Richard Caturano, an office managing partner who heads McGladrey’s Boston office, is one of the accounting industry leaders backing the push for a separate standards board for private companies.
“We feel very strongly that a new separate board be established under the oversight of the Financial Accounting Foundation,” he said in an interview Friday with Accounting Today. “We know the board would have to coordinate activities with the FASB and that the recommendations not be subject to FASB approval, and we strongly agree with that. We’ve been waiting a long time for clarification of some of the standards for private companies. For decades FASB has been focused on the needs of the public companies.”
He argued that there are about 20 million more privately held companies in the U.S. than publicly traded companies and added that it is ridiculous and burdensome to apply the public company standards to private companies.
Caturano was one of the founders of Vitale, Caturano & Co., back in 1978. Later known as Caturano & Co. after his longtime partner left the firm in 2008, the firm was acquired by McGladrey last year (see McGladrey to Acquire Caturano). Caturano has been on the board of directors of the American Institute of CPAs since 2008, and the AICPA has been pushing to form a separate standard-setting board for private companies. The Blue-Ribbon Panel on Standard Setting for Private Companies issued a report in January recommending a separate board (see Blue-Ribbon Panel Recommends Private Company Board).
The Financial Accounting Foundation is studying the recommendations in the report, which would require the Financial Accounting Standards Board it oversees to give up its control over private company standard setting. FASB, for its part, has tried to do more outreach to private companies, recently adding a member to its board from the private company world, Daryl Buck, and dedicating staff members to engage more with private companies on new standards.
However, like AICPA president and CEO Barry Melancon, Caturano doesn’t think those changes go far enough. Caturano is the former chairman of the AICPA's Private Companies Practice Section Executive Committee, and he will be vice chairman of the AICPA in October.
“That’s a step in the right direction, but ultimately it doesn’t make any sense for the FASB to continue to service both needs,” Caturano said. “Although they have in fact taken those small steps, we need much more drastic change and we need it quickly. The best way to get it done is to have a board made up of experts in private company financial reporting and have that board determine what the standards should be for private companies.”
Some of the accounting standards he thinks most urgently need to be modified for private companies are in the areas of fair value measurement, consolidation of entities, uncertainty in income taxes, goodwill impairment, and leasing.