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NASBA Stands Behind FASB’s Private GAAP, Can’t Believe the AICPA’s Chutzpah

On Tuesday we discussed the AICPA's effort to offer a new OCBOA for small businesses, making special note of the Financial Accounting Foundation's slightly irritated response. While the FAF was fine with Melancon & Co. issuing the new Financial Reporting Framework (FRF) for SMEs, they wanted to remind everyone that FRF was most certainly not GAAP, but if you wanted to slum it with a second-rate accounting method, that was your business.

I then surmised that FRF was an effort by the AICPA to squeeze into the accounting standards business, framing it as a "market-based solution" or whatever while still kissing the FAF's ring. Something like, "Hey, we're not GAAP. We're not trying to be GAAP," when it might, kinda sorta, look a lot like GAAP that the FAF's Private Company Council would've come up with. On the AICPA's part, it was a pretty ballsy thing to do and we're not the only ones who think so.

NASBA has come out against the AICPA's proposal, and they have come out swinging:

The National Association of State Boards of Accountancy (NASBA) reaffirmed today its support of Generally Accepted Accounting Principles (GAAP) as modified by the Financial Accounting Standards Board (FASB) to meet the financial reporting needs of private companies. NASBA believes significant progress is being made by the Private Company Council (PCC) of the FASB. Consequently, private companies should not consider adopting the Financial Reporting Framework (FRF) for Small and Medium-Size Entities released by the American Institute of Certified Public Accountants (AICPA) on Monday. 
In other words, if a small businessperson were to ask a representative of NASBA the question, "Should I consider adopting the AICPA FRF for my business?" the answer wouldn't be "No" so much as it would be, "HELL NO." Not only that, NASBA can't believe the AICPA had the nerve to do such a thing in the first place:
“At a time when accountability and transparency of those in authority is scrutinized, it is troubling that a non-authoritative proposal to significantly weaken the financial reporting of private companies and public protection is even being suggested,” said Gaylen R. Hansen, CPA, Chair of NASBA.
We mock a lot — A LOT — of press releases from organizations in the accounting business, but this thing is awesome. It pulls no punches:
This past year, the AICPA created the FRF as an Other Comprehensive Basis of Accounting (OCBOA), sometimes recently referred to as a special-purpose framework, but without appropriate due process, and despite the decision of the FAF to continue to vest all standard-setting authority with a single body, the FASB, and without substantial support from many stakeholders, including accounting regulators. In January, NASBA requested that the FRF initiative be tabled or withdrawn until the work of the PCC could be evaluated.
And just when you thought they were going to stop there, NASBA starts getting really aggressive:
In the interest of furthering public protection, NASBA is also developing recommended rule language prohibiting the use of non-authoritative standards unless it is acceptable to Boards of Accountancy.  
We reached out to the AICPA for a reaction and they provided us with this statement:
As the largest professional accounting organization in the US, the AICPA shares with NASBA a commitment to serving the public interest. The use of an Other Comprehensive Basis of Accounting (“OCBOA”), also known as a Special Purpose Framework, has long played an important and vital role in fulfilling the financial information needs of small businesses across the country. Thousands of smaller enterprises, from attorneys, to doctors to small business owners on Main Street use OCBOA based financial statements to run their practices and businesses.  OCBOA based financial statements, which includes the cash basis and income tax basis of accounting, are frequently used by Main Street and users of those entities’ financial statements.
To further improve upon existing OCBOA, the AICPA has recently released guidance on the use of the cash basis and income tax basis of accounting.  On Monday, June 10, the AICPA  launched the Financial Reporting Framework for Small- and Medium-Sized Entities – another form of OCBOA that further meets the needs of Main Street.  The AICPA has carefully developed the FRF for SMEs working with a group of experts that followed due process, including exposure of the proposed Framework for public comment.
Moreover, the AICPA promulgates robust and effective professional audit, compilation, and review standards that govern how a CPA reports on OCBOA-based financial statements. These standards have long been recognized by state boards of accountancy. As always, the AICPA stands ready to work with other organizations and state boards to give priority to those areas where public reliance on CPA skills is most significant.
Playing it cool, I see. Something tells me this is not over by a long shot. Get the popcorn ready.