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Private Company Financial Reporting Should be Based on GAAP
June 17, 2013
Stern + Associates
(908) 276-4344, x-221
Montvale, N.J., June 17, 2013 -- U.S. Small Business Administration (SBA) data suggests that up to 70 percent of net new job growth in the U.S. comes from small businesses. Private companies in the U.S. need to maintain credibility with sound internal controls and the freedom to innovate. Like all enterprises, small businesses wish to both preserve and create value, but they have unique needs and are often disproportionately impacted from “disclosure overload.” However, in their external financial reporting, it is important that private companies of all sizes report financial information with integrity, credibility, efficiency and flexibility so they can generate sustainable value for their stakeholders.
IMA’s position and principles:
- Market-based research and analysis by the PCC (FAF Private Company Council) and BRP (AICPA/FAF/NASBA Blue Ribbon Panel) should be the guide for a reporting framework.
- The PCC and BRP clearly concluded that a “GAAP-based” framework serve as a foundation, which can then be flexibly tailored to meet the unique reporting and disclosure needs of private company issuers.
- An “optional” framework which may not be GAAP-based, such as an “other comprehensive basis of accounting” (OCBOA) approach, will cause marketplace confusion, especially if it is not driven by the needs of marketplace participants.
- 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).
- An accounting association body should not be setting what could be perceived as authoritative standards which, in fact, are non-authoritative and thus difficult to regulate or enforce.
About IMA® (Institute of Management Accountants)
IMA®, the association of accountants and financial professionals in business, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) program, continuing education, networking, and advocacy of the highest ethical business practices. IMA has a global network of more than 65,000 members in 120 countries and 200 local chapter communities. IMA provides localized services through its offices in Montvale, N.J., USA; Zurich, Switzerland; Dubai, UAE; and Beijing, China. For more information about IMA, please visit www.imanet.org.