Accounting Firm Offers Public Service Announcement Regarding Effort to Reform Private Company Financial Reporting Standards that Burden Small Businesses

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Filomeno & Company, a proactive CPA and business advisory firm, is supporting The American Institute of Certified Public Accountants (AICPA) effort to reform privately held company financial reporting standards that place unnecessary burden and cost on small to midsized companies, urging privately held companies to take action.

Filomeno & Company
In recent years, accounting and reporting guidelines too often have lacked relevance and have become unnecessarily complex and costly.

Filomeno & Company, a proactive CPA and business advisory firm, is supporting The American Institute of Certified Public Accountants (AICPA) effort to reform privately held company financial reporting standards that place unnecessary burden and cost on small to midsized companies, urging privately held companies to take action.

BACKGROUND

Financial reporting statements from privately held companies, which make up fifty percent of our nation’s private-sector economy, are intended to satisfy informational needs of bankers and others who conduct business with those private companies. Their financial reporting needs are different from those who use public company financial statements and are most often focused on understanding the financial statements for investment-analysis purposes.

Nevertheless, privately held companies are held to the same reporting standards developed for publicly traded companies registered with the Securities and Exchange Commission. To put this into perspective, there are only 15,000 publicly traded companies compared to the 28.5 million private businesses nationwide that prepare U.S. GAAP (Generally Accepted Accounting Principles) financial statements, according to the U.S. Census Bureau. Yet U.S. GAAP is driven by issues that occur in the capital markets to address the needs of public companies and their stockholders.

“In recent years, accounting and reporting guidelines too often have lacked relevance and have become unnecessarily complex and costly,” said George Thomson, Director of Accounting and Auditing Services for Filomeno & Company. “There’s an obvious inequity here and that is what our professional association is trying to reform.”

Earlier this year the AICPA co-sponsored a Blue Ribbon Panel on Standard Setting for Private Companies, with the Financial Accounting Foundation (FAF) and the National Association of State Boards of Accountancy, which recommended to the FAF that it accept changes and modifications to U.S. GAAP to reflect the private company environment and create a new standard-setting board to implement those changes.

The FAF received more than 3,000 letters from constituents expressing support for the Panel’s recommendations prior to issuing a proposal. However, the FAF’s proposal on private company financial reporting falls substantially short of what is necessary to make GAAP relevant for private companies by not including establishment of a separate authoritative board.

WHAT THIS MEANS FOR SMALL BUSINESS

“The irrelevance and confusion that is caused coupled with the significant increased cost when evaluating and implementing these standards for preparing financial statements is to the detriment of the small to midsized privately held companies that we serve and support,” Thomson said.

Additionally, anything that hinders small businesses has a profound impact on the U.S. economy. According to the U.S. Small Business Administration, small businesses employ more than half of all non-farm private sector workers in the United States and are responsible for 44% of the private payroll. They have generated 64% of the new jobs created during the past 15 years.

“Especially in these difficult economic times, we want to advocate for businesses and hope to send that message loud and clear,” Thomson said.

WHAT YOU CAN DO

Financial reporting is the backbone of business and we are trying to make dramatic change that is long overdue.

CLICK HERE to send FAF a comment letter expressing support for an independent board to set GAAP modifications for private companies. It will take just 30 seconds of your time. Fill in your name on the prewritten letter and click ‘Send Letter’ to make your voice heard. The comment deadline is January 14, 2012.

About Filomeno & Company
Filomeno & Company is a proactive business advisory firm offering a wide range of services including: accounting & auditing, business advisory, business valuations, corporate tax, individual tax or strategic tax, qualified plans and fraud prevention. Located in West Hartford, CT, the company’s mission is to passionately serve our clients, our community, our firm and each other. For more information, contact Filomeno & Company at 860.561.0020 or visit http://www.filomeno.com.

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Jessica Lyon
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