Transcript PCFR Toolkit 2011 PowerPoint Presentation

Private Company
Financial Reporting
Historic Changes to Benefit the
Marketplace
Copyright © 2011 American Institute of CPAs
Background on Financial Reporting
15,000 issuers vs. 28.5 million private
companies but GAAP driven by public
company issues
Small businesses employ more than half of
all private sector workers
Private companies and their financial
statement users have information needs
different from public companies
Copyright © 2011 American Institute of CPAs
U.S. Not Alone
• Canadian Accounting Standards Board decided one
size does not fit all and published Accounting
Standards for Private Enterprises in Dec. 2009
• UK Accounting Standards Board proposing three-tier
system of financial reporting
• Germany has become first major country to have two
standard setters
• Council on Accounting for Unlisted Companies
formed in Japan to determine if changes should be
made to standard-setting process for unlisted
companies
• IFRS for SMEs – being used in many areas of the
world and being considered in some others
Copyright © 2011 American Institute of CPAs
What U.S. Constituents Say about GAAP for
Private Company Financial Reporting
• Too many GAAP-specific requirements not useful or
relevant for private companies’ financial statement
users
• Greater FASB emphasis on equity/public company
investors
• Most important problem: relevance
• Increased complexity is burdensome, timeconsuming
Based on 2004 AICPA task force research among
constituents with 3,709 responses
Copyright © 2011 American Institute of CPAs
In sum…
Private companies incurring significant unnecessary
cost for financial statement preparation and audit,
review or compilation services
Private companies are increasingly taking GAAP
exceptions
Current system is not attuned to the needs of private
company financial statement preparers and users
Copyright © 2011 American Institute of CPAs
U.S. Answer: Blue Ribbon Panel on Private
Company Financial Reporting
Address how accounting standards can best meet
private company financial statement users’ needs
Determine future of GAAP standard-setting process
for private companies
18 panel members: cross-section of financial
reporting constituencies, including lenders, investors,
owners, preparers and auditors
Copyright © 2011 American Institute of CPAs
Panel’s Major Conclusions
Resolved: A systemic problem exists that
needs solving
Supermajority recommendation #1:
• Enhance GAAP for private companies by making
significant modifications, where warranted
Supermajority recommendation #2:
• FAF should create a separate private entities
accounting standards board
Copyright © 2011 American Institute of CPAs
Reasons for Separate Board Not Subject to
FASB Approval
Board consisting of
members with private
company constituent
experience would set
different standards
FASB carries out SEC’s
statutory responsibility for
accounting standards
(investor orientation)
History and current
environment demonstrate
FASB cannot effectively
balance competing needs
of both public company
and private company areas
Copyright © 2011 American Institute of CPAs
Other Key Recommendations
Framework for differential decision
criteria
3-5 year sunset review to determine
effectiveness of new board
5-7 board members
Copyright © 2011 American Institute of CPAs
Current Status of Initiative
FAF formed working
group
Group has been
engaged in outreach
to advisory groups
and individuals
Action plan to be
issued this fall
Now is the
time to affect
outcome
Copyright © 2011 American Institute of CPAs
How You Can Shape Your Future
Participate – Tell FAF you
support panel’s
recommendations for:
• Differential standards
• Separate, autonomous
standard-setting body
Copyright © 2011 American Institute of CPAs
Online Letter
Assistant for
Customized
or Original
Letters
Copyright © 2011 American Institute of CPAs
Resources to Help
aicpa.org/privateGAAP
Send letter to
FAF using
online tool
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Backgrounder
FAQ
Videos
Articles
Press release template
Gather support from others
with education toolkit
Copyright © 2011 American Institute of CPAs
Time for Change…
Copyright © 2011 American Institute of CPAs
…It’s Decades in the Making
Copyright © 2011 American Institute of CPAs
Need More Information?
Copyright © 2011 American Institute of CPAs