Little Big GAAP

Little Big GAAP
Task Force Makes Recommendations on GAAP for Private Companies

An American Institute of CPAs task force is recommending that the AICPA work with the Financial Accounting Standards Board and its Financial Accounting Foundation to make GAAP more fundamentally effective for use by private companies.

The AICPA’s Private Company Financial Reporting Task Force issued its final report on Feb. 28, stating that, based on its yearlong research, private constituents require their own set of standards specific to their needs, and that the AICPA should form a commission or some other cooperative effort with FASB to determine how such standards should be developed.

According to the report, the task force’s research showed that public accounting practitioners, financial managers, lenders, investors, and sureties found general-purpose financial statements using GAAP have moderately high to high value to private company users.

However, while these private company constituents favored GAAP’s consistency, compatibility, and usefulness in credit and investment decisions, they said specific GAAP requirements lacked relevance or usefulness. Small business owners, creditors and lenders, and some practitioners found little relative use for such specific requirements as share-based payments or variable interest entities, the report stated.

According to a March 1 statement, FASB has not commented on the report’s findings, but has agreed that any alteration to GAAP would require much public comment and input.

To read the task force’s entire report, go to www.aicpa.org/download/news/2005_03_01.pdf and scroll to the link at the bottom of the second page.