Be a Part of Making Historic Change for Private Companies

Anytime you have a “first” of anything it’s an important and memorable occasion. With that in mind, my first topical blog post is on a subject I believe is critical to our profession, those we work for and those we serve. I’m talking about private company financial reporting.

Few opportunities exist where a person can say they took part in something truly historic. CPAs, their clients and employers, bankers and other stakeholders have such an opportunity before them today, and it all starts with a letter. For more than 30 years, CPAs, lenders, private company owners, investors and others have said U.S. GAAP mainly reflects the public company environment, resulting in unnecessary complexity and a lack of relevance for private company financial statements. We’re now closer than we’ve ever been to changing this, and you have the ability to push this across the goal line - finally.

A special blue ribbon panel that studied the issue last year came to two important conclusions. First, significant changes and modifications in GAAP, where warranted, are needed to recognize the unique needs of private company financial statement users and business owners. Second, a new, separate standard-standing body that would report directly to the Financial Accounting Foundation (which oversees the Financial Accounting Standards Board) and not be subject to FASB veto power is essential to have effective, long-term standard setting for private companies.

I am urging you to immediately contact FAF to express support for the panel’s recommendations.  I also ask that you reach out to other stakeholders, especially users of private company financial statements (e.g., bankers, venture capitalists, sureties/insurers), and educate them on the problem so they write to FAF too. Original letters are best as they express your experiences and perspectives. For those who want some help, we’ve prepared an online tool to make the process quick and simple. Go to aicpa.org/privateGAAP for the letter-writing assistant and for additional information on the opportunity before us.

We expect FAF to make critical decisions soon, perhaps even next month. Take action now and be a part of accounting history.

Barry C. Melancon, CPA, President and CEO, American Institute of CPAs.