New York (March 10, 2004) -- In response to a deluge of inquiries regarding private company financial reporting in the wake of Sarbanes-Oxley, the American Institute of CPAs said it has appointed a special task force to study whether there are issues with private company financial reporting.
The Private Company Financial Reporting Task Force, comprised of 16 AICPA members and non-members, will spend the next several months trying to determine -- among other things -- if there is indeed an issue with traditional generally accepted accounting principals in financial statements, particularly among those who rely on the statements when making lending, investing or other business decisions. The task force would also enlist the help of a number of stakeholder organizations, including the American Bankers Association, Financial Executives International, the National Federation of Independent Business and state CPA societies.
“As [AICPA chairman] Scott Voynich has traveled around the country speaking to members, the question he’s heard quite often is ‘Is financial reporting for private companies meeting the needs of users of financial statements as it should be?’” said James Castellano, head of the task force and former AICPA chairman. “He appointed this task force for the sole purpose of doing research and outreach to really discover the issue or issues and, if needed, to recommend solutions to the [AICPA] board.
Castellano, managing partner at St. Louis-based CPA firm Rubin Brown Gornstein & Co., said he expects the task force will issue a fact-finding report to the AICPA board at its September meeting. In addition, he noted that the task force is still working on exactly how to go about its research and is exploring “a wide range of methodologies.”
Among the key concerns to be researched by the task force are frustration with the relevance of the current body of GAAP literature to smaller, private companies; the belief among some CPAs that lenders don’t appear to be using all of the GAAP information required in financial statements; the cost/benefit equation for private companies of certain reporting and disclosures, which may have been designed primarily for public companies; and a trend by the Financial Accounting Standards Board toward convergence with international accounting standards and fair-value accounting.
-- Seth Fineberg
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