The Sharblog

Nearing the Finish Line

This weekend marks the start of spring.  Each year this change in the season provides a belief that we will shake off the effects of winter and find better days ahead.  And after the winter we had this year in Texas, it will be especially sweet to see the flowers and trees in bloom and hear a chorus of birds in the air.

This spring also provides us with a sense of renewed hope that we may see progress on the issue of financial reporting for private companies.  I wrote about this issue in a blog post about a year ago (“Groundhog Day for Standards”) when the announcement was made that the AICPA , Financial Accounting Foundation (FAF), and the National Association of State Boards of Accountancy (NASBA) had collectively appointed a Blue Ribbon Panel (BRP)to study the issue.

The BRP has done a lot of work and held a lot of meetings over the past year, and it issued a report and recommendations in January.  The FAF reviewed the BRP’s report, and, at a meeting earlier this month, announced it was forming a Trustee Working Group to address standard setting for private companies as well as nonprofit organizations, which were not part of the BRP’s charge.  This new Working Group will conduct outreach to stakeholders in various ways over the upcoming months, so be on the lookout for news and your opportunity to weigh in.

In case you missed the BRP’s report, they are making two major recommendations.  First, that a separate standard setting board be created for private companies that would operate under the oversight of the FAF, similar to the FASB.   Second, that there be changes and modifications to existing GAAP, where appropriate, for private companies to reflect the needs of their financial statement users.   There would not be an entirely new GAAP for private companies, but rather appropriate exceptions from GAAP in areas that do not make sense or provide value for users of financial statements.

It is critical that CPAs and the clients/users of financial statements for private companies (and now nonprofit organizations) let the FAF and this new Trustee Working Group know how they feel about this issue.  TSCPA did that back in January when our Executive Board adopted a resolution saluting the work of the Blue Ribbon Panel and encouraging a new approach to standards for private companies that better serve their needs.  You can read the resolution here.

 The FAF Trustee Working Group will be seeking input over the upcoming months.  If you or your clients have an opinion on this issue, you need to take the time to write to the FAF and share it.  We are getting close to the finish line now, and it will require a grassroots effort to carry this issue to fruition.  This is your opportunity to make a difference and help secure a new approach to financial reporting for private companies.  Please make your voice heard.

Executive Board Podcast

Listen to the latest Executive Board Podcast that Jeff Gregg and I recently recorded: Executive Board #5

Pay What You Can?

I recently read about a new concept being tried in the marketplace where a business asks its customers to pay what they can afford, rather than a set price. In this case, the business is Panera Bread, a publicly traded company with around 1400 company owned and franchise operated bakery-cafes in 40 states around the United States, which is operating its first nonprofit restaurant called St. Louis Bread Co. in Clayton, MO. They hope to open two more nonprofit locations in the next few months.

In this business model, the restaurant’s cashiers tell customers a “suggested” price based on the menu. According to Panera’s CEO, about 60-70 percent of customers pay in full, about 15 percent leave a little more and another 15 percent pay less or nothing at all. A handful of customers have been leaving big donations – like $20 for a cup of coffee. Some customers who otherwise might have to forgo eating a meal have been able to get one without paying.

Panera’s nonprofit model is an example of a concept called “community kitchens” where businesses operate partly as charities. Customers who need a discount, or even free food, can get it with no questions asked. Panera borrowed the idea from some other smaller, local restaurants that were operating on these lines.

Panera’s CEO had doubts at the outset whether the concept would work. Signs in the restaurant remind customers that they are on their “honor” to pay appropriately to their capabilities. After a few months of operation, the results support that people are basically honest and good, and the vast majority are not abusing the system.

Panera hopes the nonprofit chain will challenge other businesses to push their charitable/philanthropic activity beyond just writing checks. They would like to see them use their core competencies as businesses to help solve problems in our larger society – not just for the publicity, but to make a real difference.

Is this a concept that is likely to catch on and grow in the larger marketplace? Only time will tell. But I like the idea of the business community finding ways to help solve societal problems rather than always expecting the government to play the lead role and come up with the money to support them – through taxes. This is especially true today in a time period of rising government deficits and limited government resources to apply to programs. If we want less government, then the private sector has to step up and help solve some of these problems. I think the private sector is more likely to be innovative in the development of solutions and more willing to make modifications and changes to programs when the need arises. So my hat is off to Panera for giving this a try.

 

New: Executive Board Review

Kym and I just finished our latest Executive Board podcast, recapping our meeting that took place last weekend.  Check it out below:

Executive Board #4