Private Company Financial Reporting

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Private Company Financial Reporting
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AICPA PCFR Task Force

• A task force, appointed by the Chair of the
  AICPA, is engaging in a dialogue with the
  stakeholders of private company financial
  reporting.
• The task force members represent key constituent
  groups including practitioners, owner/managers
  and users of private company financials.

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The Mission

• Determine whether or not general purpose
  financial statements of private, for-profit
  entities, prepared in accordance with generally
  accepted accounting principles (GAAP), meet the
  needs of all constituents of that reporting
• A related question is whether or not the cost of
  providing all that is required in GAAP financial
  statements is justified by the related benefits
  to private company constituents

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Scope

• For-profit, privately-held companies
• No size limitation
• Grassroots outreach is U.S. focused
• With understanding of what has been done
  internationally
• NOT about broader-based information needs, such
  as non- financial performance indicators

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Who is the Task Force?

• 2 bank lenders (ABA)
• 2 venture capital investors (NVCA)
• 1 former and current standard setter (FASB/FASAB)
• 4 preparers (BIEC, FEI, NFIB, State Society)
• 1 educator (ARSC)
• 6 firms (PCPS, TIC, State Societies)

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Target Grassroots Constituents

• External users investors, lenders, sureties
• Business owners and management
• Non-management owners
• Practitioners
• Need practitioner opinion plus hope to reach more
  external users through CPAs

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Engaging in a Dialogue

• Our approach to our outreach efforts with all
  constituents is to
• Stimulate discussion through communications
• Collect input through statistical surveys and
  other grass roots methods
• The core document for this outreach is a
  discussion paper posted at http//www.aicpa.org/do
  wnload/news/2004/Discussion_Paper_5-10-04.pdf

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Going Forward

• Complete surveying by July 31
• Task force reviews results in August
• If results indicate an issue, the task force will
  attempt to define it
• If an issue is identified, the task force will
  propose a solution to the AICPA Board of Directors

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Questions for Discussion

• What is the main purpose for which your private
  company clients requested GAAP financials in
  2003?
• In general, what is most valuable aspect of the
  GAAP-based financial statements you prepare for
  your clients? Why? Least valuable? Why?

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Questions for Discussion

• What, if any, challenges do you face related to
  preparing financial statements for private
  companies in accordance with GAAP? What, if any,
  challenges do you foresee in 2004?
• What suggestions, if any, would you provide for
  improving the measurement, recognition or
  disclosure for GAAP financial reporting for
  private companies?