Private Company Accounting: A Concept Whose Time Has Come

Vincent J. Love, CPA, CFE

The Perspectives section of the December 2010 CPA Journal included an article, “IFRS for SMEs: Not for Private American Companies” by Natasha Herman, that contained conclusions concerning private company financial reporting that cannot be left unanswered. The article posits that we should not establish or recognize accounting standards for private companies that would be different from those applied to public company financial reporting, that is, companies required to register and file reports with the SEC. The reasons given to support the position taken can be broadly categorized as follows: 1) acceptability, 2) comparability, 3) impact on education, 4) dilution of expertise, and 5) the incurrence of unnecessary and redundant expense. Under each of these categories are reasons why it would be a mistake to have two sets of standards. I respectfully disagree with this position and with every argument in support of it presented in the article.