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Responses to ACSPC Request for Public Input


Question 21. Should accounting standards provide smaller companies with different alternatives for measuring accounting events that would reduce the amount of time that would otherwise be spent by smaller companies to comply with those accounting standards? If these alternatives were available to smaller companies, would smaller companies take advantage of them even if the results of the measurements obtained from the alternatives were less favorable to them in the short term? Why or why not?

The following answers have been received:

08/02/2005 17:44:12   Standard should be even across all companies unless there is an exemption for things that don't make sense (stock option accounting)

08/03/2005 01:39:17   It is difficult to answer this without knowing what the alternatives would be. Simply substituting other forms of auditing for 404 misses the real point.

08/03/2005 08:55:04   Yes, however would not want to compromise quality of audit.

08/03/2005 10:40:26   Yes. If the results were less favorable in the short term, they would be corrected for the long term.

08/03/2005 12:17:58   less favorable means faster demise. it seems the sec is out to eliminate any company that is sized to be on the bb or pinks. this is a perception that is reality.

08/03/2005 15:01:40   I would have to know more specifics. I think it would be difficult to have two accounting standards.

08/03/2005 15:22:49   Not sure of hwat you want here.

08/03/2005 16:58:51   We don't have many complicated events. Our accounting is mostly straight forward. When something comes up, we figure it out and account for it correctly. Since we aren't too complicated, our accounting costs are in line with our revenues. SOX, on the other hand, the costs would be out of line with our revenues since we'd have to spend a lot of time/money to succussfully complete SOX.

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   Yes. Yes. In my opinion, one of the most valuable assets a micro-cap company has is time. Whether it's in production, research, or marketing, time is better spent in activities that will provide direct return on investment. Dealing with an auditor, explaining issues which the auditor may not understand abot the company is a waste of otherwise valuable time. I think that if the auditor is able to maintain the scope of his activities, any less than favorable outcomes would be minimized.

08/03/2005 19:55:50   INTEGRITY!

08/04/2005 09:39:15   No. There needs to be consistenty for the investor to make decisions among all companies. It would be far too complicated for the investor to understand the rules around large companies financial information and then a different set of rules for small companies financial information.

08/04/2005 12:09:05   Again, I'm not so hung up on the accounting standards, as I am the ability to get expertise to assist us in compliance. Not allowing me to use my external auditors, who know me as well as anyone, is a crippling effect of SOX.

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   No

08/05/2005 10:54:31   Same standards should apply

08/05/2005 12:38:34   sEE ITEM #5

08/05/2005 12:44:28   I have no comment.

08/05/2005 15:34:53   Does not apply to us

08/05/2005 15:43:46   I could not decode this question. Accounting standards? I assume you are referring to reporting requirements under 302/404. If the question is, "Should a less stringent set of requirements for 404 assessment was proposed for small businesses? Would small businesses take advantage of them even if the new rules were less favorable in the short term?" IF THAT IS THE QUESTION, I doubt that the answers would be yes to such a speculative question because the current requirements are - as cited - more costly in the short term (first cycle cost) for small banks and the recurrent test cost is relatively low except for new functions added. Therefore anything that increases short term cost would not be a gain.

08/05/2005 16:45:38   Perhaps, this suggestion is worthy of study.

08/05/2005 19:33:08   I think that anything that could be done to reduce the work load for the small company would be useful and hopefully less expensive. I have no idea whether the alternatives would be addopted or not. It would depend on what they are and how realistic the measurements are. Assuming that they would generate information that was factual and beneficial, they would be adopted.

08/06/2005 13:52:06   See #16 above. Alternative measurements could reduce costs, but not appropriate.

08/08/2005 09:29:48   The oxi moron is that if any company has to spend to much time to apply an accounting standard, then that standard is useless and leads to imcomparablity of financial statements (too much judgement, assumptions, what if theorys). For example, stock compensation and deferred tax valuation allowances - You could possibly have 10 companies with the same facts and circumstances and arrive at 11 different conclusions. What a mess for the average financial statement users. Who is right? What does this mean? Are they manipulating the results?

08/08/2005 11:10:11   no, an accounting standard should be applied uniform to all, otherwise an investor cannot compare confidently companies on different levels if the basis for recording or reporting certain transactions are allowed to be different.

08/08/2005 14:06:10   I don't have an answer for that one as I am not sure what you're referring to when you speak of alternatives. As for what companies might do or not do, I don't think you can accurately predict. It would depend on the individual company situations.

08/08/2005 15:43:24   Not applicable to us.

08/08/2005 21:39:10   We believe that alternatives of measuring accounting events, even if the alternatives were less favorable in the short term, would be welcomed by small companies. Any reduction in reporting and compliance costs would greatly benefit small companies in their efforts to grow their operations.

08/09/2005 09:30:31   Yes. Smaller companies need relief of the costs and manpower required to meet these standards.

08/09/2005 16:26:34   I do not think that the standards should be different. We do not want to begin eroding the value of public reporting of small companies versus large companies.

08/09/2005 17:25:10   Acounting standards should be relatively the same for all as that's what makes our capital markets the best - everyone knows all public companies use same rules. I just have a problem with SOX as again it's form vs. substance in my book.

08/10/2005 09:04:41   no comment

08/10/2005 13:44:39   Sure,I think most small companies biggest complaint is cost and time of compliance with regulation. If more efficient measurement techniques were available it would be a benefit even if it meant more conservative measurement results. Most small companies are not driven by the quarterly or short-term numbers. We want to be around for the long haul.

08/10/2005 16:00:18   I've read the question 3 times and am still confused. Sorry.

08/10/2005 17:18:15   Different alternatives are NOT the answer - One set of rules is only viable option.

08/10/2005 22:09:27   Long question.......Too many if's

08/11/2005 08:35:22   Yes, this would be helpful.

08/11/2005 20:27:22   NO! Having different standards for different size companies would / could confuse most readers of the financial statements.

08/12/2005 13:12:10   No opinion.

08/12/2005 14:46:45   Yes, the goal is to rekindle investor confidence. A framework that strips down the documentation and yet provides meaningful data enough to make a realistic assessment on a companies control environment would be at the advantage of a smaller company.

08/12/2005 16:35:01   Hard to answer without knowing the alternatives.

08/13/2005 12:39:43   Don't know

08/15/2005 13:08:27   I would favor a single standard of accounting. More importantly, I would suggest that accounting standards for large and small companies be established with consideration for the cost/benefit of such standards.

08/15/2005 14:27:30   The cost of accounting compliance for small public companies is most affected by change, the timing and predictability of change and the environment in which change is implemented. Problems in these areas involve substantial costs, substantial investment of top management time and focus and increased litigation. What the standards actually are is relatively unimportant because they simply become proceduralized and can be implemented at a lower level in the system. (This response obviously does not address issues as to what standards present meaningful information and what standards present confusing and misleading information, which is the subject for another inquiry.)

08/15/2005 15:10:05   not sure

08/15/2005 15:13:01   No. My big issue with this is that the smaller companies may become big companies one day. How do you change the accounting policies/procedures when this happens? What do you do with historical financials after you become big? Also, measuring performance within industries is very difficult. Set one accounting standard and make all comply (assuming the standard is reasonable of course).

08/15/2005 15:14:45   Believe that a common set of standards is the best idea.

08/15/2005 16:33:43   Anything that would reduce the time required so we can focus on running the business would be welcome- regardless of how the measurements turned out.

08/15/2005 16:41:14   no

08/16/2005 09:51:21   I think all companies should have the same accounting standards.

08/16/2005 10:10:36   No.

08/16/2005 10:21:17   Perhaps

08/16/2005 10:26:28   no, one set of rules is right, phased or stepped introduction is better

08/16/2005 10:42:02   Don't know. Depends on the company and the issue.

08/16/2005 10:44:16   I think all public companies need to be subject to same rules.

08/16/2005 11:18:54   Cost is the driving factor for smaller companies. If accounting standards were revamped to make it less costly to comply, I believe smaller companies would take advantage of that and believe that it would be beneficial in the long run even if their is a short term cost.

08/16/2005 11:52:16   Yes

08/16/2005 12:15:34   No, I thing that the accounting standards should be uniform across all size companies.

08/16/2005 12:40:54   No,, hard to say.

08/16/2005 13:04:14   Since I currently do not find the accounting standards as overburdensome, I do not find the suggestion that standards for small businesses be different from larger businesses, except perhaps the expensing of stock options.

08/16/2005 13:12:04   The issue is not different alternatives for smaller companies ...the issue is the extent to which accounting literature and standards try to prescribe everything removing the possibility that the company, together with its independent auditor, might well know of a better approach that would be more appropriate and descriptive!

08/16/2005 13:19:29   I don't believe that a "limited tool-box" approach is any better than a "single tool" approach. Given the vast differences between companies, I believe that the end result should be dictated, with the alternative means of arriving at that end being open to individual companies and their auditors to determine.

08/16/2005 13:20:23   See earlier comments. I strongly oppose rules that give more "options" or choices to companies. This distorts comparability between companies and opens the system to risk of abuse. People know what the rules are - they should comply with them.

08/16/2005 13:25:32   I am against Big GAAP/Small GAAP, as stated earlier. The issue arises when there is change, and smaller companies have fewer resources to address the impact of change. Once a change is integrated, the time of compliance is usually not onerous.

08/16/2005 13:27:00   See my answer to question 16 above.

08/16/2005 13:30:33   Yes. For instance, FAS 133 is very difficult for a small company.

08/16/2005 14:08:05   The problem with allowing alternatives affects the comparability of financial statements.

08/16/2005 14:23:10   I believe that all companies should be treated the same for accounting standards.

08/16/2005 15:15:12   I believe that reporting in general is a burden that all companies have and therefore anything that would ease that burden would be used by the reporting company. If only small companies can take this advantage, so be it, but I believe all companies would if given the opportunity.

08/16/2005 16:08:50   Although we are not an overly complex organization, we have not found any applicable accounting standards to be overly burdensome. My belief is that if you (as a small company) want the benefits of complex transactions, then you should play by the same rules as larger organization.

08/16/2005 16:09:47   Yes. Probably, smaller companies are more bottom lne focused than investor focused

08/16/2005 16:16:04   Yes this would be helpful and yes of course managements would take advantage of these alternatives, if available.

08/16/2005 16:45:09   As noted above, we don't like differing standards for different companies. However, if we don't fix the ever increasing proliferation of rules we must accept different standards. Companies, their auditors and their investors should decide what disclosures are most important about the company. I don't see a company knowingly using a disclosure which would put them at a competitive disadvantage unless they go the next step and conclude the disclose is of no real interest to the investors.

08/16/2005 18:35:41   I can't think of examples of this sort of thing. If such standard generated less favorable reported results, it's questionable whether many small companies would use them.

08/16/2005 21:29:07   Uncertain.

08/17/2005 10:59:57   Yes I believe smaller companies might take advantage of these alternatives. I would have to have more information to make a more focused judgement. It all comes to understanding the costs, benefits and risks.

08/17/2005 12:28:22   If we had some flexibilty, that would be helpful.

08/17/2005 12:36:00   With any such situation, costs, efforts, and the likelihood of error would be weighed against alternative reporting. If such variation is available, we would review the materiality of its impact vs. its costs.

08/17/2005 12:48:33   They would.

08/17/2005 18:49:27   Accounting is not the problem (with the major exception of EBITDA see above) it is auditing.

08/17/2005 19:31:08   No, once again, I believe accounting data should be consisent, regardless of the size of business.

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   I don't think having different measurement standards for small companies makes sense for the companies or the investors. What happens if a company moves from small to large of vice versa? Would a restatement be required? if not, how would results be compared between periods with different standards? Some companies might choose to use a measurement standard that resulted in less favorable results for the sake of simplicity, but I doubt it would be many.

08/18/2005 08:03:31   Yes, it would be good - different sizes of company have different needs.

08/19/2005 02:56:12   No, there should be only one GAAP - the key is better and more open communciation between companies and their audit firms.

08/19/2005 11:44:44   I'm not sure if this is a small vs large company issue. The intentions of management of small companies and large companies can vary, and as such different principles could apply in certain circumstances.

08/19/2005 13:49:01   Once Accounting Standards have been established there should be no difference in the application of those rules between smaller and larger companies; all standards should be uniformly applied. It would be hoped that if alternative standards were available that all companies would choose to apply measurement standards consistently, however, to ensure this is done it is necessary for the Standards to be consistent for all companies.

08/19/2005 14:40:28   No comment.

08/19/2005 14:50:07   Accounting standards generally should be the same although some variance between industries might be acceptable.

08/19/2005 17:03:28   Smaller companies should have to comply with the same standards as larger companies.

08/21/2005 22:19:50   I think accounting standards should be consistently applied by all public companies, large or small.

08/22/2005 14:21:23   Only if materiality was not affected. It is also important to maintain comparability, and so the results should be the same and not less comparable.

08/22/2005 15:20:23   Small companies should generally measure transactions the same as large companies for consistency and comparability.

08/22/2005 15:47:02   Yes.

08/22/2005 15:47:34   No. Why confuse everyone with a different set of standards. Any cost saved in compliance would be lost by investors having to understand a different set of rules based on the size of the company they were researching.

08/22/2005 17:54:28   I don't understand the question, but I generally don't think different standards for different size companies are a good idea (see #16 above).

08/22/2005 17:56:59   There should be common accounting standards

08/22/2005 19:27:18   Yes. Allow them to pick up most events inthe Q without so many 8-ks. 8-K's should be optional.

08/22/2005 20:10:17   Accounting standards for certain events or revenue reporting should be consistent with what long term reporting requires. I don't see the gain in changing the rules for short term if in the long term the reporting would have to be consistent with general accounting standards.

08/23/2005 15:56:30   If we weren't spending all of our time on SOX we would have time to measure accounting events in the exact same manner as any other company.

08/23/2005 16:49:34   Not sure

08/23/2005 18:10:00   Consistent manner is preferred.

08/23/2005 21:11:03   Without knowing the specifics this is a bit like...how long is a piece of string? Overall smaller companies may be willing to adopt the streamlined accounting practices if they are not unduly penalized by the market place, loan convenants, etc. for adopting the practices.

08/24/2005 10:14:02   Yes - - all of the standards requirements shold be based upon company size.

08/24/2005 14:30:13   I think you need consistency across the board for comparables.

08/24/2005 16:19:27   Probably. Everything needs to be simpler. Much of the existing accounting standards require much to much judgement. We want quick and easy, not rigorous with very little benefit.

08/24/2005 16:26:56   No opinion.

08/24/2005 16:54:47   No. GAAP should be GAAP

08/25/2005 15:23:41   N/A

08/25/2005 17:02:43   Yes. Yes. If the companies are development stage, they are generally in loss positions anyway so less favorable treatment would not be a problem.

08/26/2005 12:41:42   Not sure.

08/26/2005 13:07:22   No Comment.

08/26/2005 15:31:29   No

08/26/2005 16:22:08   No.

08/26/2005 17:46:13   Yes to the first question.

08/27/2005 11:21:03   Yes - allow the use of the SEC's definition of 'materiality' (whether a numbers adjustment would change an investor's decision) instead of the more-often-used 5% change. The success of implementing any such alternative would rest on whether all of the smaller accounting firms understood such and had clear guidelines on implementing such.

08/29/2005 07:07:37   Yes, and maybe.

08/29/2005 10:21:15   We would rather see accounting standards simplified and equal for all rather than being so complex that only large companies can determine how best to comply. In lieu of simplification, we would consider simplified small company accounting alternatives to the extent that they did not put us at some competitive disadvantage in our markets.

08/29/2005 10:21:25   We would rather see accounting standards simplified and equal for all rather than being so complex that only large companies can determine how best to comply. In lieu of simplification, we would consider simplified small company accounting alternatives to the extent that they did not put us at some competitive disadvantage in our markets.

08/29/2005 11:21:29   No, different alternatives should not be used becuase it may be harder to compare two small companies.

08/29/2005 14:18:47   As I said earlier, I believe the accounting standards in place are fine for both small and large firms. I would not support changes in them solely for the purpose of reducing the amount of time spent on compliance.

08/29/2005 14:53:30   Answer to first question: No, small companies do not need more time, we need different rules as explained in my answers to question 17. above.

08/29/2005 15:31:21   I feel that use of any accounting method other than GAAP would require such detailed disclosure that it may be more trouble than it is worth. Our company's financial reports are fairly simple, thus this is not a big issue for us.

08/29/2005 17:09:27   Yes. The cost to comply (less on-going monitoring and compliance)could outweigh spreading the cost to a longer time frame.

08/29/2005 17:12:26   Yes the time saving would be helpful. I think we would take advantage of them even if less favorable in short term if that is what it took to continue to get everyone to be reasonable with standards for smaller companies.

08/29/2005 17:36:32   If they are not compromised by other or conflicting requirements that would not reduce the work load, then it would be a useless exercise. If not it would be very helpful

08/29/2005 19:02:32   I would be interested in a long term beneficial effect. I could live with short term pain if gain were in the future.

08/29/2005 19:05:24   Yes. Many smaller companies lack the expertise to perform the esoteric measurements required by certain standards, and there is significant expense involved in hiring third parties to perform these measurements. Small companies likely would take advantage of simplified measurement methods even if the results were less favorable. For a small company, the cash and resource constraints related to making complex or time-consuming measurements represent a significant and real cost which outweighs the intangible benefit of a measurement that provides a short-term favorable accounting measurement.

08/29/2005 21:00:01   No I think there should be consistency between all companies.

08/30/2005 15:04:16   Companies of all sizes, but especially small companies would do anything to reduce the cost and complexities of complying with "accounting events". Acquisitions of "smaller" entities and the requirements of consolidation accounting are a nightmare for small companies ($10 million). More or less favorable is relative. The solution should be one that is simple and accurate from an investors perspective.

08/30/2005 15:07:00   Certain of the accounting treatments are excessively difficult and complicated. Smaller companies would benefit by easing up those requirements. However, generally speaking if an alternative approach were significantly less favorable I doubt it would be used.

08/30/2005 17:08:46   Believe that smaller companies may be unlikely to pursue accounting standard options that result in less favorable outcomes. In general do not believe that there is a valid justification for two different sets of accounting standards, though in certain circumstances it may be beneficial to smaller companies to have available alternative easier to apply accounting standards.

08/30/2005 18:26:14   N/A

08/30/2005 18:48:02   Yes the standards should provide smaller companies with different alternatives to use if they wish. Some companies might choose to use the more complicated accounting methods if the measurements were more favorable.

08/30/2005 18:51:48   We don´t see the benefit of providing different alternatives for measuring accounting events based on the size of the company. This availability of alternatives to measure an event would certainly be confusing to investors and could lead to manipulation of earnings.

08/30/2005 21:07:56   Depends on potential growth of the company. Smaller companies who plan to grow will most likely comply with the primary accounting standard for the benefit of future consistency

08/30/2005 23:57:28   No. accounting standard must be stardandized for comparsion propuse.

08/31/2005 08:31:59   No.

08/31/2005 10:19:14   No comment.

08/31/2005 10:21:37   Huh? Depends upon the standards.

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.

08/31/2005 14:25:37   Accounting standards are generally not the problem. We had no real problem meeting the standards in 10QSB but a small company can't operate under the same standard as an Exxon. SOX only added to that problem.

08/31/2005 14:32:46   Offering more options may in fact have the opposite effect. You would then need to evaluate more options for the proper treatment of accounting events. Regardless of the options available, the path of least resistance is probably going to be followed to minimize costs, yet still ensure compliance with the standards.

08/31/2005 15:19:27   Sounds good on paper, difficult in practice. Acctg firms are not going to have big GAAP and little GAAP specialists. Auditors will not be sufficiently knowledgable on all subjects. Again too much.

08/31/2005 16:13:45   Alternatives for measuring accounting events would be an improvement if reporting is consistent between companies in the same industry.

08/31/2005 16:16:33   21. See also answer to question #16. Accounting standards should be applied to all companies in the same fashion, whether large or small. Difficulties would arise to setting the thresholds for differentiating the size, as well as when companies switch size classes. Also, it would be wise to have a standard accounting practice for all companies, and within the profession. Generally, additional exceptions to current rules and regulations only foster greater confusion. Accounting standards should be as consistent as possible across all companies.

08/31/2005 16:29:59   Smaller companies again want to spend their time deal with competing in the market place not working on accounting rules. Small companies are concerned about how to sell goods or services at a profit not favorable or unfavorable short term account treatments.

08/31/2005 17:16:33   I don't have an opinion here.

08/31/2005 18:22:30   See number 16.

08/31/2005 18:23:08   Yes, alternative methods could be available, but still within GAAP. Plus the company should not be able to bounce from one method to the other just to show better outcomes. If the alternative was used, then changed, it should be treated as a change in an estimate & impacts disclosed. The level of use would also be dependent on the level of acceptance in related industries, for example, requirements to comply with GAAP by banking partners.

08/31/2005 19:16:05   21. Again accounting standards should be easy for investors to understand and universal. They also should be written to facilitate good decision making by the employees and management of the company and not distort the facts of the transaction.

08/31/2005 20:55:07   Accounting standards should be the same for all. As a company grows it should not have to worry about different rules at different levels of business.

09/01/2005 00:55:31   No - measurement of accounting events should be consistent among all entities.

09/01/2005 14:30:54   Yes, alternatives should be made available. We can speak only of this small company. We have the attitude that we do honest accounting and the numbers are what they turn out to be. We would opt for lowering expense and reducing management time spent on the issue.

09/01/2005 17:12:34   I would not want two sets of standards. That could be confusing to the street. If these alternatives were less favorable they would probably prefer the more rigorous approach.

09/04/2005 07:42:16   Yes. Very often smaller companies do not have the resources needed to comply with bigger companies accounting standards. I believe such alternatives will not take advantage of this companies for budget reasons.

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Modified: 10/13/2005