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Responses to ACSPC Request for Public InputAccounting/AuditingQuestion 16. Are the current accounting standards applied to all U.S. companies appropriate for smaller companies? If not, please explain what revisions to existing standards might be appropriate.The following answers have been received: 08/02/2005 17:44:12 Black-Scholes option pricing model is stupid and makes no sense for small companies. Some standards for small companies do not reflect the business realities. Segmented information, recent accounting pronouncements, huge discussion of accounting policies and methods don't add value. 08/02/2005 23:36:32 Yes 08/03/2005 01:39:17 To keep this simple, eliminate this terribly conceived regulation. Or make it voluntary. If neither is acceptable, then reduce the scope of these audits by at least 75%. 08/03/2005 07:01:34 yes they are. but make all the standards simpler and enforce...Keep It Simple Stupid... 08/03/2005 08:55:04 No 08/03/2005 08:58:39 No. Smaller companies that are regulated don't need the same standards as the big guys. 08/03/2005 10:40:26 No comment 08/03/2005 12:17:58 no, overkill to the max. cost ineffective 08/03/2005 15:01:40 The current accounting standards are appropriate. 08/03/2005 15:22:49 Yes, for the most part. Unlike SOX, most of the recent accouting standards of the past six years have dealt with complex issues that do not apply to companies our size. 08/03/2005 16:58:51 yes - we should be held to the same accounting standards as everybody else. Internal controls and SOX is a different story. 08/03/2005 18:01:35 Please look into item no 29 08/03/2005 18:30:29 x 08/03/2005 19:54:33 I have no opinion on this question. 08/03/2005 19:55:50 THEY ARE APPROPRIATE IF THEY ARE ENFORCED!!!! SEE ITEM #5 ABOVE! 08/04/2005 09:39:15 Yes. Please refer to responses in number 14. 08/04/2005 10:40:16 I would hate to see a big and little GAAP. SOX is a totally different issue. 08/04/2005 12:09:05 The standards are fine. It's how SOX has crippled the smaller companies in compliance of these standards that is the problem. 08/04/2005 13:38:24 No comment. 08/04/2005 14:20:27 I will have our CFO give his opinion here. 08/04/2005 18:05:44 Yes 08/05/2005 10:54:31 Yes 08/05/2005 12:38:34 Current Standards are adequate if enforced! See item #5 above 08/05/2005 12:44:28 I believe GAAP should be applied uniformly to all public companies for purposes of standardized data and interpretation. 08/05/2005 15:34:53 Not certain 08/05/2005 15:43:46 The is universal agreement among peer banks vis-a-vis large banks and among our accountants that one plan (set of standards) DOES NOT fit all. It is hoped that the COSO small business project and PCOAB efforts will bring improved insights to this problem. 08/05/2005 16:45:38 Yes, these are the generally accepted rules of business. 08/05/2005 19:33:08 No they should not all be applied to small companies. Too numerous to discuss here. 08/06/2005 13:52:06 Yes. Need one measurement standard. Should definitely consider a lower level of disclosures for smaller companies. 08/08/2005 09:29:48 Yes. 2+2=4. No matter who you are. If you want to reduce the creditablity to the public of the accounting and regulatory profession even further, then create more complexity. 08/08/2005 11:10:11 yes 08/08/2005 11:39:29 Again, I go back for the appropriateness for the individual industry. 08/08/2005 14:06:10 For the most part I think the accounting standards should be appllied to all companies big or small. I don't think compliance in those situations is too onerous for smaller companies. 08/08/2005 15:43:24 Yes. 08/08/2005 21:39:10 Our experience is that we are forced to apply GAAP concepts that were created for very large companies to our very small operation. At times, the results of this effort seems illogical, and it can alter what we consider the true results of our operations, both negatively and postively. Many companies report non-GAAP measures as part of their results in an attempt to overcome these accounting issues in an attempt to reflect their "true" results. The problem is that the non-GAAP measures are sometimes very different for different companies. Requiring a GAAP to non-GAAP reconciliation as part of an earnings report only complicates the issue. Regulation SB seemed like an attempt to provide small companies with an easier way to comply, but SB reporting is nearly idential to non-SB reporting. Our opinion is that Regulation SB should be updated to reduce the compliance costs while providing a baseline for relevant investor information. 08/09/2005 09:30:31 No. One-size does not fit all. One example: for banks one of the many burdens is reporting the same quarterly financial results to multiple regulators in multiple forms using unique software/filing methods for each. 08/09/2005 16:26:34 Reducing the requirements will be difficult and frankly prbabably not very effective as the auditors will be reluctiant to truly change their standards based upon company size...just my opinion. There needs to exemptions based upon industry or size...the switch is either off or on. 08/09/2005 17:25:10 All but SOX are fine in my book. 08/10/2005 09:04:41 no comment 08/10/2005 13:44:39 I am not aware of standards that should be applied differently. 08/10/2005 16:00:18 How about a little more leniency on stock option accounting? 08/10/2005 17:18:15 Yes - all companies should be treated the same, large and small; public and private 08/10/2005 22:09:27 Can't answer that as things are done differently for different reasons. 08/11/2005 08:35:22 Yes, the standards are fine. External auditors however should have some latitude in the application of a standard given the size and capability of a smaller organization. 08/11/2005 20:27:22 There is nothing wrong with the current accounting standards. Such standards should apply to all companies, regardless of size. 08/12/2005 13:12:10 No opinion. 08/12/2005 14:46:45 Yes are appropriate. However, auditoring approaches need to be tailored to the size and complexity of the company. Therefore, specific modified guidance needs to be made for smaller companies. Just stating that the external auditors need to tkae size and complexity into consideration is not enough. 08/12/2005 16:35:01 Yes appropriate. 08/13/2005 12:39:43 NO, but do not know what is more appropriate 08/15/2005 13:08:27 The accounting standards are appropriate, although compliance with added disclosure of supplemental information can be burdensome. 08/15/2005 14:27:30 As noted above, I think it matters less what the standards are than how they change. What we need is an undestandable and predictable set of rules, applied in an environment that is neither naive nor paranoid and benefitting from the application of an enlightened understanding of materiality. The existing standard, so applied, should work for any public company. 08/15/2005 15:10:05 not sure 08/15/2005 15:13:01 Yes, for financial statement audits. 08/15/2005 15:14:45 Sure. There should be a common and level playing field, and the public should be protected, however, accounting rules are not always in the company's financial interest. 08/15/2005 16:33:43 How can 404 be appropriate to small companies when it costs so much. The audit was fine, and we have been public for 40 years without complaint until now. The other standards are and continue to be fine. 08/15/2005 16:41:14 no opinion 08/15/2005 18:59:52 Current practice in stock-based compensation is ridiculous. Black Scholes is the easiest (but not easy) to implement, but the results are worse than meaningless. The assumptions underpinning Black Scholes are invalid for small companies. 08/16/2005 09:51:21 yes 08/16/2005 10:10:36 Yes. One set of standards are important. 08/16/2005 10:21:17 Across the board, the idea of "judgement" has been thrown out; the accounting profession continues to churn out very complex standards, which are a burden to all companies, but in particular small companies. There needs to be room for judgement, both by management and the auditors. 08/16/2005 10:26:28 no, reduce disclosures and general burden on small companies 08/16/2005 10:42:02 Most of them are. 08/16/2005 10:44:16 I think all public companies need to be subject to same rules. 08/16/2005 11:18:54 I believe the accounting standards, as a whole, are appropriate for all. 08/16/2005 11:52:16 No. 08/16/2005 12:14:10 NO Comment 08/16/2005 12:15:34 I think that the accounting standards are fine. 08/16/2005 12:40:54 Tough audit 08/16/2005 12:42:56 These one size fits all standards are absurd for smaller companies. 08/16/2005 13:04:14 The FASB 123 (R) standard is a hardship for smaller companies since the standard effectively prevents small public companies like Image Sensing Systems, Inc. from using stock options in the future to compensate our executives and key employees. And of course, the more successful we are, the more the cost of the stock option. 08/16/2005 13:12:04 This question is too sweeping; responding woudld teke hours. There are some standards that are inappropriate, however. 08/16/2005 13:19:29 In my opinon, our accounting standards are far too focused on technicalities rather than intent (which, for that matter, mirrors our legal system). A well-intended and well-run company should be able to opperate without any hindrence by accounting standards. Yes, they should be required to report honestly to their shareholders, but the actual operation of their company should not be hindered. The current accounting standards (specifically SOX 404) serve to force companies to spend excessive resources on reporting that should be spent on strenghting that which is to be reported (ie. profitability, growth, etc.). 08/16/2005 13:20:23 Yes. But standards that are driven by "concept" instead of legalistic or special interest lobbying, would make one set of standards more appropriate. The current mess with constant amendments is difficult to follow all the time. Consistency encourages comparability. The standards should be amended to reduce the amount of discretion afforded companies in the US. But I definitely would have the same standards for all entities, regardless of size or cost to comply with. 08/16/2005 13:25:32 Never have been a proponant of Big GAAP/Small GAAP. Hard enough to understand the esoterics of accounting with one set of rules. 08/16/2005 13:27:00 Yes. Accounting rules are complicated enough without creating separate standards for small companies. It would create total confusion. What would happen when a "small" company transitions to a "large" company? 08/16/2005 13:30:33 FAS 123R is a joke. Anyone familiar with the history of Long Term Capital realizes the folly of trying to model complex financial markets. I believe FAS 123R will render publice financial information unuseable. 08/16/2005 14:08:05 The standards are fine, except congruence of principle application within industries would help. 08/16/2005 14:23:10 I believe that the accounting standards need to be applied equally to all companies. 08/16/2005 15:15:12 No. In my opinion you cannot and should not paint all companies with the same broad brush. Larger companies with more sophistacated accounting systems need different kinds of guidelines than do smaller companies with less sophisticated systems and personnel. I belive every accounting pronouncement needs to be looked at from both the large company and the small company angle and adjusted accordingly. 08/16/2005 16:16:04 Yes, accounting standards should apply to smaller companies, although the standards are becoming more and more complex and wide reaching and are difficult to comply with all... 08/16/2005 16:45:09 We don't like a multiple sets of standards depending on the size of a company. On the other hand, the proliferation and complexity of new standards requiring a rather simple $100 million in sales company having to keep current and comply with the same rules as a complex $100 billion in sales company needs to be changed. The real issue is do we need to reduce the complexity by using accounting principles instead of rules. 08/16/2005 18:35:41 In my curmudgeonly view, accounting standards in general are moving away from their foundations (that the financial statements should REASONABLY state, etc.etc.) to hypertechnical standards that benefit nobody, for large or small companies alike. A few recent examples are the need to have an economic valuation of intangibles performed every year instead of simply amortizing them on a consistent and systematic basis, and the obsessing that is now taking place over what sort of stock option valuation model should be used, poorly veiled threats from the SEC that it "doesn't like" the Black Scholes model, and the resulting need to hire another blasted "expert" consultant to write a justification for WHATEVER calculation method the company adopts, notwithstanding that statisticians advise us the BlackScholes and the binomial methods yield very similar results. 08/16/2005 21:29:07 GAAP criteria are sufficient. 08/16/2005 21:40:38 Obviously, $1M in accounting fees for a $100M company is not the same as $1m in fees for a $1B company 08/17/2005 12:28:22 I do not know? 08/17/2005 12:36:00 I don't have a problem with any accounting standards as I understand the term and see no reason they should not be applied universally. 08/17/2005 12:48:33 NONE. 08/17/2005 18:49:20 I think the standards should be applied uniformly just as I believe the SOX standards should be applied uniformly. Once you start created different standards, then it just becomes to confusing, too costly for the accounting firms to operate with different auditing standards and too confusing to the market in terms of understanding what rules the auditors were operating under for this or that specific public company. 08/17/2005 18:49:27 I have no issue with the accounting standards (other than non-cash charges - see below) - it is the auditing standards that are out of line with the benefits they provide. 08/17/2005 19:31:08 I think GAAP should be applied to both small and large companies to maintain the integrity of financial numbers. 08/17/2005 21:27:12 The accounting standards should be simplified for all companies. Their needs to be a major thinning of current applicable GAAP. Rules should be simplified to ensure consistent application across companies. For expample, their is now a debate surrounding FAS123R regarding the measurement date for the charges to be recorded upon the issuance of employee options. The current literature now indicates that the date is not the Board approval date but rather the date an agremeent has been reached between the Company and the grantee. In addition to the additional administrative burden for this measurement (now there would be different measurement dates for each option granted even if they are all approved by the Board on one day) it opens the door to companies to shift the measurement date to one that would result in a lower charge. This is only one example of the incredible complexity that has creeped into GAAP and had the effect of making application of the rules less comparable among companies rather than more comparable. As the Controller of a small company I am required each year to review a GAAP disclosure checkist of close to 150 pages. The complexity of the disclosures makes the information going out to the investing public less rather than more understandable. 08/17/2005 22:55:14 Existing standards seemed to have evolved over the last 25 years to rely less on general principles that can be applied using reasonable judgment to much more on specialized standards that are in many cases more confusing than the general standard was. I don't think the size of the company should be much of a consideration for accounting standards, but is important when considering the implementation of other regulations, such as SOX 404. 08/18/2005 08:03:31 Yes, but would advise to install fraud check points. 08/19/2005 02:56:12 Standards should be applied equally. There should be no large and small GAAP. 08/19/2005 11:44:44 No, there are always items that are treated differently, or have different objectives that must be accounted for in the same manner, which isn't necessarily appropriate for small companies. 08/19/2005 13:49:01 The current accounting standards (hereafter referred to as GAAP) are appropriate for ALL U.S. companies whether large or small. The application of GAAP produces a level of confidence in data presentation and should not be altered because of company size. The application of SOX is weighted, negatively, against smaller companies. 08/19/2005 14:40:28 Yes. 08/19/2005 14:50:07 Current accounting standards are appropriate. 08/19/2005 17:03:28 I think they're appropriate. 08/21/2005 22:19:50 Yes 08/22/2005 14:21:23 No. More time to adapt to SOX and some limited freedom of interpretation. 08/22/2005 15:20:23 I can't think of any that should not apply to small companies. 08/22/2005 15:47:02 Yes. Accounting standards are not the issue. 08/22/2005 15:47:34 Generally yes. 08/22/2005 17:54:28 I do not think different accounting standards should be applied to different size companies. If it's correct accounting, it's correct for all. 08/22/2005 17:56:59 Appropriate, with exception of SOX 08/22/2005 19:27:18 Yes. It should be a common languare to investors. All small comapnies hsould folow GAAP as they wish to grow up to larger companies. I don't think the costs of complaying with the common GAAP language are onerous. 08/22/2005 20:10:17 They seem to be. Accounting principals which apply to how transactions are reported, how items are depreciated, etc., should be standard to all companies. 08/23/2005 00:42:38 other than fas 123R seem appropriate enough. this will be very difficult to implement (cost/effort) 08/23/2005 15:56:30 Yes, all smaller companies should be on a level playing field. 08/23/2005 16:06:08 I think the current standards are appropriate. 08/23/2005 16:49:34 Most are 08/23/2005 18:10:00 Yes. 08/23/2005 21:11:03 the accounting standards appear to be appropriate. The SOX requirements for regulatory compliance are the burden. 08/24/2005 08:50:18 Personally, I think all of the pro-forma requirements make the financials more confusing to the investors and I'm a CPA. 08/24/2005 14:30:13 Yes 08/24/2005 16:19:27 They are fine. 08/24/2005 16:26:56 Yes - we believe GAAP should continue to be applied to all companies, regardless of size. 08/24/2005 16:54:47 Yes 08/25/2005 15:23:41 Yes. 08/25/2005 16:04:36 Yes - GAAP is GAAP and it shouldn't matter what size you are. 08/25/2005 16:26:29 Yes. 08/25/2005 17:02:43 Current standards need to be simplified for all companies and/or a different definition of materiality needs to be developed. 08/26/2005 12:41:42 I think all public companies should follow the same financial reporting standards. Two sets of gaap for public companies does not make sense. 08/26/2005 13:07:22 No Comment. 08/26/2005 15:10:01 NO. Change the minimum company value to something closer to a billion dollars. Don't require SOX controls for ANY company that is already heavily regulated - such as banking and health. 08/26/2005 15:31:29 Yes 08/26/2005 16:22:08 It seems like there ought to be simpler disclosure requirements for smaller companies such as with stock-based compensation and benefit plans. 08/26/2005 17:46:13 The new regulations "killed" the trust relationship between the management and the auditors. The auditors are not longer our partners and consultants. They are no use for us - just another burden and cost. They canont advise, They cannot recommend. Theoretically they should represent the shareholders, but in fact they no longer represent anybody - they are too afraid. They are a meaningless body doing a meaningless job. 08/27/2005 11:21:03 Yes. Any deviation from this would be very problematic to implement and enforce. The one viewpoint I would change is "materiality." The original SEC definition involving whether an investor would alter his decision is the one that should be re-emphasized here. If the number change that would result from a correct application from current accounting rules is immaterial, that implementation shouldn't be required. Far too often, SEC applies a 5% test (net loss, total assets, total current assets, etc.) where even a 20% change would simply not matter to investors. 08/29/2005 07:07:37 In general - too heavey. 08/29/2005 10:21:15 In many cases yes but in some cases the standards probably don´t make as much sense, although no specific examples jump to mind. In general, it is our belief that the problem doesn´t necessarily lie with a standard being inappropriate for small companies. Rather, some pronouncements are so complex that only large companies with many resources can interpret them. More importantly, many investors don´t understand the results anyway. We would rather see an overall simplification of standards to allow companies and investors to better understand the finished product of such standards. 08/29/2005 10:21:25 In many cases yes but in some cases the standards probably don´t make as much sense, although no specific examples jump to mind. In general, it is our belief that the problem doesn´t necessarily lie with a standard being inappropriate for small companies. Rather, some pronouncements are so complex that only large companies with many resources can interpret them. More importantly, many investors don´t understand the results anyway. We would rather see an overall simplification of standards to allow companies and investors to better understand the finished product of such standards. 08/29/2005 11:21:29 Yes 08/29/2005 14:18:47 The current accounting standards applied to all U.S. companies are appropriate for smaller companies. The accounting standards are designed to display the economic events of firms employing them. Economic events do not distinguish between large and small firms, and neither should their reporting of those events. The argument often put forth by proponents of exemptions for small companies from accounting standards is that the small firms can´t afford to implement all of the accounting standards - but not all accounting standards are going to apply to all small firms. For instance, not all of them transact with derivative financial instruments; not all of them have multiple reportable segments. But if they do have such transactions or operations, there´s no reason why they should not report their activities. Size is not an excuse; transactions that happen deserve to be reported to investors. The American Institute of Certified Public Accountants no longer sets auditing and accounting standards for public firms. They are the only beneficiaries I can see for having big/small company accounting standards, and I don´t believe that´s any justification for having two sets of rules. 08/29/2005 14:53:30 No. The SEC and the accounting community (PCAOB, FASB and practioners) need to develop accounting standards and GAAP for small companies. The problem is that we have only one set of rules that have been written to address much larger companies and the issues that giant companies typically face. 08/29/2005 15:31:21 The independence standards for auditors should be relaxed to allow them to provide more guidance to small company management without penalty. Auditors should be allowed to provide more assistance with the implementation of SOX, including identification and documentation of controls and testing. Auditors should also be allowed to advise management on the proper accounting for certain transactions and on methodology for making estimations. 08/29/2005 16:10:53 No---Again a one size fits all question----look at the industries. 08/29/2005 16:20:53 They probably are appropriate but it is more difficult for smaller companies to have qualified employees to meet allof the accounting standards. 08/29/2005 17:12:26 I beleive that the FASB should give longer implementaion periods for small companies and also consider exemptions or at least short cut rules for smaller companies that struggle sometimes with the more complex standards. SFAS 123R would be a good one to try to simplify and delay (more). 08/29/2005 17:12:43 The costs for a small company to comply with some standards can outweight the benefits. Implementing SFAS 123R could be excessively burdensome to a company if it is required to focus so much effort on a minimal amount of expense. Looking at alternative valuation methods such as the binomial lattice method, calculating the suboptimal exercise factor, or simply justifying the current Black-Scholes based approach is expensive. 08/29/2005 17:36:32 No. 08/29/2005 19:02:32 The accounting standards are fine for small and large companies if applied equally. Only when large companies apply leverage to get special dispensations is there a problem. Have auditors assigned and fees set by the SEC and the problem is gone. 08/29/2005 19:05:24 We believe current accounting standards are unnecessarily complex. Accounting issues of concern to many smaller companies, such as revenue recognition, derivatives, business combinations and equity compensation , contain such significant complexity that full and consistent compliance is problematic. New literature, including FASB pronouncements, EITF´s, FSP´s, SEC rules, SEC speeches, etc. are being produced at an astounding rate and create additional complexity. However, rather than developing and maintaining two sets of standards (small company/large company), we believe the best solution is to reduce the overall complexity of the accounting standards and rules and maintain a single set of standards for all companies. 08/29/2005 21:00:01 Yes - I think standards must be applied evenly over all companies. 08/29/2005 22:40:58 Elimination of FAS 123R would be a good start, as it really puts small public companies at a competitive disadvantage when it comes to hiring and retaining good employees compared to larger companies. 08/30/2005 15:04:16 No, how can the rules be the same for a $10 million and a $10 billion company. There is no legitimate basis to apply the same rules to companies 1/1000th the size of another. 08/30/2005 15:07:00 Some disclosure requirements are overkill and quite frankly are meaningless to most investors. What investor really understands the stock option disclosure? Sure they understand expense or not, but do they understand the tables of stock option activity and do they care about the remaining contractual life of a group of options? 08/30/2005 16:27:18 No 08/30/2005 17:08:46 Yes, we believe that they are in general appropriate for smaller companies. 08/30/2005 18:26:14 N/A 08/30/2005 18:48:02 Whose accounting standards are you talking about? Those in SOX do need to be revised for smaller companies so as to put less of a burden on them. Are you talking about generally accepted good accounting practices? The AICPA does a good job of setting these forth and updating, so these standards are OK as is. 08/30/2005 18:51:48 We believe that the current accounting standards are appropriate for smaller companies. 08/30/2005 19:47:16 For comparability purposes, accounting standards should be the same for all companies. 08/30/2005 21:07:56 Yes. 08/30/2005 21:39:41 We don´t believe that the accounting rules should be different for smaller or larger companies. It´s the method of implementation that is of concern, not the rules themselves. 08/30/2005 23:57:28 Yes 08/31/2005 08:31:59 Yes, they should be consistent. 08/31/2005 10:19:14 No, I do not believe that the SOX 404 regulations should apply to small companies where the company stock is not publicly traded. Also for publicly traded stock companies below a certain size, the SOX 404 testing should only occur evry 2-3 years. 08/31/2005 14:00:12 Yes. One GAAP. 08/31/2005 14:00:16 There are no accounting standards in force for our company that create undue burdne for us to adhere to. While staggered implementation dates are helpful for smaller companies, I think maintaining different standards for companies based on size doesn't help smaller companies in the long run because you lose the comparisons between companies. 08/31/2005 14:12:37 We believe that the notion of one set of accounting standards for large companies and another set of accounting standards for smaller companies would only further complicate an accounting environment that is difficult enough to manage already. As noted in a previous response, we believe the key consideration should be what information is most important to an investor´s decision, regardless of the size of the company. We believe that many of the current accounting standards (such as FAS 123R) have been adopted as reactionary measures to a relatively small population of accounting failures and that these changes are being demanded not by investors, but by academics, politicians and regulators. This being said, we do believe that smaller companies face a much tougher challenge to comply with the accelerated filer deadlines and should be given a full 90 days to file their annual reports. The definition of a non-accelerated filer as one with public float of less than $75 million is far too low a threshold and we agree with current proposals to increase this to an amount that is in excess of $500 million. 08/31/2005 14:25:37 All accounting standards can't be the same. If our $190 million company was the same as Exxon we would triple profits each year. 08/31/2005 14:32:46 There has been debate for years on "Big GAAP" and "Little GAAP". There are always going to be issues in large companies that don't apply to smaller companies due to the potential complexity of large company business practices. However, when similarities exist, consistent application of accounting standards should be used for comparability purposes. 08/31/2005 15:19:27 No, smaller companies face the same issues as larger companies but work with a lean staff and limited resources. These factors need to be taken into account. 08/31/2005 16:05:33 Yes. 08/31/2005 16:13:45 Certain accounting standards and disclosures are not appropiate for smaller companies. Disclosures such as extensive pension plan disclosures and fair value of financial instruments are of limited value and generally not understood by investors. 08/31/2005 16:16:33 16. Accounting standards should be applied to all U.S. companies in the same fashion, whether the companies are small or large. This facilitates a level playing field, and all companies can be compared to each other. Also, there would be a major issue with converting any type of exception to a company that became a large company. As more exceptions are created in business, confusion arises when analyzing financial statements or comparing results between companies. Standardization is key to simplifying processes and analyzing financial results. One challenge with the current standard setting process is that it is burdensome and difficult to navigate. Full-time paid standard setters do just that, set standards, with insufficient regard to whether a new standard is needed. Furthermore, standard setters have done a poor job in linking concepts within specific standards to other standards, resulting in little logic to the GAAP, but more of a rules based approach. 08/31/2005 16:29:59 Some standards are applied to smaller companies where there is no materiality at all just so it does not look like something was missed. 08/31/2005 17:16:33 With the exception of 404, I think we can live with the rest. 08/31/2005 18:22:30 Generally, we not do support divergence of the accounting literature into small company and large company. While we believe companies engaging in the same activities ought to follow the same accounting concepts, application may be differential. Although large companies are more likely to engage in complicated transactions, smaller companies engaging in those same transactions should follow the same concepts. Standardized GAAP can assist users in understanding financial reporting but that is most important for public entities whose users of the financial statements are much more diverse, and with different rights, than the stakeholders in non-public companies. Smaller companies do struggle with accounting literature, but larger ones can as well. We believe this is an indication accounting literature as a whole is complicated for all preparers, not just those employed by smaller companies. Given the additional proportionate burden on smaller companies, we believe that small companies should be provided some relief during adoption of new standards as discussed below in our response to question 17, and that there should be differential disclosure requirements. Accounting standards should be as straightforward as possible for all companies. Accounting literature should be usable and understandable for all preparers and auditors. We commend FASB´s codification project and their efforts towards simplification. However, even recently issued standards are not simple and some are very lengthy. We believe that FASB has developed that approach because preparers and auditors do not wish to be second-guessed based on the litigious and regulated-nature of the U. S. environment. However, with a move to principles based standards, it is difficult for FASB to envision the potential impact of a standard. As a result of that, standards have been issued, revised, and amended at a record pace. The majority of the companies seem hard-pressed to keep up with all the changes and smaller companies in particular do not have the resources to monitor all the amendments and changes. Frequent revisions and amendments further exacerbate the problem for all companies. For example, Interpretation 46, Consolidation of Variable Interest Entities, a forty-three page standard originally issued in January 2003, cast a wide net for relationships to be considered for consolidation. In a principles-based environment, it is very difficult for the FASB to envision all of the possible outcomes from issuing a standard which is likely the reason for the multiple amendments to FIN 46. After a flurry of implementation issues were identified, five FASB Staff Positions were issued and a revised seventy-eight page standard, Interpretation 46(R), was issued in December 2003. If standard-setting is going to continue in this fashion, we believe that the highest and best relief for smaller companies is to allow extended implementation dates. In other words, extending the effective date for smaller companies would allow the accounting to “settle” and alleviate the need to follow every twist and turn along the way. Many current accounting standards that apply to all US companies could be revised in how they apply to smaller companies. Examples of where such revisions could be made include: • Small companies often agree to buy back shares of stock from large shareholders--FAS 150 seems to make this liability equal to the buy back amount instead of equity • Derivatives--companies with nominal derivative activity shouldn't have to look to see if they have such instruments, embedded or otherwise, or to use fair value accounting • Comprehensive income--eliminate for smaller companies • Cash flow details--simplify for smaller companies • Disclosures--allow exclusion of disclosures that are not considered of significance. For example, if the market value of securities is within 5% of cost, let that fact be stated, instead of requiring presentation of both amounts. • Stock options--many disclosures could be eliminated or simplified 08/31/2005 18:23:08 Yes 08/31/2005 19:16:05 16. Accounting standards should apply equally to all. The problem today is they are becoming extremely complex which leads to the exploitation of loopholes or grey areas, which was much of the problem with cases at Enron and Qwest. An additional problem is they are creating exceptions in accounting treatment, which makes the task of interpreting financial statements increasingly difficult for the majority of the investing public. 08/31/2005 20:55:07 We do not have any major issues with the current accounting standards, except for the expensing of stock options - this is just plain wrong and highly non-motivational for employees, companies and therefore shareholders. 09/01/2005 00:55:31 Raise the thrshold for a "small company" to $750 million. Allow smaller companies to voluntarily "opt in" for SOX 404 if needed. 09/01/2005 11:40:19 Most are appropriate if not too costly to implement. It is difficult for smaller companies to have the staff to deal with all the new, complex pronouncements. 09/01/2005 14:30:54 The current standards rely extensively on testing controls over processes, whereas with smaller companies, detailed transactions testing is more appropriate in most cases. Most small businesses lack segregation of duties, have smaller accounting and finance departments and fewer complex transactions. Consequently, relying on controls in place would be a lower cost and risk than a detailed transaction and account balance approach. 09/01/2005 17:12:34 Generally yes. 09/04/2005 07:42:16 Yes
http://www.sec.gov/info/smallbus/acspc/acspc_rpc16.htm
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