be to take our company’s more than $10 million net worth and make it zero through the
imposition of this standard.
I will briefly touch upon the ramifications of such an accounting bombshell. Cold Spring builds
only public works projects, all of which require surety bonds2. First, wiping out our equity
would make us unable to obtain bonds. Second, we would be in violation of loan covenants3.
Third, many states like Pennsylvania have pre-qualification requirements4 in order to bid on
public works projects. FAS 150 would have rendered us unqualified to bid on most projects in
Pennsylvania, because the state requires the contractor to show net worth in order to bid. Finally
and this is strictly a psychological reason -- this change would have dramatically altered the
way our balance sheet looked. Dad first worked for Cold Spring the summer after the Japanese
attacked Pearl Harbor. He has worked his tail off for more than six decades. No way, not on my
watch, will he be told that the company just lost all it’s net worth, even if it is only on paper.
FAS 150 first came to my attention at an AGC Tax and Fiscal Affairs committee meeting in June
of this year. During our two-day meeting, we discussed the implications of the standard – which
at that point was effective in December 2003 – and decided our best course of action was to put
together a task force to contact FASB with our concerns. At the end of August, AGC sent our
four-page letter. This letter was timed to arrive at FASB the day before their board meeting
addressing FAS 150. Because of our letter, and the letters of other associations of nonpublic
companies, FASB delayed extension of FAS 150 for an additional year.
2 Surety bonds are guarantees that the contract will be completed and that workers, suppliers and subcontractors will be paid. Virtually all public contracts require surety bonds. Loan covenants often require a target net worth. 3