Big GAAP vs. Little GAAP

In the world of accounting standards, publicly-traded companies rule, and you suffer because of it. I bet you didn't know that, but it's true. You may not be familiar with things like FIN 46(r), FIN 48, SFAS 142, or SFAS 150, but because of accounting pronouncements like these, we have to spend more time on your account "applying GAAP (generally accepted accounting principles)" and less time consulting and adding value.

These pronouncements make sense in the context of pubicly-traded companies where there is a separation between management of the company and the users of the financial statements (investors, creditors, etc.). But you generally have a personal relationship with the users of your financial statements, primarily your commercial lender. Your lender can meet with you or call you (or us) easily to get clarification of an item in your financial statements or to know that you have a related entity that you do business with. So you don't need accounting rules like FIN 46(r) - Consolidation of Variable Interest Entities.

If you and the users of your financial statements don't need these things, then why do you have to worry about them? Because, generally speaking, the users of your financial statements want financial statements prepared in accordance with GAAP as a starting point for their analysis of your company. They make various adjustments to "simplify" things, but to make those adjustments they need a familiar starting point, and that point is GAAP. And for as long as there has been GAAP, it has been a one-size-fits-all thing.

Over the past 30 years, the question of whether there should be Big GAAP (for publicly-traded companies) and Little GAAP (for closely-held companies) has been debated several times. This debate is currently happening again, and you should care and take part. 

GAAP is set by FASB (the Financial Accounting Standards Board), who is overseen by the FAF (Financial Accounting Foundation), a non-profit, non-governmental organization. Recently, FAF joined with the AICPA (American Institute of CPAs) and NASBA (National Association of State Boards of Accountancy) to hold hearings regarding creating a separate set of GAAP for closely-held companies. Those hearings resulted in a recommendation to FASB that now is the time to develop Little GAAP.

Unfortunately, FAF seems to now be slowing down/stalling the process for this much-needed change, as they have taken the report of one panel and decided to form another panel to discuss things more. This type of behavior has happened previously in the past 30 years, with the result always being that you end up with GAAP as one-size-fits-all.

If you want to see changes, now is the time to act. If you want your CPA to be able to focus less on compliance with rules that your lenders don't even really care about, now is the time to contact FASB. If you want to be able to get more prospective value and less retrospective "bean counting" out of your CPA, go to this website and use the information to send a letter to FASB urging them to adopt separate GAAP for closely-held companies: https://apps.aicpa.org/pcfr/

We hope the end result of this process is that you will end up with an accounting framework that provides more meaningful and less costly financial statements. I presume you want this too, and, for that reason, I ask you to help us help you.