Key Findings from the FAF’s 2023-2024 Review of the Private Company Council (PCC) 

The Financial Accounting Foundation (FAF) recently released its comprehensive review of the Private Company Council (PCC), providing valuable insights into the effectiveness and future direction of this important advisory body. This review, published in 2024, represents the first formal evaluation of the PCC since 2015 and offers crucial insights for the accounting profession. 

Understanding the Context 

The PCC plays a vital role in the accounting standard-setting ecosystem. While the United States has several thousand public companies, it has millions of private entities spanning diverse industries, sizes, and structures. The PCC serves as an advisory board to the Financial Accounting Standards Board (FASB), ensuring these private entities’ perspectives are considered in the standard-setting process. 

Within the organizational hierarchy, the FAF oversees both the FASB and the Governmental Accounting Standards Board (GASB), with the PCC serving as an advisory body to the FASB specifically focused on private company matters. 

Review Process and Methodology 

The FAF conducted this review over a two-year period, beginning in early 2023 and concluding in 2024. Their comprehensive evaluation process included: 

• Internal Data Collection  
• Surveys of current and former PCC members 
• Input from FASB staff and FAF trustee liaisons 
• External Stakeholder Engagement  
• Virtual meetings with CPA firms serving private companies 
• Consultations with banking industry lenders 
• Discussions with other external stakeholders (e.g., specific industry associations, accounting professional bodies) 
• Request for Public Comment  

29 comment letters: 16 from practitioners, 12 from professional organizations, (including an institutional investors group), and 1 from an academic.  

Key Findings and Recommendations 

Mission, Remit, and Structure 

The review found strong stakeholder support for the PCC’s execution of its dual mission: 

• Advising the FASB on the application of accounting standards to private companies 
• Identifying necessary GAAP modifications for private organizations 

Stakeholders particularly praised the PCC’s work in areas such as goodwill, intangibles, and hedge accounting, while suggesting some room for improvement in developing additional GAAP alternatives for private organizations. 

Communication and Outreach 

This area received mixed feedback, with stakeholders identifying several opportunities for improvement: 

• Stakeholders reported an information gap between the PCC and its constituents, including lack of awareness about PCC activities and difficulty accessing information about its deliberations 
• Need for enhanced awareness and education initiatives 

FAF’s recommendations include: 

• Supporting a new agenda prioritization process 
• Creating an annual PCC report as a key communication tool 
• Enhancing the PCC website for improved user accessibility 

Meeting Operations and Culture 

The review found positive feedback regarding: 

• Meeting frequency (quarterly, with additional meetings as needed) 
• Meeting format and structure 
• Working group effectiveness 
• Overall cultural environment 

Stakeholders particularly appreciated the inclusive and prepared nature of PCC meetings, with the FAF recommending continuation of these successful practices. 

Size, Composition, and Recruitment 

This area received significant stakeholder attention, with several key points: 

• Concerns about ensuring adequate representation given the PCC’s limited size (9-12 members, including chair) 
• Challenge of representing the diversity of private companies 

FAF’s recommendations include: 

• Continuous evaluation of council composition to maintain stakeholder trust 
• Implementation of an “evergreen” application process for year-round submissions 
• Maintaining FAF’s appointment authority for final member selection 

Looking Forward 

The review sets several important changes in motion: 

• FASB will assume responsibility for future PCC reviews, with FAF oversight 
• Implementation of new communication tools and strategies 
• Enhanced recruitment processes while maintaining high standards for membership 

Conclusion 

Overall, the FAF’s review presents a positive assessment of the PCC’s effectiveness while identifying specific areas for enhancement. The recommended changes focus on improving stakeholder communication, ensuring diverse representation, and streamlining recruitment processes, all while maintaining the PCC’s strong operational foundation. These changes aim to further strengthen the PCC’s effectiveness in serving the private company sector and adapt it to the evolving accounting landscape.