AICPA Wants New Standards Board for Private Companies
AICPA President Barry Melancon has called for the Financial Accounting Foundation (FAF--parent organization for FASB and GASB) to establish a new accounting board for private companies. Melancon cites preliminary work of the "Blue Ribbon Panel" from members of the AICPA, FASB and NASBA (National Association of State Boards of Accountancy) would lead to standards quite different from either U. S. GAAP or IFRS. It should be noted that the IASB has already published its effort at private-company standards (IFRS for SME) and that a poll of accountants taken by WebCPA opposed separate standards for private companies 55-42.
Oh, the headaches here. Let me start by stating that private companies in excess of approximately $100 million in capitalization should be subject to either full U. S. GAAP or IFRS to be consistent with their large public company brethern. For small-to-medium sized private companies--there are no good options; anything leads to different standards from larger companies and it is not clear how the cost-benefit tradeoff of convenience vs. reduced usability measures out until you get to very small (less than $5-10 million in capitalization) companies. Hope that David Albrecht and the Summa has some thoughts on this.
Oh, the headaches here. Let me start by stating that private companies in excess of approximately $100 million in capitalization should be subject to either full U. S. GAAP or IFRS to be consistent with their large public company brethern. For small-to-medium sized private companies--there are no good options; anything leads to different standards from larger companies and it is not clear how the cost-benefit tradeoff of convenience vs. reduced usability measures out until you get to very small (less than $5-10 million in capitalization) companies. Hope that David Albrecht and the Summa has some thoughts on this.
posted by Dan Meyer at 6:03 PM
1 Comments:
Dan, Appreciate your insights and thank you for the notice. To clarify - while we are asking the FAF to create a separate accounting board for private companies, private companies would be able to choose to use the same GAAP standards as U.S. public companies if their investors or creditors felt there was a need to do so. The board would function as an on/off switch on FASB standards; so if FASB issues a standard the new board could accept it in whole, or propose and adopt revisions for private companies that make sense. For a sector that amounts to half the U.S. economy, we think that would solve a lot the disconnect private companies have with current standards now. -- Barry Melancon
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