Add Your Voice to the Standards-Setting Process: Small and Medium-Sized Businesses Need to Be Involved in the Accounting and Financial Reporting Standards-Setting Process. Submitting a Comment Letter Is One Way to Get Your Voice Heard
Exline, John, Strategic Finance
Small and medium-sized enterprises (SMEs) are the silent majority of industry and commerce. They serve as the backbone of the economy, constituting the majority of companies, the primary source of job growth, and the lion's share of value exchange. Yet despite their numbers and impact, they are silent because there's no one group or organization uniting SMEs in a common voice.
This becomes a critical problem for SMEs when it comes to regulation and standards setting. There's a growing concern that regulators and standards-setting bodies have lost touch with the concerns and needs of SMEs. Many of those who work in or with SMEs believe that these standards-setting groups are focusing excessively on protecting investors in capital markets and removing risks and uncertainty from investments. By and large, these aren't the concerns of SMEs.
The market has grappled with this dualism for many years. A number of groups have attempted to address the concern. The American Institute of Certified Public Accountants (AICPA), Financial Accounting Standards Board (FASB), and National Association of State Boards of Accountancy (NASBA) formed the Blue Ribbon Panel to conduct research and outreach in order to develop a recommendation to improve private company accounting. The Financial Accounting Foundation (FAF) reorganized the FASB and implemented the Private Company Council (PCC) for the same reason. The International Accounting Standards Board (IASB) and others have developed or modified their standards for SMEs. Even the U.S. JOBS Act contained elements to encourage the easing of regulations and requirements for earlystage companies. The Act also proposed the development of guidance and governance so that smaller companies can employ crowd-funding types of capital acquisition.
Several different organizations and governing bodies propose and set business standards, including the acceptable methods of accounting and financial reporting. When proposing a new standard, these groups often publish a draft version of their proposal as a way to solicit feedback from various stakeholders, such as practitioners, investors, the general public, and businesses or companies that will have to follow the new standard. SMEs can and should take part in this process to provide feedback and bring added light to how they are affected by these standards and regulations.
The various groups have different processes to get feedback or encourage support for their recommendations. Typically, changes in laws and regulations are open processes, but they don't seek input from those impacted. The accounting standards setters have a very open and inclusive process where they try to solicit input from those impacted by the recommended changes. These standards-setting groups follow an agenda or project list where they list issues they're researching and addressing and the approximate schedule for feedback and comments. These schedules are readily available on their websites. Once they have developed something, they "expose" it for feedback. They typically allow 45 to 60 days for public review and comments.
Anyone can submit a comment letter. To help summarize the feedback and viewpoints, the groups request answers to prepared questions. This will help them evaluate key points and impacts of a proposal. As letters are filed, they're made available on the group's website for others to view. By reading other comment letters, you can get a feel for the format of the process and the direction of comments from other constituents. For example, the FASB will have staff prepare a tabular presentation and summary analysis of all comment letters. When the Board meets to deliberate the feedback received, it not only has the benefit of having read the comment letters, but also summarized information that provides some directional and order-of-magnitude weighting of responses. The FASB has also instituted outreach efforts to letter writers to better understand issues and opinions. …