I want to tell you about a very positive recent development that
could transform the financial reporting system for many of the nation’s
29 million private companies and the CPA firms who serve them. A new
Blue Ribbon Panel will take a fresh look at how U.S. accounting
standards can best meet the needs of private
company financial statement users and expects to make
recommendations this year. A survey of
governing Council members at our Oct. 2009 meeting showed
overwhelming support for exploring different accounting standards for
private companies and our board of directors approved a resolution to
form the panel at its meeting the following month. The Financial
Accounting Foundation, which oversees the Financial Accounting
Standards Board, also approved such a resolution in Nov. 2009.
Creation of the panel was jointly announced
in Dec. 2009 by the AICPA and the Financial Accounting Foundation
with support from the National Association of State Boards of
Accountancy. Last month Rick Anderson, CPA, chairman of the firm of Moss
Adams LLP, was appointed chairman of the panel [an interview with
Anderson appears in the Journal
of Accountancy]. Other members to serve are in the process of
being named.
According to Small Business Administration statistics, small
businesses employ more than half of all private sector workers and are
responsible for 44% of the private payroll in this country. They have
also created 64% of the new jobs in the United States during the last 15
years. They have been instrumental in many new innovations and are an
important element in our economic recovery.
That the nation’s economic vitality relies so heavily on small
business is why the AICPA believes our country needs a financial
reporting system that provides financial statement users and small
business owners with the information they truly can use and understand.
We CPAs know full well that the financial reporting needs of our
private company clients or employers and their financial statement
users are different from those of public companies. It’s time for
accounting standards to reflect this difference.
The panel’s findings and recommendations will be a welcome addition
to the work of the Private Company
Financial Reporting Committee. The PCFRC, a joint initiative of
the AICPA and the FASB, has for the last several years monitored
standard setting and spoken out on behalf of the needs of private
companies and the CPAs who serve them. In recent months, the PCFRC has
added its voice to the many calls within the accounting profession for a
new and comprehensive evaluation of private company accounting. Its
work on important proposed and existing standards continues.
I believe that establishment of this special panel is a major step
toward a financial reporting system that brings valuable information to
the users of private company financial statements and does not burden
these companies and their CPAs with requirements that have no relevance
to their investors, lenders and other financial statement users. It
most likely will help control financial reporting costs as well,
something I am sure our members in business and industry would
appreciate. CPAs serving private companies will be freed up to help
clients address the unique challenges they face and seize new
opportunities. I will keep you updated on the panel’s work as it
proceeds.