Private Company Financial Reporting Task Force
Mark Landy, CPA
Private Company Financial Reporting Task Force
Private Company Financial Reporting... GAAP for Smaller and/or Closely Held Businesses... Big GAAP versus Little GAAP... Over the past three decades, numerous organizations, including the AICPA and the Financial Accounting Standards Board, have studied this issue. In recent years a growing number of interested parties, including bankers, business owners, and practitioners have questioned the relevance of certain financial reporting requirements for privately held companies.
Approximately 17,000 of the nation’s 4.9 million corporations are registered with the SEC. Recognizing the impact that private companies have on the economy, the AICPA formed the Private Company Financial Reporting Task Force. This Task Force, comprised of individuals representing private company financial reporting constituents, was asked to conduct research to explore:
• Whether the financial statements of private companies, prepared in accordance with GAAP, meet the financial reporting needs of constituents of the reporting; and
• Whether the cost of providing GAAP financial statements is justified compared with the benefits they provide to private company constituents
In addition, this Task Force was asked to study the results of its research, reaching conclusions and making recommendations based upon research findings.
The Task Force unanimously concluded that:
• GAAP for private companies should be developed based on concepts and accounting that are appropriate for the distinctly different needs of the constituents of that reporting;
• Although GAAP with exceptions and OCBOA are being used and are sometimes appropriate, these exceptions and other bases of accounting are not the best response to private company financial reporting findings identified in the research; and
• Fundamental changes should be made in the current GAAP standard-setting process to ensure that financial reporting needs of private company constituents are met.
Based upon the conclusions made by this Task Force, the AICPA Council adopted a resolution that directed AICPA management to work with the Financial Accounting Foundation and the Financial Accounting Standards Board to identify and implement a process that would evaluate, where appropriate, potential changes in recognition, measurement, and disclosures from current GAAP as applied by private companies. Any proposed changes that might result from this effort would be fully exposed for public comment and debate.
I am very interested in hearing your thoughts on this topic. Please contact me at mlandy@millerallen.com. Remember,
