Launching itself into the teeth of a controversy, the Financial Accounting Foundation recently proposed a structure for setting private-company accounting rules that would position the Financial Accounting Standards Board as “the ultimate standards-setter,” in the words of Teresa S. Polley, FAF president and CEO.

The centerpiece of the plan is the new Private Company Standards Improvement Council (PCSIC), which would identify, propose, and vote on exceptions or changes to U.S. generally accepted accounting principles (GAAP) aimed at private companies, according to a statement issued by the board of trustees of the FAF, a private-sector body that oversees FASB and the Governmental Accounting Standards Board.

Chaired by a member of FASB, the new council would comprise between 11 and 15 members, appointed by the FAF trustees and representing investors, lenders, auditors, accountants, and preparers of private-company financial statements. The latter constituency could include CFOs, according to Polley. While the participants haven’t been named yet, FASB member Daryl F. Buck, who previously spent 18 years as CFO of Reasor’s Holding Co., a private company with $400 million in annual sales, seems clearly to be in the running for the chairmanship of the new council.

In proposing that FASB be the ultimate arbiter of private-company reporting standards, the FAF trustees have put themselves squarely in opposition to a plan put forward 10 months ago by the Blue-Ribbon Panel on Standard Setting for Private Companies, a group that counted Polley among its membership.

Under the new FAF plan, changes approved by a two-thirds majority of the council would be forwarded to FASB for ratification. The changes would become final following public comment, further deliberation by the PCSIC, and final ratification by FASB.

Spearheaded by Barry Melancon, president and CEO of the American Institute of Certified Public Accountants, the Blue-Ribbon Panel’s plan called for “a separate private-company standards board” that would be overseen by the FAF and would “work closely” with FASB. But the board, not FASB, “would have final authority” over changes and exceptions to U.S. GAAP targeted to private companies.

The FAF’s plan to put FASB at the helm is “180 degrees off the Blue-Ribbon Panel’s recommendation that determinations for private companies would not be subject to the vetoes of FASB,” says Melancon.

The biggest reason the FAF trustees opposed the notion of a separate board not under the wing of FASB was that a board with “the autonomy and the authority to promulgate GAAP will result in two GAAPs,” says Polley. “Based on the input we got from our constituents, and even around the table at the Blue-Ribbon Panel, a two-GAAP system was not a desired outcome.”

The FAF chief also says that she sees the relationship between FASB and the new council as “a partnership” in which both bodies would meet together “at the same table.” Thus, the council would not vote on issues “in a vacuum,” she says. “They would understand FASB members’ perspective and the FASB members’ decisions about whether to ratify or not.”

Polley says that 9 or 10 FASB professionals are focused full-time on private companies. They will be “assigned to every single project on the FASB agenda to ensure that private companies are considered” and outreach maintained, she says.

Both Polley and Melancon urge private-company CFOs to weigh in on the proposal. The FAF trustees are seeking public comment on the plan through January 14, 2012. They also plan to conduct roundtables across the country on the issue in early 2012.

David M. Katz is New York bureau chief and senior editor for accounting at CFO.