Historic changes in financial reporting are on the horizon for many of the nation's 29-million private companies and small businesses.

FASB's parent organization, the Financial Accounting Foundation (FAF), is expected to discuss a report this month recommending the formation of a new standard-setting board to establish exceptions and modifications to U.S. GAAP for private companies. This discussion follows the culmination of a year's worth of work by a blue-ribbon panel, which was formed in December 2009 as part of a joint effort by the AICPA, FAF and the National Association of State Boards of Accountancy, to examine private company financial reporting.

These discussions have been applauded by many privately held companies. While many of the financial reporting standards issued since the Enron scandal may make sense for publicly traded companies, many privately held companies and small business owners have stated that they feel compliance with these standards has not only made their financial statements more confusing, but has also placed an administrative and financial burden on their businesses. Those opposed to the formation of this new standard-setting board state that having two sets of reporting standards for public and private companies can create confusion to third-party users.

The blue-ribbon panel, which held five meetings during 2010, finalized its major recommendations at a meeting on December 10, 2010. The report containing the panel's recommendations has been submitted to FAF, which will consider the report at its February 15 meeting and thereafter release proposals for public comment.

For more information please contact your Engagement Principal or e-mail Scott Derco at sderco@smf-cpa.com.