There are certain things that I've resigned myself to believing will never happen in my lifetime. One is my brother-in-law repaying the money he has owed me for 13 years. The other would find me suddenly enjoying lower taxes in New York State. For good measure, you can also add to that list the day my children stop requesting money.
Setting aside those personal, and, of course, fiscal interests, another thing I have remained skeptical about is a formalized set of private company financial standards. The protracted debate over whether there should be a separate set of standards for non-Securities and Exchange Commission issuers has been ongoing since I was flunking trigonometry in high school. Throughout the often-spirited discussions, proponents have correctly pointed out that a neighborhood auto parts store, for example, would not necessarily need to deploy the same financial reporting standards as Xerox or General Motors.Conversely, others have cited the inevitable politics that would be involved in determining just who would ultimately have oversight over the project.
And interestingly enough, in an online poll we conducted last month asking readers whether private companies should have their own set of accounting standards, 55 percent said no, 42 percent said yes, and 3 percent responded that they were not sure (although, as with political polls, there's a fair chance that sentiment could change from week to week).
Last month, the American Institute of CPAs hosted a meeting of the Blue Ribbon Panel on Private Company Standard-Setting regarding a new model of financial reporting. One of the original goals of the panel when it was established in December was to provide recommendations on the future of standard-setting for private entities, including whether separate, stand-alone accounting standards for private companies are needed.
Last month, a majority of Blue Ribbon Panel members voted in favor of establishing a separate standard-setting board for private company accounting, but the panel will wait until December to issue its final recommendations. Those recommendations will mostly be from one of the proposed models, known as Model 2B, using GAAP with exceptions for private companies and a separate private company standards board. However, the committee draft will also include some details of another model, known as Model 2A, which uses GAAP with exceptions for private companies and a restructured Financial Accounting Standards Board in lieu of a separate board for private issuers.
To many, FASB had been perceived as the logical group to spearhead private company standards, but much of the board's work is earmarked toward the needs of public companies and their auditors. It had for the most part left the work on private company standards to the AICPA-FASB joint task force - the Private Company Financial Reporting Committee.
FASB has never garnered a reputation as an organization that sets land speed records. Add to that the fact that Bob Herz, its chairman since 2002, abruptly packed up and left in October, and the fact that it's also working with its overseas counterpart - the International Accounting Standards Board - on a series of critical convergence projects with an agreed-upon due date of June 2011. So its "to-do" list is a bit crowded without the added headache of hammering out private standards proposals.
True, a separate board would create yet more bureaucracy, but it would at least end the debate on private standards. Either way, a determination will be made next month.
I'd hate to think my brother-in-law would be quicker returning my money.
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