Grant Thornton recently issued a white paper that reports results of a survey (318 respondents) they conducted with some CFOs from both private and public companies (authors of the paper are John Hepp and Meredith Vogel). Notwithstanding the usual caveats that come with survey data, there are some interesting (and sometimes surprising) results reported in the paper that I summarize (the full white paper can be accessed here).

The first set of survey results address the question of who should be the standard setter for private companies in the United States? Given the level of criticism leveled at the FASB for not considering the special circumstances of private companies, I was surprised to read from the report that given a choice between the FASB, the IASB, and a separate standard setter, 59% of private company CFOs responded that they would prefer the FASB. This compares with only 22% and 18% preferring the IASB and a separate standard setter, respectively. This result would seem to go counter to a Blue Ribbon Panel’s recommendation to the FAF that a separate board be created to promulgate standards for private companies. Among public company CFOs, 52% responded in favor of the FASB being the standard setter for private companies. Relatedly, the majority of public company CFOs also expressed a preference for the FASB as the standard setter for public companies. So much for all the hype we sometimes hear among auditing firms that IFRS in the United States is inevitable; apparently, that’s not what is wanted among most preparers.

The next set of results that caught my eye addressed the question about the primary objective of financial reporting. The choices were A) to provide information about past transactions and events so that users may evaluate your performance according to your business model and earnings during that period, B) To provide information on economic resources, claims to those resources and changes to them so that users may estimate the nature, timing and risk of your future cash flows, C) to provide information about the nature, timing and risk of your future cash flows, and D) some other objective. I would describe choice A) above as a transaction approach to measuring performance with a stewardship emphasis; choices B) and C) refer to the nature, timing, and risk of future cash flows, which is wording resembling the FASB/IASB revised Conceptual Framework. The majority of both private and public company CFOs chose A) as the primary objective of financial reporting, even though the FASB has been trending toward the asset/liability approach to measuring income in their new standards, and the revised Conceptual Framework does not reference stewardship as a primary objective.

The final result that was quite surprising to me was that almost two-thirds (i.e., 63%) of both private and public company CFOs indicated that cash flows from operations is considered to be their company’s primary indicator of performance, in spite of research evidence indicating net income is the most value-relevant metric. By comparison, net income was chosen by 49% of private company CFOs and 57% of public company CFOs (the CFOs were allowed to choose more than one performance metric). More results are available in the report for the interested reader.

There are a couple of take-aways from this survey for me (you might have others). First, there seems to be a large gap between what I tend to hear in the media about the need for a separate standard setting body for private companies and the inevitable adoption of IFRS, and the perceived needs of preparers. Second, preparers and standard setters appear to be operating on different footing with respect to the objectives and usefulness of financial reporting, which undoubtedly leads to disagreements as to what prescriptions should come from completed standards. I believe there are implications for academics in research and teaching that come from the survey. I’d like to hear your views.