The AICPA Board of Directors met January 18 – 20 and continued to explore a number of areas critical to the future of the CPA profession. Major topics included such diverse subjects as the CGMA Launch, Private Company Financial Reporting, IFRS for Public Companies, Standards for CPE programs and the three-year strategic plan for the AICPA. Let’s hit a few of these.
The Board received an update on the FAF proposals on Private Company Financial Reporting. 7,700 letters have been sent to the FAF with a vast majority supporting the position that the Blue Ribbon Panel recommendations need to be implemented in full. That would mean a separate Board from the FASB that would result in differential standards for private companies. The comment period has closed and the FAF is now conducting a series of 4 roundtable sessions across the country to gather even more detailed feedback. The first session already took place in Atlanta and the last session will take place in Boston. We should hear more from the FAF on the impact of this input on their proposals sometime in March. I know this is a very important issue to many of you so I will continue to keep you updated as additional information becomes available.
We spent most of Friday morning reviewing, discussing and providing feedback on the AICPA’s three year strategic plan. As I discussed in last weeks blog, the AICPA really does turn the strategic plan into concrete actions and goals. Those actions and goals and then assigned out to various direct reports to the CEO of the AICPA. They are then measured, rated and compensated based on the achievement of those goals. The strategic plan is the starting point for a whole performance management process.
The Board heard a proposal from the Personal Financial Planning Executive Committee on the possibility of granting standard setting authority to the committee. With increasing regulation in this area, it is more important than ever to show that CPAs already have the right standards and processes in place and don’t need any additional regulation. This topic will be discussed further at the regional council meetings in March and then again at a future Board meeting so there is plenty of time to give your input on the idea. And if standard setting authority is granted, any standard would go through a full exposure and comment process before it was adopted. Please feel free to share your thoughts with be directly or as a comment to this blog.
Next week the AICPA and CIMA will be launching the Chartered Global Management Accountant (CGMA) credential. This credential will be a game changer for CPAs working in the B&I space. It will be a way for you to build on your CPA designation in differentiating yourself from other accountants and finance professionals in the workplace. In conjunction with the launch, the AICPA-CIMA JV will issue a number of thought leadership papers and tools covering a variety of topics from risk and innovation to business models to the skills and talents needed to continue to be successful in your career. In addition, the AICPA and CIMA will be there with practical ways to help your business and therefore your career. Please look for a blog covering the CGMA after it is launched.
The variety of issues the profession is dealing with can be mind boggling, but with the help of a great staff and great volunteers, the AICPA will continue to be there to serve you no matter what part of the profession you are in.
I attended the AICPA Council meeting last week. As expected a major topic of discussion was the FAF exposure draft on private company financial reporting, but before I get to that topic I want to list some of the AICPA’s accomplishments over the past year. The AICPA achieved record membership (372,000); Completed a major bylaw change better defining the categories of membership; Reached agreement with CIMA on forming a joint venture to issue the first Chartered Global Management Accountant credential; Successfully lobbied for the repeal of the onerous 1099 requirements and the elimination of the ability to patent income tax strategies; Resolved may problems with initial IRS proposals on Tax Preparer Registration; Completed the clarity project on auditing standards for private companies; Replaced and out of date and increasing unworkable SAS 70 regime; Successfully highlighted the CPA profession to the next generation resulting in record accounting majors and graduates; And completed an update of the vision for the CPA profession for the next 15 years. I would like to highlight two of these accomplishments before I address Private Company Financial Reporting.
The new CGMA certification for CPAs with expertise in Corporate and Management Accounting is scheduled to make its debut on January 31, 2012. The core purpose of a CGMA is to be “trusted to guide critical business decisions.” This is what CPAs in B&I do everyday, but now we will have a credential to recognize the unique nature of that service and differentiate us from non-B&I CPAs as well as other “accountants” that work in business. There are going to be additional focus areas on professional development, but it won’t be only about the individual CGMA taking the initiative. Our joint venture partner, CIMA, has extensive experience in working with employers to set up development programs for finance departments and we intend to bring this expertise into the U.S. along with the CGMA. This will not only enhance the skills of CPAs in business, but also elevate CGMAs in the minds of one of the most important influencers on our careers – our employers.
CPA Horizons 2025
The AICPA has spent time working with thousands of our members to update the Vision of the future of the CPA profession during the past year. The development has been a evolution of the existing vision rather an a revolutionary change in direction. The core purpose for CPAs remains the same, “ CPAs…Making sense of a changing and complex world.” In addition many of the core competencies such as Integrity and Objectivity remain the same. Some, however, have changed. For example, “technologically adept” is now gone as a distinct competency because the concept is so pervasive it now is really part of all of the core competencies. The final report on CPA Horizons 2025 will come out after inclusion of additional feedback from Council obtained at this meeting. Be on the lookout for it late this year.
Private Company Financial Reporting
As I reported in my last blog, FAF issued an exposure draft on private company financial reporting that did not follow the Blue Ribbon Panel recommendations. The Council was extremely disappointed in the FAF and as a result passed the following resolution at the meeting.
“Be it Further Resolved, That because the Financial Accounting Foundation’s proposal does not contain the establishment of a board under the Financial Accounting Foundation empowered to set differences in U.S. GAAP standards where appropriate for privately-held companies, which is the preference of this Council, and if the Financial Accounting Foundation’s proposal is not modified to include such a board under the Financial Accounting Foundation, this Council directs the AICPA Board of Directors to consider all options, including consideration of other independent standard-setting bodies as the standard setter for U.S. GAAP for private companies, the creation of a committee or board within the AICPA or a standard-setting body as a separate entity, to develop private company generally accepted accounting principles (PCGAAP) or comprehensive private company-specific basis of accounting that would deliver meaningful, lasting improvement to private company financial reporting consistent with the Blue Ribbon Panel recommendations.”
Just to be clear, let me repeat a statement made by our new Chair-Elect Richard Caturano. The AICPA Board, Council and members do not want to take control of private company GAAP. What we want is a separate Board under FAF as recommended by the Blue Ribbon Panel sponsored by FAF, NASBA and the AICPA, but if the FAF refuses to follow those recommendations, the AICPA Council and Board will have to act accordingly.
On October 4, the Financial Accounting Foundation (FAF) released their long awaited request for comment on a plan to deal with Private Company Standards. For those who have been eagerly awaiting the next step in establishing differential private company standards after the Blue Ribbon Panel recommendations, the FAF’s request for comment was a bitter disappointment. After eight months of the least transparent process to ever come from the FASB or FAF, the recommendation included three important facets:
- Creation of a “new” Private Company Standards Improvement Council
- Creation of a framework for deciding when differential standards are appropriate
- Leaving final say on all standards with the FASB
This plan falls significantly short of the Blue Ribbon Panel recommendation to have a separate Board with final authority over private company standards. While there are some good aspects to the FAF plan – the creation of a framework for deciding differential standards – I want to point out three major problems I have with the recommendations.
First, this “new” Private Company Standards Improvement Council isn’t new at all. It sounds a lot like the Private Company Financial Reporting Committee (PCFRC) to me. The PCFRC was set up 5 years ago as a last ditch effort to deal with Private Company Standards under the existing FASB standard setting structure. It failed miserably. The FASB refused to act on several PCFRC recommendations to make standards better for private companies. Unlike NASBA and the State Boards that took our last ditch effort to work together and deal with Mobility seriously, the FASB didn’t. As a result, today we have a Mobility framework that while not perfect, works while we are nowhere on private company standards. What are we supposed to do now, trust that the FASB has seen the error of its ways? After forty years of refusing to deal with differential standards I simply do not believe that any change in the FASB attitude will last more than a year and everything will be right back to where we are now.
Second, the FAF seems to have this idea that two separate sets of GAAP – one for Private companies and one for Public companies – is a bad thing and “is not a desired outcome.” I disagree. Two sets of GAAP is exactly the desired outcome. If you think that would cause all sorts of problems you need to take a look at the rest of the world. Most countries, in addition to adopting IFRS, also now have two separate sets of GAAP. Two sets of GAAP not only works, it often works better that one set of GAAP that satisfies no one.
Finally, as a public company employee I think it’s time for the public companies to get a little selfish about the FASB. The Sarbanes-Oxley Act changed the funding for FASB so that it comes from fees paid solely by public companies. As such, I think it only appropriate that the FASB focus on public company issues. We should get something for paying the freight.
Private Company Standards are sure to be a major topic at the AICPA Council meeting this week, so I’ll provide you a further update on this important topic along with other items of interest discussed at the Council meeting in my next blog.