PRIVATE COMPANY STANDARDS – IS IT TIME?
PRIVATE COMPANY STANDARDS – IS IT TIME?Presentation for:Maryland Association of CPAsCPA SummitJune 3, 2011BWI Hilton
Presentation for:Maryland Association of CPAsCPA SummitJune 3, 2011BWI Hilton
Our PanelistsAll members of the MACPA
Private Company Standards Task Force
Our PanelistsAll members of the MACPA
Private Company Standards Task Force
Skip Falatko, CPA – MACPAArt Flach, CPA – Grant ThorntonJoselin Martin, CPA – Hayles & Howe,
IncCarl Kampel, CPA – Ellin & Tucker,
Chtd
Skip Falatko, CPA – MACPAArt Flach, CPA – Grant ThorntonJoselin Martin, CPA – Hayles & Howe,
IncCarl Kampel, CPA – Ellin & Tucker,
Chtd
MD ComptrollerMD Comptroller
CAQ
US Treasury
MD Comptroller
Courtesy of the Maryland Association of CPAs – 2008 edition Drawing by Carol Kirwan, CPA
Public Company Private Company Int’l Company
FinancialReporting
Audit /Attest PerformanceStandards
Code of Conduct
Another way to look at standards & oversight
State Oversight & Enforcement of CPA LicenseCPALicensure
SECFASB
FASBPCFRC
IASBIFRS & SME
PCAOB
AICPAASB, ARSC,
PRBIAASB
AICPAPEEC
AICPAPEEC
IFAC
FAF
FASB
PCFRC
GASB
The PlayersThe PlayersSEC
& State Boards & State CPA Societies
BRP
Additional Background InfoAdditional Background Info
15,000 issuers and 28.5 million private companies but GAAP driven by public company issues
Small businesses employ more than half of all private sector workers
Private companies and their financial statement users have information needs that are different than public companies
Similar Issue Outside the US TooSimilar Issue Outside the US Too
Concerns About Private Company Financial Reporting Include:
Concerns About Private Company Financial Reporting Include:
Too many GAAP-specific requirements not useful or relevant for private companies
Greater FASB emphasis on public companies
Increased cost, complexity, time-consuming using full GAAP
Use of OCBOA raises the issue of what’s “generally accepted”
Too many GAAP-specific requirements not useful or relevant for private companies
Greater FASB emphasis on public companies
Increased cost, complexity, time-consuming using full GAAP
Use of OCBOA raises the issue of what’s “generally accepted”
U.S. Answer: Blue Ribbon Panel on Private Company Financial ReportingU.S. Answer: Blue Ribbon Panel on
Private Company Financial Reporting
Address how accounting standards can best meet private company financial statement users’ needs
Determine future of GAAP standard-setting process for private companies
Sponsored by AICPA, FAF and NASBA
18 panel members: cross-section of financial reporting constituencies, including lenders, investors, owners, preparers and auditors
Blue Ribbon Panel’s Conclusions
Blue Ribbon Panel’s Conclusions
A problem exists that needs resolution
Recommendation #1 - Enhance GAAP for private companies by making significant modifications, where warranted
Recommendation #2 - FAF should create a separate private entities accounting standards board
A problem exists that needs resolution
Recommendation #1 - Enhance GAAP for private companies by making significant modifications, where warranted
Recommendation #2 - FAF should create a separate private entities accounting standards board
Other Key BRP RecommendationsOther Key BRP Recommendations
Framework for differential decision criteria
3-5 year sunset review to determine effectiveness of new board
5-7 board members
$4-5 million annual budget
FAF “Working Group”FAF “Working Group”
FAF created a “Working Group” on March 4, 2011
Comprised of FAF Trustees and FAF Staff
Added non-profits to the mix
FAF created a “Working Group” on March 4, 2011
Comprised of FAF Trustees and FAF Staff
Added non-profits to the mix
90.87% of MACPA members believe we need Private Company Standards
90.87% of MACPA members believe we need Private Company Standards
Insights form the Spring & Fall, 2010 PIU / town hall meetings covering 2,000+ members
Judy O’Dell chair of FASB PCFRC shared her perspective
Judy O’Dell chair of FASB PCFRC shared her perspective
The MACPA requested that private company’s be exempt from Fin 48 and Fin 46Rin September, 2008. The PCFRC’s recommendations were ignored by FASB.
MACPA’s responseMACPA’s response
MACPA sent comment letter to FAF on December, 2010 for initial survey
MACPA Chair Kimberly Ellison-Taylor appoints special Accounting Standards Task Force
Accounting Standards Task Force held meetings from Jan – Apr, 2011
MACPA sent comment letter to FAF on December, 2010 for initial survey
MACPA Chair Kimberly Ellison-Taylor appoints special Accounting Standards Task Force
Accounting Standards Task Force held meetings from Jan – Apr, 2011
MACPA Accounting Standards Task Force – The power of “We”MACPA Accounting Standards
Task Force – The power of “We”
Chair:
Art Flach Grant Thornton Public accounting firm
MACPA Facilitators:
Tom Hood MACPA CEO & Executive Director Non-Profit
Jackie Brown MACPA COO Non-Profit
Skip Falatko MACPA CFO Non-Profit
Task Force Members:
Ernie Paszkiewicz Gross Mendelsohn & Assoc. Public accounting firm
Rob Tuggle BB&T Banking
Bill Ziegler BB&T Banking
Carl Kampel Ellin & Tucker Public accounting firm
Joselin Martin Hayles & Howe Private company
Liz Gantnier Stegman & Co. Public accounting firm
Bob Tarola Right Advisory Public company consultant
Mike Manspeaker Smith Elliott Kearns & Company, LLC Public accounting firm
Ken Kelly McCormick Public company
Don McConnell KCI Private company
Jim Canalichio Dixon Valve Company Private company
Jim Jenkins Stout Causey & Horning Public accounting firm
Al DeLeon DeLeon & Stang Public accounting firm
Debra Busk DeLeon & Stang Public accounting firm
Charles Postal Santos, Postal & Co. Public accounting firm
Jim McKinney University of Maryland Educator
OJ Phillips Small Business Administration Government
Our guiding principlesOur guiding principles
Draft conclusions – approved by MACPA Board
Draft conclusions – approved by MACPA Board
Private Company Standards need to be addressed (costs, complexity, OCBOA)
Current structure is not working – PCFRC recommendations were not addressed, prior studies indicate issue
Other jurisdictions around the world recognizes needs of private company users are different
Private Company Standards need to be addressed (costs, complexity, OCBOA)
Current structure is not working – PCFRC recommendations were not addressed, prior studies indicate issue
Other jurisdictions around the world recognizes needs of private company users are different
TASK FORCE ISSUESTASK FORCE ISSUES
Concept of differences in recognition and measurement
Separate Board
Funding source to ensure independence Collaboration with FASB How much divergence Disparity of interests, small vs. large
Concept of differences in recognition and measurement
Separate Board
Funding source to ensure independence Collaboration with FASB How much divergence Disparity of interests, small vs. large
TASK FORCE ISSUESTASK FORCE ISSUES Effect of increasing complexity
Revenue Recognition Leases IFRS
Is it too much?
How does everyone become knowledgeable – Bankers, sureties and other users
Effect of increasing complexity
Revenue Recognition Leases IFRS
Is it too much?
How does everyone become knowledgeable – Bankers, sureties and other users
What is the future role of the FASB?
Input and support to IASB.Advancing considerations of U.S.
perspectivesIncorporating IFRS into U.S. GAAP
through an endorsement processEducating U.S. constituents about
IFRS
What is the future role of the FASB?
Input and support to IASB.Advancing considerations of U.S.
perspectivesIncorporating IFRS into U.S. GAAP
through an endorsement processEducating U.S. constituents about
IFRS
TASK FORCE ISSUESTASK FORCE ISSUES
New DevelopmentsNew Developments
AICPA launches Private Company Standards resource center
http://www.aicpa.org/privateGAAPFASB offers webcast:
FASB Update for NonPublic Entities (Private Companies)
AICPA launches Private Company Standards resource center
http://www.aicpa.org/privateGAAPFASB offers webcast:
FASB Update for NonPublic Entities (Private Companies)
Our view is that we applaud the efforts of FASB to focus on needs of private companies and that there was a formal structure with the PCFRC that was ignored. It is time to give this new approach a chance with a re-visit in five (5) years.
ConclusionConclusionOn June 2, 2011 the MACPA Board
of Directors unanimously adopted the report & recommendations of our Accounting Standards Task Force, urging FAF to move forward with the separate Private Company Standards Board and the recommendations in their Blue Ribbon Panel report.
On June 2, 2011 the MACPA Board of Directors unanimously adopted the report & recommendations of our Accounting Standards Task Force, urging FAF to move forward with the separate Private Company Standards Board and the recommendations in their Blue Ribbon Panel report.
http://www.macpa.org/Content/26146.aspx
http://www.slideshare.net/thoodcpa/macpa-private-company-standards-whitepaper
MACPA Announcement
MACPA whitepaper can be viewed & downloaded here:
Next StepsNext StepsDistribution and
communicationEducation & awareness of
our members and the small business community
Make our voices heard at the FAF
Distribution and communication
Education & awareness of our members and the small business community
Make our voices heard at the FAF
Skip Falatko, CPADirector of Finance
Maryland Association of CPAsBusiness Learning Institute
(443) 632-2322E-mail [email protected]
Web http://www.macpa.orgBlogs http://www.cpasuccess.comhttp://www,bizlearningblog.com
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Tom Hood, CPA.CITPCEO
Maryland Association of CPAs
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