GAAP for private companies: the Private Company Task Force conducted extensive research on the issue of private company financial reporting. Here's a summary of the task force's findings and conclusions.

• Position: Generally accepted accounting principles

Generally accepted accounting principles (GAAP) for private companies should be developed based on concepts and accounting that are appropriate for the distinctly different needs of constituents of that financial reporting." In addition "Although GAAP with exceptions and other bases of accounting are being used and are sometimes appropriate, the Task Force does not believe that these exceptions and other bases of accounting are the best response to the private company financial reporting findings identified in this study."

These two conclusions are based on research conducted among more than 3,700 lenders, investors, sureties, business owners, financial managers, and public accounting practitioners, as well as the perspectives and experiences of task force members. Although various groups have studied the issue of private company financial reporting as far back as 1975, this research effort is the most comprehensive ever undertaken. The research sponsor, the task force brought together by the AICPA, was composed of representatives of key constituents of private company financial reporting. The representatives included private company business owners and financial managers, practitioners, lenders, investors, and a former standards setter. The task force was led by Jim Castellano, past AICPA chair. William E. Balhoff, past chair of the PCPS Executive Committee, was a member of the task force.

An independent market research firm, The MSR Group of Nebraska, conducted the research.

The task force's charge

The purpose of the research was to explore whether:

* The general purpose financial statements of private companies, prepared in accordance with GAAP, meet the financial reporting needs of constituents of that reporting.

* The cost of providing GAAP financial statements is justified compared with the benefits they provide to private company constituents.

More information about the task force, its process, its report, and the research effort can be found at http://www.aicpa.org/members/div/acctstd/pvtco_fincl_reprt/index.htm

Key research findings

The task force's research found that the key constituent groups rated the overall value of...