Contractors eye decision by accounting board

Construction & Demolition Recycling, March-April, 2004

* A financial accounting standard (known as FAS 150) that would have been detrimental to closely held contracting companies by requiring them to account for mandatorily redeemable shares on their income statements as a liability has been "indefinitely delayed."

This standard, proposed by the Financial Accounting Standards Board (FASB), Norwalk, Conn., would wipe out much of the net worth of private companies and make it extremely difficult for them to obtain bonding and insurance OH projects, according to a release from the Associated General Contractors of America, Alexandria, Va.

Most non-public construction-related companies have buy/ sell agreements. FAS 150 originally required companies to classify mandatorily redeemable shares as a liability on their balance sheets. In many cases, this would wipe our the net worth of these closely held businesses, making it difficult to demonstrate collateral to lenders, to insurance companies and to bonding agents.

Now that FAS 150 has been indefinitely delayed, many in the contracting business are watching closely to see if the FASB will attempt to advance the standard in the future.