Private company council to be reviewed for effectiveness, trustees say

The Private Company Council (PCC) has been placed under “a formal review” to assess its effectiveness in working as the FASB’s primary adviser on developing accounting rules for privately held companies, the board’s trustees said.

As part of that effort, the Financial Accounting Foundation (FAF) will issue a consultation document this week to solicit public comment about the PCC, trustee chair Edward Bernard said on Feb. 27, 2024. “Stakeholder contributions are important to the success of this review and critical to the governance process,” he said.

The FAF will issue the document on Feb. 29 with a May 31 comment deadline, according to the discussions.

“Specifically what we’re looking for is opportunities for improvement; opportunities for stakeholders views as to the effectiveness,” added Timothy Ryan, co-chair of the FAF’s Standard-Setting Process Oversight Committee.

The PCC is composed of 12 members who work in the private sector, including as financial statement preparers, users, and auditors. The body uses the Private Company Decision-Making Framework to advise the FASB on the appropriate accounting treatment for private companies for items under active consideration on the FASB’s technical agenda. The PCC also advises the FASB on possible alternatives within GAAP to address the needs of users of private company financial statements. Any proposed changes to GAAP are subject to endorsement by the FASB.

The trustees’ review comes at a pivotal time for the PCC as it recently appointed Jere Shawver as chair to succeed Candace Wright who vacated the seat at the end of last year after serving several terms.

This is the second formal review of the PCC since it was established in 2012. The last review took place in 2015.

In response to the last review, FAF trustees made targeted improvements to increase the PCC’s effectiveness without significantly changing the PCC’s roles and responsibilities, including the establishment of working groups within the PCC for active FASB projects, mechanisms to increase the transparency of the PCC’s discussions and views, and creation of a PCC Technical Agenda Consultation Group.

In Aug. 2019, the FAF Trustees amended the PCC’s operating procedures to increase the maximum length of a PCC member’s second term from two years to three years. In Nov. 2021, the FAF amended the PCC’s operating procedures to add an eight-year term limit for the PCC Chair.

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