In the past few years, much has been made of the plans to merge the accounting standards used in the US with those used by much of the rest of the developed world. In 2002, the US standards setter and the international standards bodies agreed to a framework for convergence of US generally accepted accounting principles (US GAAP) with the International Financial Reporting System (IFRS) in a document known as the Norwalk Agreement.1 Since then, the US and international bodies (known, respectively, as the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, or IASB) have worked to align their respective standards so that, eventually, developed nations will have a homogenous accounting system. One particular point of difficulty in this effort, however, has been the issue of fair value accounting. The economic recession that began in 2007 further complicated convergence efforts as attention was drawn away from reconciliation efforts and focused on both placing blame and reforming the practices that caused the crisis. Then, with the election of President Barack Obama, the entire convergence movement was threatened when the newly-appointed chairwoman of the Securities and Exchange Commission announced that she would not “feel bound”2 by the convergence roadmap established by her predecessor.
According to the latest PricewaterhouseCoopers/National Venture Capital Association MoneyTree report, venture capital (VC) investments in the first half of 2009 are 55% lower than the same period in 2008, falling from $15.2 billion to $6.8 billion. To be sure, $6.8 billion is still a substantial sum of money, but the decrease in funding from venture capital firms means increased competition for every dollar in an financial environment that is already unfriendly to new investments. As banks have reduced or eliminated companies’ credit lines and are unwilling to provide other forms of financing, entrepreneurs are now forced to look for more-creative ways to fund their operations. Venture capital funding, where investors provide financing to begin operations, support ongoing growth, and foster development of new ideas, is an increasingly appealing option for small businesses impacted by the recession. Whereas entrepreneurs may have previously resisted relinquishing any amount of control over their companies (see below) in exchange for operating capital, some organizations now find that they have no other choice if they are to survive.