State Board Report
NASBA leaders are following through on the resolution unanimously approved at the April 19 Board of Directors’ meeting in response to the American Institute of Certified Public Accountants’ creation of their Financial Reporting Framework (FRF) for Small- and Medium-Sized Entities (see sbr 6/13). On July 10 the AICPA released the final version of its FRF and NASBA quickly sent out a press release outlining its concerns with the FRF, including its lack of an appropriate public exposure process. NASBA had requested the AICPA allow the Private Company Council time to propose appropriate modifications to the Generally Accepted Accounting Principles (GAAP) before the Institute rolled out its new standards.
NASBA Chair Gaylen Hansen (CO) wrote: “At a time when accountability and transparency of those in authority is scrutinized, it is troubling that a non-authoritative proposal to significantly weaken the financial reporting of private companies and public protection is even being suggested.”
At the June Regional Meetings, June 5-7 in New Orleans and June 26-28 in Chicago, State Board members were asked to consider how State Boards should treat non-authoritative standards. Who can set financial reporting standards in the United States? Can any group? What should the State Boards’ role be in the acceptance of such standards? At both the Eastern and Western Regional Meetings, Board representatives were given opportunities to discuss what NASBA’s concerns are about the AICPA’s proposal. Among the issues are:
NASBA President Ken Bishop told attendees at the Meetings that NASBA will work through the Uniform Accountancy Act Committee to consider Model Rule language which would require that, before a non-authoritative accounting standard can be used by a CPA in a state, it must first be approved by the State Board.
On June 17 the Institute of Management Accountants also issued a press release stating their disagreement with the FRF. They agreed with the concerns raised by NASBA and also stated: “IFRS-based frameworks (such as IFRS for SMEs) should only be considered in a coordinated, holistic manner driven by the national standard setter and regulator (FASB/SEC).”
The AICPA’s FRF is based upon the Canadian IFRS for SMEs as adapted by an AICPA Task Force led by Dr. Thomas A. Ratcliffe.
On July 1, the President and CEO of the Financial Accounting Foundation, Terri Polley, released a letter discussing the FRF-SME. She stated, “For private companies already using GAAP, moving to the AICPA framework would be a major leap. Companies – and users of their financial statements – may not realize just how significant that leap may be, particularly as NASBA noted, because the framework borrows GAAP concepts, but there is no requirement to disclose the substantial differences between GAAP and the framework.”
President Bishop reports NASBA and AICPA continue to discuss their common interests in having appropriate standards for small- and medium-sized private companies.
- MEMBER CENTER