Today I watched AICPA President and CEO Barry Melancon speak about the changes that must be made to create separate standards for public and private companies.
The private company reporting committee made two recommendations to FASB about FIN 48 and FIN 46. It was recommended that FIN 48 (accounting for uncertainty within income taxes) should become inapplicable for private companies in order to improve disclosure and accuracy within statements. the second recommendation was that FIN 46 (consolidation of variable interest entities) be changed to better fit private entities and reporting standards. These were two great recommendations that will help regulation over many private sectors
After some discussion, FASB rejected both recommendations. Barry Melancon believes that if FASB retains the power to veto there will be little to no progress.
Barry Melancon believes that enough is enough, FASB has been sitting on this issue for 35 years. He used the following football analogy to better illustrate his message:
" When you have a first and goal, there are different things that can happen. The first thing that happens is the defense unit that comes out on the field that tries to stop you from scoring takes on a little different character than the defense that’s been on the field for the other 90 yards. They are a little meaner, a little bigger, a little more intense. They growl, and spit a little bit. But they’re there to stop you. And they’re number one desire is to keep you out of the end zone. They don’t even want you to kick a field goal, but they’ll settle for that when you have a first and goal. And if they can get a turnover, they will be the champions of their team for that period of time.
The people who are opposed to differential standards today know we have first and goal, they want us to have a turnover. Now maybe they’ll settle for a field goal and say there will be differential standards but with a veto for FASB.
The time to act is now. We have a first and goal, and you’re on that offensive line. The defense wants to keep you out of the end zone. The question becomes do we get held to a field goal or do we have a turnover… we’ll see. If we don’t score now, the clock will almost certainly run out.
The people who do not support differential standards they are the 35 year consecutive champions. Sometimes dynasties have to be broken."
In order to better control the accuracy of financial statements FASB must approve of committee regulation changes or they themselves should put out legislature. Privatized companies must face more scrutiny in order to increase their liability for any corporate misdoings. Barry Melancon is right when he says the time to act is now. So many resources have been spent in the past two years developing committees and if no action is taken it will have been a waste and further push the movement.
In order to better control the accuracy of financial statements FASB must approve of committee regulation changes or they themselves should put out legislature. Privatized companies must face more scrutiny in order to increase their liability for any corporate misdoings. Barry Melancon is right when he says the time to act is now. So many resources have been spent in the past two years developing committees and if no action is taken it will have been a waste and further push the movement.
Sources:
FASB. FASB Interpretation No. 46. FASB, Dec. 2003. PDF.
FASB. FASB Interpretation No. 48. FASB, June 2006. PDF.
Melancon, Barry. "AICPA News." Welcome to the AICPA. AICPA. Web. 25 Oct. 2011. <http://www.aicpa.org/News/Pages/AICPANews.aspx>.
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