Accounting for Private Versus Public Companies

FASB has also recognized the importance and potential impact of private company financial statements. According to Forbes, out of the 5.7 million firms with employees in the United States, less than 1 percent have shares listed on a U.S. exchange. Although we tend to think of private companies as small companies, the reality is quite the opposite, with private firms accounting for 86.4 percent of U.S. firms with 500 or more employees. Number of primary users and their access to management.

1. Investment strategies of primary users.
2. Ownership and capital structure.
3. Accounting resources.
4. Learning about new financial reporting guidance.

• Select two of the differential factors that interest you, and briefly explain why.
• In your own words, explain the factor and why it is different from a publicly traded company.
• Identify the accounting risks associated with each of your chosen factors. What would you recommend to minimize those risks?