Earlier this week, the Indiana CPA Society completed its 12th annual series of Professional Issues Updates throughout the state. The PIU covers a multitude of topics, but one message was sent loud and clear – Indiana CPAs are strongly in favor of the proposed move toward private company financial reporting.
While the prospect of private company financial reporting represents what could be one of the biggest changes to impact the CPA profession in decades, the issue reaches far beyond accounting. Other private company stakeholders include small business owners, bankers and lenders, sureties and insurers, and venture capitalists.
Nearly 2,000 INCPAS members (33 percent of all Indiana resident CPA members) attended one of 16 half-day programs in 13 cities over 39 days, beginning Aug. 19 in Batesville, Ind., and ending Sept. 26 in Carmel, Ind. The total number of attendees was a record for the 12 years of the program. It is annually the best attended Society program.
Attendees were surveyed electronically. One of the questions asked whether or not they support proposed recommendations from the Blue-Ribbon Panel on Private Company Financial Reporting, a specially-appointed group that earlier this year presented several proposals to the Financial Accounting Foundation. An overwhelming number of attendees, 81 percent, said yes. Only seven percent said no, while 12 percent were undecided and one percent did not vote.
“CPAs in Indiana have sent a clear message that they support the creation of an independent board to set differential standards for private businesses,” said Barry Melancon, CPA, American Institute of Certified Public Accountants president and CEO. “The time has come for FAF to heed the call to make GAAP relevant for private companies.”
By show of hands at each program, the vast majority of participants expressed their support in person. Verbal comments made during the program were also strongly supportive. Attendees were a mix of CPAs in public accounting, industry, government and education, and included many young Society members new to the CPA profession.
The INCPAS member feedback comes on the heels of an Indiana CPA Society Board of Directors resolution adopted in June. The Society’s Board voted to support the development of accounting standards that better meet the needs of private companies. Specifically, the resolution endorses the Blue-Ribbon Panel’s recommendations to establish a separate standard-setting board for private companies and to ensure that changes and modifications are made to existing and future Generally Accepted Accounting Principles, or GAAP. Fourteen other state CPA societies have adopted similar resolutions.
“The issue of Private Company Financial Reporting has been considered by a panel of experts in the field of financial reporting, namely the Blue-Ribbon Panel,” said INCPAS Chairman Charles Johnson, CPA, the managing principal of Engaging Solutions, LLC in Indianapolis. “The recommendations have overwhelming support of the members of the Indiana CPA Society, and the Society’s board of directors.
“With a majority of CPAs in support of moving forward on the recommendations of the Blue-Ribbon Panel now, we should not have to wait another 40 years for change,” Johnson added.
Society Chair-elect Kevin Kruggel, CPA, a partner with Kruggel Lawton and Co., LLC in South Bend, Ind., echoed Johnson’s thoughts. “As evidenced by 81 percent of PIU attendees in favor of the Blue-Ribbon Panel’s recommendations, it is obvious that the time has come to adopt differential reporting standards. The complexities of providing proper information for public companies have diverged from the needs of privately-held companies. Certain standards that have been promulgated in recent years have little relevance for private companies and the instances of GAAP departures in private company financial reports have increased dramatically. My clients (all closely-held private companies) are unwilling to pay for my firm to apply standards that they and their bankers feel are irrelevant,” said Kruggel.
The need to create a separate set of accounting standards for private companies in addition to those for public companies has been an oft-debated issue for nearly 40 years. While previous efforts have failed, the recent movement offers the greatest propensity for new standards to date. Many practitioners and constituents agree that change is needed to improve the usefulness and relevance of financial statements and reduce the financial burden to small businesses.
“With small companies, some of the rules are costly for them to adhere to and have very little meaning on their financial statements,” said Karen Miller, CPA, the president and CEO of The Farmers Bank in Frankfort, Ind., expressing her views from a banking profession perspective. “It makes even more sense for private company financial reporting today with the new costs of regulation and compliance. Financial statements prepared with the proposed new standards would be more cost-effective for small business.”
The Blue-Ribbon Panel was jointly formed in late 2009 by the American Institute of Certified Public Accountants, the Financial Accounting Foundation and the National Association of State Boards of Accountancy. The 18-member panel spent a year exploring possible changes in accounting standards with an emphasis on meeting the needs of users of private company financial statements in the United States. Its recommendations were finalized in January 2011 in a report submitted to the FAF.
FAF, which is responsible for the oversight, administration and finances of the Financial Accounting Standards Board, or FASB, has been studying and conducting outreach on the recommendations for the past several months. Thousands of CPAs nationwide, including some from Indiana, have expressed their support of the recommendations in letters to FAF. An action plan from FAF is expected to be issued before the end of the year.
The PIU has been used as a measuring stick for significant issues affecting Indiana CPAs since the series began in 2000. Business and financial reporting have been topics covered with regularity over the years. With approximately 25 percent of its membership attending the programs, the data gathered from the follow up survey is highly indicative of the opinions of Society members. The response rate on the survey itself is generally high. With Indiana being “middle America” the FAF should look at these results and anticipate that this perspective is true in most of the country, mandating the need for change now.
Currently, more than 7,000 CPAs in public practice, industry, government and education are members of the Society. INCPAS serves the public interest as well as its members. Its members are required to abide by the CPA profession's code of conduct. INCPAS members also receive access to quality educational programs provided by the Society, resources that enable them to better perform their job functions, and peer networking for information sharing that broadens their skills and knowledge base. Indiana CPA Society members are the most highly qualified and competent CPAs in Indiana. Make sure your CPA is a member of the Indiana CPA Society.
While the prospect of private company financial reporting represents what could be one of the biggest changes to impact the CPA profession in decades, the issue reaches far beyond accounting. Other private company stakeholders include small business owners, bankers and lenders, sureties and insurers, and venture capitalists.
Nearly 2,000 INCPAS members (33 percent of all Indiana resident CPA members) attended one of 16 half-day programs in 13 cities over 39 days, beginning Aug. 19 in Batesville, Ind., and ending Sept. 26 in Carmel, Ind. The total number of attendees was a record for the 12 years of the program. It is annually the best attended Society program.
Attendees were surveyed electronically. One of the questions asked whether or not they support proposed recommendations from the Blue-Ribbon Panel on Private Company Financial Reporting, a specially-appointed group that earlier this year presented several proposals to the Financial Accounting Foundation. An overwhelming number of attendees, 81 percent, said yes. Only seven percent said no, while 12 percent were undecided and one percent did not vote.
“CPAs in Indiana have sent a clear message that they support the creation of an independent board to set differential standards for private businesses,” said Barry Melancon, CPA, American Institute of Certified Public Accountants president and CEO. “The time has come for FAF to heed the call to make GAAP relevant for private companies.”
By show of hands at each program, the vast majority of participants expressed their support in person. Verbal comments made during the program were also strongly supportive. Attendees were a mix of CPAs in public accounting, industry, government and education, and included many young Society members new to the CPA profession.
The INCPAS member feedback comes on the heels of an Indiana CPA Society Board of Directors resolution adopted in June. The Society’s Board voted to support the development of accounting standards that better meet the needs of private companies. Specifically, the resolution endorses the Blue-Ribbon Panel’s recommendations to establish a separate standard-setting board for private companies and to ensure that changes and modifications are made to existing and future Generally Accepted Accounting Principles, or GAAP. Fourteen other state CPA societies have adopted similar resolutions.
“The issue of Private Company Financial Reporting has been considered by a panel of experts in the field of financial reporting, namely the Blue-Ribbon Panel,” said INCPAS Chairman Charles Johnson, CPA, the managing principal of Engaging Solutions, LLC in Indianapolis. “The recommendations have overwhelming support of the members of the Indiana CPA Society, and the Society’s board of directors.
“With a majority of CPAs in support of moving forward on the recommendations of the Blue-Ribbon Panel now, we should not have to wait another 40 years for change,” Johnson added.
Society Chair-elect Kevin Kruggel, CPA, a partner with Kruggel Lawton and Co., LLC in South Bend, Ind., echoed Johnson’s thoughts. “As evidenced by 81 percent of PIU attendees in favor of the Blue-Ribbon Panel’s recommendations, it is obvious that the time has come to adopt differential reporting standards. The complexities of providing proper information for public companies have diverged from the needs of privately-held companies. Certain standards that have been promulgated in recent years have little relevance for private companies and the instances of GAAP departures in private company financial reports have increased dramatically. My clients (all closely-held private companies) are unwilling to pay for my firm to apply standards that they and their bankers feel are irrelevant,” said Kruggel.
The need to create a separate set of accounting standards for private companies in addition to those for public companies has been an oft-debated issue for nearly 40 years. While previous efforts have failed, the recent movement offers the greatest propensity for new standards to date. Many practitioners and constituents agree that change is needed to improve the usefulness and relevance of financial statements and reduce the financial burden to small businesses.
“With small companies, some of the rules are costly for them to adhere to and have very little meaning on their financial statements,” said Karen Miller, CPA, the president and CEO of The Farmers Bank in Frankfort, Ind., expressing her views from a banking profession perspective. “It makes even more sense for private company financial reporting today with the new costs of regulation and compliance. Financial statements prepared with the proposed new standards would be more cost-effective for small business.”
The Blue-Ribbon Panel was jointly formed in late 2009 by the American Institute of Certified Public Accountants, the Financial Accounting Foundation and the National Association of State Boards of Accountancy. The 18-member panel spent a year exploring possible changes in accounting standards with an emphasis on meeting the needs of users of private company financial statements in the United States. Its recommendations were finalized in January 2011 in a report submitted to the FAF.
FAF, which is responsible for the oversight, administration and finances of the Financial Accounting Standards Board, or FASB, has been studying and conducting outreach on the recommendations for the past several months. Thousands of CPAs nationwide, including some from Indiana, have expressed their support of the recommendations in letters to FAF. An action plan from FAF is expected to be issued before the end of the year.
The PIU has been used as a measuring stick for significant issues affecting Indiana CPAs since the series began in 2000. Business and financial reporting have been topics covered with regularity over the years. With approximately 25 percent of its membership attending the programs, the data gathered from the follow up survey is highly indicative of the opinions of Society members. The response rate on the survey itself is generally high. With Indiana being “middle America” the FAF should look at these results and anticipate that this perspective is true in most of the country, mandating the need for change now.
Currently, more than 7,000 CPAs in public practice, industry, government and education are members of the Society. INCPAS serves the public interest as well as its members. Its members are required to abide by the CPA profession's code of conduct. INCPAS members also receive access to quality educational programs provided by the Society, resources that enable them to better perform their job functions, and peer networking for information sharing that broadens their skills and knowledge base. Indiana CPA Society members are the most highly qualified and competent CPAs in Indiana. Make sure your CPA is a member of the Indiana CPA Society.