The issue. This gives a clear picture of

                The article mentioned above was an informative one about how John “Jack” J. Brennan, chairman of the Financial Accounting Federation, tried to seek advice on whether there was any need of the FAF creating a new body, the Private Company Council (PCC), for the privately held companies to determine generally accepted accounting principles (GAAP) on March 1,2012. The article was informative of both sectors but Brennan stand is questionable. He was the one who came up with the idea but seems to be lost in between not implementing it and the after effects of implementing it.

            Different parties had torn decisions or ideas to share in this meeting. Those against the Financial Accounting Standards Board (FASB) were of the idea that the PCC be independent of the FASB while the Big Four auditing firms on the other hand were in the notion that there were no differences between the public and private company accounting and that the issue at hand, demand for independent private-company standard setter, was the wrong issue. This gives a clear picture of how different these two groups are. It is quite evident that they are both out looking after their self-interests. Brennan tried to reason with the two parties, trying to find a common ground on which they would agree. This made him question whether the integrity of the U.S. GAAP was being compromised.

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            In the defense of Brennan, it is actually very important to have a body regulating and keeping an eye on the private sector accounting. Ever since the market crash of 1929, public listed companies in the United States were required to prepare financial reports in accordance with U.S. GAAP in order to avoid a repetition of history as the one caused by the Great Depression. This was mainly to safeguard the integrity of the U.S. capital markets while protecting the investors who might not understand much about the markets. This was only done for public companies. Private companies on the other hand had no legal requirements on preparation of finances according to U.S. GAAP. The only time they prepared their finances was in cases where they needed to secure bank or trade credit.

            The nature of the U.S. GAAP today has been shaped by different historic activities that have surrounded the unit since it was first established. The accounting scandals of the early 2000s, increased methods for measurements of assets and liabilities by the FASB, and third, the case of FASB trying to converge U.S. GAAP with the International Financial Reporting Standards (IFRS) of the U.K have been the three most affecting factors of the U.S. GAAP. Today the unit is answerable to a large chain of command and its rules and regulations keep increasing every day. This heavy burden was especially felt by the private sector that had to deal with the many requirements in GAAP, with careful consideration of those aimed at capital-market fairness and stock-price valuation, which were irrelevant to their investors. Steve Feilmer, chief financial officer of Koch industries was quick to note that the problem lay in the SEC. Mark Bielstein, a partner at KPMG, was also quick to note that the complexity of the accounting standards needs to be considered for companies in all sectors. This leaves one wondering who really is in charge of the unit.

            Costs incurred by the private companies cooperating in the GAAP are seen ss quite outstanding. Besides the many argumentative points on the standards of GAAP and a separate unit for the private companies, cost was another point of consideration. The private companies were relatively small compared to public ones. This meant that they lacked the financial means to comply with the rigorous accounting, auditing and control procedures necessitated by GAAP financial reporting. Private companies have been looking for means to avoid these requirements legally since it is a burden that they do not benefit from. This led to some company representatives like Bielstern of KPMG and Daryl Buck of FASB defend U.S. GAAP in the grounds that there are some similarities between small public and small private companies and also large public and private companies. They argued that complexity in GAAP gave them an opportunity to explore alternative none-GAAP accounting bases. This clearly depicts a tug of war from supporters and non-supporters on GAAP.

            The Private Financial Reporting Committee (PCFRC) began its operations in January 2007 to help the FASB with dealing with the private company financial standards. It has very limited impact on GAAP while at the same time the FASB and PCFRC did not find any common ground to work on in the concept that private companies were to be exceptions of GAAP. Instead, this added more complexity to the FASB not forgetting that the market was going downhill at the time. The demand for private company sector was growing rapidly. The AICPA set up a “blue ribbon panel” BRP to set the private sector apart from the public sector. This shows us that the PCFRC was not successful in separating the two distinct parties completely thus needed help from another body. This resulted to the FAF and FASB making significant moves to engage more with the private company shareholders.

            A statement given by Barry Melancon, the president of the AICPA suggested that the FASB and FAF were highly influenced by the public companies but public companies only constituted of les than half the economy. This meant that the standards by which all companies were set to work on were based on less than half of the economy representation. This depicts biasness and major neglect from the regulators’ side of failure of recognition of such a huge misguide in the market.

            In January 2011 the BRP offered their statement to request for a separate body for private companies and their needs. The presentation was insufficient even though Brennan and his fellow trustees at the FAF considered creating a separate board for the private companies, or let FASB remain head of determining GAAP with input from private company or find a middle ground such as a new body to work with the FASB to modify principles of GAAP or exempting the private companies. Discussions became intense as the private sector demanded for isolation from the GAAP. Finally, the PCC was formed, not as an independent body, but working with the FASB. It is clear that the FAF were out to remain the ones with the final say no matter what came along. This was the same reaction the AICPA had. They were skeptical about the proposal since the FAF had not done much in separating the private from the public sector. This meant that the PCC would still not be independent, taking orders and regulations from whoever had more power than they did.

            In concluding, PCC was a way for FAF to gain more information from the private companies. Supporters of this reform suggested that a totally independent body would give so much power to companies like Facebook and Koch industries. They argued that it would be more beneficial if they had the private sector under them. This was a clear depiction of struggle for power between the huge and mighty and a person just looking out for own interests. The public sector clearly is quite powerful. Tampering with its set up creates unrest in the order of things. It is evident that there is a group that rules over another. The article was particularly important in bringing such cases into light. The PCC was formed but with limited power meaning that at the end of it all, very little was altered. It was only a trap in the representation of the much-needed freedom. It is important to understand exactly what different organizations are capable of and whom they are answerable to. One might think that its freedom they are seeking but in actuality its bondage that awaits them.