in Maryland will be disappointed in this final recommendation,” he added, “yet I am hopeful that this new council will take the needs of small businesses into consideration and that FASB will listen this time around.”

That about sums it up.

Now it's your turn. What do you think of the FAF's private company solution?