Financial Reporting for Small Companies Still Hotly Debated

The National Association of State Boards of Accountancy and PricewaterhouseCoopers is opposing the AICPA’s plan to create a new reporting framework for small and middle-sized businesses that is not part of GAAP.

NASBA’s board of directors unanimously voted to urge the AICPA to either table or withdraw its proposal for setting up a Financial Reporting Framework for Small- and Medium-Sized Entities. NABSA believes the AICPA should instead allow the Financial Accounting Foundation’s Private Company Council to develop standards for private companies that could be authoritative and part of U.S. GAAP.

The proposal stems from a long debate over setting accounting standards for private companies. The Financial Accounting Foundation, the parent organization to the Financial Accounting Standards Board (FASB), decided to create a Private Company Council. The AICPA wanted that board to be independent of FASB, but it was agreed to the new council would work closely with FASB.

In turn, the AIPCA was given the opportunity to develop a financial reporting framework for small- and medium-sized enterprises, which was supposed to be less complicated and expensive than conforming with GAAP. At the same time, though, the AICPA contends the framework would still present an accurate financial picture.

“The NASBA board has significant concerns that AICPA’s initiative to develop a non-authoritative financial framework will confuse practitioners, preparers, users and the public at large for many reasons and at many levels,” Gaylen Hansen and NASBA president and CEO Ken Bishop wrote in a letter to the AICPA. PwC also asked AICPA to reconsider.

The AICPA is now considering the input it has received. “As is our normal policy, we will not be commenting on individual letters that have been received.” Robert Durak, AICPA’s director of Private Company Financial Reporting, said in an e-mail statement.