From the August 2004 issue of Entrepreneur

Until recently, entrepreneurs as a group had little say in the many onerous corporate-governance rules and financial-reporting requirements heaped on them. Unfortunate bystanders in the post-Enron blood lust for scheming companies, smaller entities-both public and private-have been buried in paper and complexity. When they have complained informally, they've often felt no one was listening.

Now, with the new Small Business Advisory Committee established by the Financial Accounting Standards Board (FASB) in March, you may actually have a voice in regulation that affects your business. The diverse committee-a group of 24 lenders, investors and analysts, auditors, and preparers of financial statements (such as CFOs and controllers from a broad range of industries)-will meet twice a year to hear small-business concerns about new and ongoing accounting standards. "They'll also be able to pick up the phone at any time and call us," says George Batavick, an FASB board member and liaison to the new committee.

Batavick, himself a CPA and former comptroller of Texaco, acknowledges that many smaller companies don't have the resources to follow FASB developments, let alone figure out how to comply with them. He sees a twofold purpose for the new committee: 1) to educate entrepreneurs regarding standards already passed; and 2) to get their perspectives regarding proposals on the table. For example, one of the agenda items at the committee's first meeting in May was the Financial Accounting Standard (FAS) No. 123 "Revised," which would mandate expensing stock options for all companies, and which drew criticism for disproportionately penalizing smaller public companies. Batavick says the FASB isn't likely to change its mind about FAS No. 123. But committee member Richard Forrestel Jr., treasurer and secretary of Akron, New York-based Cold Spring Construction Co., attended the first meeting and says it wasn't so much about voting as about being heard. "The board wants our views-period," he says, adding that there was no unanimity among committee members on FAS No. 123.

To be sure, issues that predominantly affect public companies, such as expensing options, tend to get more press, but they aren't the only FASB rules affecting small business. Forrestel's axe to grind is FAS No. 150, a complex standard that would require closely held companies to count their mandatorily redeemable shares as liabilities. "FAS 150 would have taken our more than $10 million in equity and written it down to zero," says Forrestel, who helped raise the volume enough to get the new standard indefinitely suspended.

And then there are the general consequences of accounting rules for all small businesses. Committee member Michael Cain, senior executive vice president of Frost National Bank in Austin, Texas, is concerned that the push for better reporting for public companies has created a burden that's driving small companies away from accounting firms. Cain notes that as a credit grantor, his firm relies on the consistency and accuracy of accounting data. "As things continue to evolve, we're finding more of the smaller customers starting to move away from independent auditing," he says.

Cain supports the notion of having a separate set of generally accepted accounting practices for smaller, private companies. "There is a need for greater transparency in the public arena," says Cain, "but it can't be extended necessarily to small business if it creates a cost burden that drives people away from independent auditors."

With so many interests represented at the committee meeting table, countless issues are likely to be raised. But it's not yet clear just what kind of practical impact the group will have. Cynics worry that the FASB was motivated by purely political reasons to set up the committee. While he does have concerns, Forrestel believes the new group has significant potential. "I got the chance to look FASB in the eye and tell them how things will affect our company and construction companies like ours," he says. "Due process is a wonderful thing."


C.J. Prince is executive editor of CEO Magazine. She can be reached at .