Maryland CPAs have a message for the folks who have been debating private company accounting standards:
Let's get on with it already.
The time is right to establish a separate private company accounting standards board that will develop exceptions and modifications to GAAP for private companies, an MACPA task force has concluded in a new white paper.
The paper, “Private Company Standards: Responding to the Reporting Needs of Private Companies and the Users of Their Financial Statements,” was produced by the MACPA's Accounting Standards Task Force and released as part of the association's 2011 Maryland CPA Summit in Baltimore.
“We have studied this issue for more than 30 years, and the small business community needs relief from onerous financial standards,” said Arthur Flach, CPA, managing partner of Grant Thornton LLP’s Baltimore office and chairman of the task force. “We urge the Financial Accounting Foundation to move forward with its Blue Ribbon Panel report and get started on separate private company standards.”
Created in October 2010 to respond to recommendations from the FAF's Blue Ribbon Panel on Standard Setting for Private Companies, the MACPA task force developed a series of recommendations for how standard setters can best meet the unique needs of private companies.
Specifically, the task force found that:
- The current structure does not properly address private company standards and needs to be improved.
- A separate board for private companies is warranted. The principle of “distinct but linked” with a parallel and joint process to avoid unnecessary divergence was viewed as critical to the process.
- A “sunset” provision of five years would be appropriate, with the understanding that the five-year term begins with the formation of the new board.
- The development of a differential framework for developing exceptions and modifications to extended GAAP is an essential element of the new board’s work and critical to the successful development of private company standards.
- A proper cost-benefit balance is critical to the success of the new private company standards while taking into account the relevance to the financial statement users.
- A single source of GAAP is imperative and would be codified in the same manner for private and public companies, with private company exceptions noted and contained within the respective pronouncements.
“It is clear private company stakeholders see a need to improve standards for private companies,” the white paper concludes. “… Any further studies should be limited to determining how the recommended changes can be implemented and not continuing to study whether changes are needed.”
The task force's findings mirror the opinions of a vast majority of MACPA members. The private company standards issue has been reviewed and discussed with more than 1,500 MACPA members at a series town hall meetings throughout Maryland over the past year. More than 90 percent of members polled at those meetings believe GAAP modifications and exceptions for private companies are the best solution to the problem.
- Read the white paper in its entirety.
- Check out “Private Company Standards: Is It Time?” The presentation was part of the 2011 Maryland CPA Summit in Baltimore.
What do you think: Is it time for a separate set of private company standards?