Private Co. Reporting: Why Standard Setter Morgan Is for It, Investor Morgan Against (Video)
What concerns do investors have about reduced private company requirements?
That’s a question we put to our members in a survey, findings of which we used in our CFA Institute publication, Addressing Financial Reporting Complexity: Investor Perspectives, released earlier this year.
Investors’ primary concerns were those of comparability, loss of useful information, and increased complexity. Survey results showed that:
- 82% of respondents believe the creation of separate private company standards would create comparability issues for those investing across public and private companies
- 65% say it would result in the loss of information useful to their financial analyses
- 73% believe it may actually increase complexity instead of lessening it.
Investors believe the initiative will reduce companies’ compliance costs. This benefit, however, is unlikely to outweigh the costs for investors.
Nonetheless, standard setters around the world have gone on, to differing degrees, to institute private company reporting in their jurisdictions.
In a recent conversation with Robert Morgan, CFA, former member of the Canadian Accounting Standards Board, we asked why as a standard setter he voted in favor of private company reporting when as a user he has been dead set against differential reporting requirements. Here’s what he says.
If you liked this post, consider subscribing to Market Integrity Insights.