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FAF report finds Private Company Council effective

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The Financial Accounting Foundation released a report that found the Private Company Council has been performing its duties effectively in representing the views of privately held companies and advising the Financial Accounting Standards Board and should continue to operate.

The FAF, which oversees FASB and the PCC, as well as the Governmental Accounting Standards Board, began reevaluating the role of the PCC in February. The PCC emerged in 2012 after the FAF, which oversees both FASB and the Government Accounting Standards Board, heard feedback from private companies that they would like more of a voice in standard-setting at FASB.

Previously, FASB and the American Institute of CPAs had operated a joint committee known as the Private Company Financial Reporting Committee. The FAF, the AICPA and the National Association of State Boards of Accountancy set up a Blue-Ribbon Panel on Standard Setting for Private Companies in 2009 to study the issue of allowing greater input from private companies, and the panel issued a plan in 2011 calling for establishment of a separate council under the oversight of the FAF that would hold its own votes. However, within a few years, it became more of an advisory committee to FASB, much like the Financial Accounting Standards Advisory Council, but not a standard-setter in its own right. The PCC still meets regularly, including  this week, and FASB continues to report on its meetings.

The PCC uses a Private Company Decision-Making Framework to advise 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 FASB.

Led by the Standard-Setting Process Oversight Committee of the FAF Board of Trustees, the review elicited input from stakeholders vita surveys, virtual meetings, and letters in response to a request for public comment.

The FAF trustees determined that, overall, the PCC is fulfilling its mission and duties effectively and that it should maintain its current mission, remit and structure. The trustees also affirmed the PCC’s current meeting operations and culture. However, the report did point to opportunities for positive change, including ramping up the PCC’s communications activities, publishing a PCC annual report, and enhancing recruiting activities to identify and select new PCC members in the future.

“Good governance prompts us to conduct periodic reviews of our important advisory councils,” said FAF trustee and co-chair of the Standard-Setting Process Oversight Committee Timothy Ryan, head of technology and business enablement at Citigroup, in a statement Wednesday. “I am pleased that stakeholders largely expressed support for the PCC while making excellent suggestions for potential improvements to make it an even more effective body.”

Many stakeholders agreed the PCC is effectively fulfilling its advisory role to FASB, striking the right balance between reducing complexity and ensuring relevant and reliable information to stakeholders, according to the report. They also expressed views that the PCC has been successful in addressing the needs of the users of private company financial statements, indicating they have observed wide adoption of private company alternatives and practical expedients. 

“Overall, the sentiments focused on the positive impact the PCC has had on financial reporting for private companies and their stakeholders since its establishment in 2012, with a recognition that the PCC is the optimal vehicle to continue this important work,” said the report. 

Several stakeholders said the PCC has successfully educated FASB on issues where private companies operate differently than how public companies operate. For example, the PCC provided feedback to FASB on certain aspects of the leasing standard, and on areas that resulted in GAAP alternatives for private companies for goodwill, intangibles, hedge accounting and variable interest entity consolidation standards. 

“We are grateful to the many stakeholders who freely shared their diverse perspectives about the PCC,” added FAF trustee and co-chair of the Standard-Setting Process Oversight Committee Manju Ganeriwala, the former treasurer of the Commonwealth of Virginia, in a statement. “We are confident that the PCC can sustain its excellent track record of providing thoughtful, expert advice and counsel to the FASB for many years to come.”

The AICPA praised the findings of the report. “The American Institute of Certified Public Accountants appreciates the thoroughness of the Financial Accounting Foundation’s review of the Private Company Council, and we share the report’s findings that the council has been effective in its mission,” stated AICPA vice president of financial reporting Daniel Noll. “The AICPA has observed all of the PCC meetings since its inception and notes that it has fulfilled its role well, both in  suggesting changes to existing GAAP and in advising on prospective GAAP. As the FAF’s report notes, there are thousands of public companies in the United States but millions of private companies, so this is a critical advisory role for our capital markets. We look forward to more important work by the PCC and its continued advocacy for stakeholders who depend on financial reporting by private companies.”

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IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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