May 27, 2004--Since the collapses of the likes of Enron and WorldCom and the introduction of the Sarbanes-Oxley governance laws in 2002, new accounting standards have been geared almost solely toward publicly-owned corporations. Small businesses are now taking a closer look at whether these standards suit their own financial reporting.
On Tuesday, the National Federation of Independent Business joined a study on the effectiveness of financial reporting for privately held businesses. The task force, headed by the American Institute of Certified Public Accountants, is seeking to determine if there are issues with financial statements of private companies based on Generally Accepted Accounting Principles when those statements are used to make lending, investing, and other business decisions.
Similarly, the Financial Accounting Standards Board launched the Small Business Advisory Committee in March. The committee was formed in an effort to increase small business involvement in developing accounting standards. It held its first meeting on May 11, where it discussed a variety of specific accounting standards effecting small businesses.
The AICPA study was spurred by numerous concerns including whether much of the current body of GAAP literature is relevant to smaller private businesses and if lenders are actually using all the GAAP information required in financial statements. The study is also looking to address the costs and benefits for private companies of certain reporting and disclosures which appear to have been designed for public companies.
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