The Institute of Management Accountants (IMA) has launched a new small business financial and regulatory affairs committee that is designed to address the business operational issues unique to small companies. The committee will also provide input to regulatory bodies regarding the development of standards and interpretations. An inaugural meeting will take place in March.
IMA president and chief executive Paul Sharman estimates as many as 80 percent of the institute’s members are part of the small business community. Sharman told TA that one push for the formation of the committee came from the US Financial Accounting Standards Board (FASB). “We were meeting with the board members of FASB and we got this question from the chair about the structure of our financial reporting committee and whether there might be some other views from other participants in our organisation – like small companies – that perhaps would be helpful to hear,” Sharman said.
IMA director of professional advocacy Linda Devonish-Mills will be the committee’s staff liaison. She is also the staff liaison for the institute’s financial reporting committee (FRC). Devonish-Mills said one reason why there is a need for an IMA small business committee is the development, in recent years, of small business advisory committees for the FASB and the US Securities and Exchange Commission (SEC).
Mills explained that for the past 25 years the FRC has been the IMA’s “voice” in terms of financial reporting issues, meeting directly with representatives from the FASB and the SEC. However, the FRC has not developed a relationship with the regulators’ small business advisory committees. “So the timing is perfect for us to develop the small business committee so they also can have a chance to interact specifically with the advisory committees the major regulatory bodies such as FASB and the SEC has developed,” Devonish-Mills said, adding that the new committee will also act as a “resource” for FASB’s private company financial reporting committee.
One issue that will be raised at the March meeting is accounting standards. Sharman said at present there is no difference in financial reporting standards for small and large companies in the US as companies of all sizes use the same GAAP. “The introduction of IFRS is causing waves of dialogue and then the discussion of ‘IFRS light’, as I would call [IFRS for SMEs], is creating further discussion about how many sets of standards do we need,” Sharman said.
Sharman added that there is always interesting debate from various stakeholders about regulation: “There is a small business task force government entity that tends to be influential and everybody in government is always trying to make it easier for smaller and private companies because it’s the engine of the United States economy. Having said that, there are other forces, standard-setting bodies and people who represent the accounting firms, who would like to bring more influence and shape the rules – for example ‘let’s have some more auditing’.”
Another issue the small business committee will look at is Section 404 of the Sarbanes-Oxley Act. “[The IMA has] been very vocal about our concerns in terms of the scalability for small business practices implementing such regulation,” Devonish-Mills said. “Right now we don’t think it’s balanced.”