Basic HTML Version
CFO TO CFO
WWW
.CFO
STUDIO
.
COM
/ 1
ST
Q
UARTER
2012
strained under the onslaught of ever-increasing complex
accounting rules. Consider also that there are approximately
14,000 public companies that have SEC reporting requirements
while there are approximately 28 million private companies in
the United States, many of which require audited, reviewed or
compiled financial statements to satisfy their lenders, investors
or other stakeholders, but not to the investing public or the SEC.
3
The apparent public company tilt to much of the FASB’s
work has increased costs to all issuers of GAAP-based financial
statements, public or private. With regard to private company
issuers, the report noted that this “has led to more users of
financial statements to accept qualified opinions – a development
that calls into question whether those aspects of GAAP are truly
‘generally accepted.’”
Although the panel recommended that a new private
company standards board be established, it did not recommend
moving towards establishing completely separate GAAP for
private companies, opting instead to recommend that exceptions
and modifications be made to U.S. GAAP for private companies
under the guidance of this separate board.
Also a factor in the panel’s recommendations was recognition
of the proposed coming convergence between international
and U.S. accounting standards (IFRS vs. GAAP). The panel felt
that the FASB will be unduly distracted by its competing
standard-setting pressures related to public companies and
the push to adopt International Financial Reporting Standards
as promulgated by the IASB, the FASB’s international counter-
part, and will not prioritize private company needs.
Ultimately, the FAF rejected the panel’s recommendation
concerning establishing a separate private company board,
despite growing support for such a move, as evidenced by
official statements by the AICPA
4
and many state CPA societies
that endorsed the panel’s key recommendations. The FAF has
opted, instead, to form a Private Company Standards
Improvement Council, to the disappointment of many in the
profession. In fact, the AICPA went so far in its subsequent
press release protesting the FAF’s lack of action to threaten that
if the FAF does not move to adopt the panel’s recommendations
for a separate board, the AICPA “will consider other options,”
which “could include creating a separate standard setting body”
to do the same.
Déjà vu all over again? Sorry Yogi, but we may be coming full
circle on this one, circa 1973, when the FASB first began issuing
pronouncements, placing the AICPA in a subordinate role ever
since. Can the AICPA now reverse those positions as they relate
to future private company GAAP? Time will tell, but this train
may have left the station. “All aboard, anyone?”
v
Tim Anglim, CPA, CMA, is CEO of YesCFO, a provider of
part-time and interim CFO services for organizations
experiencing rapid change or an unstable environment –
whether due to a financial crisis, paradigm shift or
growth opportunity.
21
1
Blue Ribbon Panel on Standard Setting for Private Companies, “Report to the Board of Trustees of the Financial Accounting Foundation,“ January 2011.
2
Ibid.
3
Ibid; U.S. Census Bureau, “2008 Nonemployer Statistics Report,” http://www.census.gov/econ/nonemployer/index.html; U.S. Census Bureau, “2008 County Business
Patterns,“ http://www.census.gov/econ/cbp/.
4
American Institute of Certified Public Accountants, “AICPA Council Votes Overwhelmingly to Send a Strong Message to FAF: Adopt the Blue Ribbon Panel
Recommendations for an Independent Board,” http://www.aicpa.org/Press/PressReleases/2011/Pages/Adopt-Blue-Ribbon-Panel-Recommendations.aspx, Oct. 18, 2011.