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News and Press Releases |
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HEADLINE:
Small Biz Feels Overlooked By Accounting Board
By: Kent Hoover
Charlotte Business Journal. November 24, 2003
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EXCERPT: The Financial Accounting Standards Board's efforts to prevent future Enrons may have unintended consequences for small businesses. A biotech company, a Wendy's franchisee and a construction company testified at a Senate hearing Nov. 12 that three FASB proposals to change accounting rules could devastate small companies in their industries. Publicly traded companies of all sizes are lobbying against a proposed rule to require companies to count the value of stock options as a liability in their financial statements. But this rule, which the FASB is expected to issue in February, would particularly hurt small high-tech companies, which use stock options to lure talent away from larger companies, says Walter K. Moore, vice president of government relations for Genentech Inc. The South San Francisco-based biotech giant has issued stock options to all of its employees since it was founded 25 years ago by a biochemist and a venture capitalist. Expensing stock options would make them unaffordable for most of the 60 other small biotech companies in South San Francisco, Moore says. But Moore fears these small business concerns have "fallen on deaf ears" at FASB, a private body that establishes the standards used by companies that follow generally accepted accounting principles. Peter Salg, co-owner of Wendy's franchisee QSC Restaurants Inc., has a similar complaint. Salg's company, which owns five restaurants in Colorado, could be forced to have its financial statements audited by Wendy's outside auditor if the FASB adopts a proposed rule designed to make sure corporations report the financial results of off-balance-sheet entities. Salg says he and his partner's wife now do QSC's accounting. "Not every mom and pop can afford PricewaterhouseCoopers," he says. Salg says the rule would make franchising "much less appealing." "First of all, it just got a lot more expensive to be a franchisee," he says. "Secondly, your freedom to operate your franchise just got more limited." Salg says he found about the proposed accounting change just 10 days before the Senate hearing. "Why don't they talk to folks like us before they draft this stuff?" he wonders. Closely held businesses win reprieve Meanwhile, closely held businesses won a last-minute reprieve from a proposed accounting change that would require them to count agreements to buy back the stock of co-owners when they depart as a current liability. "For my family's company, this is all our shares," says Richard Forrestal Jr., chief financial officer for Cold Spring Construction Co. in Akron, N.Y. "The result will be to take our company's more than $10 million net worth and make it zero." Forrestal and two other members of Associated General Contractors met with FASB officials Oct. 30 to explain the impact of the rule on closely held construction companies. Contractors who saw their net worth wiped out by the rule would not be able to obtain surety bonds for public works projects or construction loans, he says. "I believe FASB heard us," he says. The board indefinitely delayed the rule -- which was scheduled to go into effect in December -- on Nov. 7.
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