Norwalk, CT, June 10, 2013—The Financial Accounting Foundation (FAF) today issued the following statement regarding the Financial Reporting Framework for Small and Mid-Sized Enterprises released today by the American Institute of Certified Public Accountants (AICPA). The statement should be attributed to Robert W. Stewart, FAF vice president of communications.

“Everyone who has an interest in private company financial reporting – lenders, investors, and private company executives – needs to understand the significant and substantive differences between the two separate efforts now underway – one by the FASB, the other by the AICPA – to address the accounting concerns of private company stakeholders.

“The FASB, working with the new Private Company Council, is seeking to identify areas in U.S. Generally Accepted Accounting Principles where appropriate alternatives could reduce costs and complexity for private companies without sacrificing the transparency, comparability and reliability of GAAP financial statements.

“The AICPA, with its Financial Reporting Framework, is creating a non-GAAP, special purpose framework (otherwise known as an Other Comprehensive Basis of Accounting, or OCBOA) for smaller, owner-managed, ‘Main Street’ businesses, whose lenders or investors do not require the comprehensiveness of GAAP financial statements.

“A central responsibility of the FASB is to ensure that the public understands that there are significant differences between GAAP and non-GAAP financial reporting. We appreciate that the AICPA has made it clear in its press release and marketing materials that its new framework is not – and is not intended to be – GAAP. The AICPA also has made it clear that businesses and accounting firms should carefully consider which financial reporting methodology – GAAP or non-GAAP – is most appropriate, given the business' unique circumstances.

“Clearly articulating the specific differences between GAAP and the AICPA framework in financial statements and supporting materials will help ensure that financial statements that are non-GAAP are not mistaken for GAAP and that companies that may in the future require GAAP financial statements understand the implications of using a non-GAAP reporting model.

“We also note that the FASB today voted to endorse and expose for public comment three proposals from the Private Company Council to simplify private company accounting within GAAP. One proposal involves accounting for intangible assets acquired in a business combination. The second involves accounting for goodwill. The third involves accounting for certain types of interest rate swaps.

“The FASB and the PCC have undertaken this work using a deliberative due process built on independence and objectivity that seeks public input from a full spectrum of interested parties. We believe that this is an excellent first step in the effort to make GAAP more responsive to the concerns of private company stakeholders and highlights the important work underway at the PCC.”

About the Financial Accounting Foundation

The FAF is responsible for the oversight, administration, and finances of both the Financial Accounting Standards Board (FASB) and its counterpart for state and local government, the Governmental Accounting Standards Board (GASB). The Foundation is also responsible for selecting the members of both Boards and their respective Advisory Councils.