Your article, "AICPA Releases Non-GAAP Reporting Framework" (June 10, online) discusses the American Institute of CPA's new alternative framework option for financial reporting by smaller private entities, the Financial Reporting Framework for Small-and Medium-Sized Entities. As discussed in the article, the framework is intended to help small businesses that are not required to use U.S. Generally Accepted Accounting Principles.

However, as president and CEO of the Institute of Management Accountants, an association that focuses exclusively on advancing the management accounting profession, I find it concerning that an accounting association body is attempting to set what could be perceived as an authoritative standard. These alternative methods are, in fact, non-authoritative and therefore difficult to regulate or enforce.

U.S. Small Business Administration data suggests that up to 70 percent of net new job growth in the U.S. comes from small businesses. To keep this "job machine" running, private companies need to maintain credibility with sound internal controls, while maintaining the freedom to innovate and create sustainable value for stakeholders. Businesses should not risk that credibility by adhering to a framework created by a group other than a national standard-setting entity.

Understandably, small businesses have unique needs and are often disproportionately impacted by "disclosure overload." While we appreciate the drive for simplicity relative to how overly complex GAAP has become, the AICPA's optional framework, which is separate from the Private Company Council's work, is not in the public interest and will create marketplace confusion.

The introduction of a non-GAAP based solution, such as an "other comprehensive basis of accounting," or OCBOA, method, is contradictory to the solution proposed by the AICPA/Financial Accounting Foundation/National Association of State Boards of Accountancy Blue Ribbon Panel and the Plan to Improve Private Company Accounting. The BRP initiative was a two-year activity driven by marketplace participants and private company entities, and it clearly concluded that the best way to achieve credibility, efficiency and flexibility in private company reporting is a GAAP-based framework modified for each organization's unique needs. To date, the PCC -- which consists of marketplace constituents and involves due process -- has also supported GAAP as the starting point for private company reporting.

Therefore, the IMA asserts that the AICPA's optional framework for private company reporting is not in the public's best interest.

Jeff Thomson, CMA, CAE

President and CEO


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