Feb 17, 2016
Andy Cromer CPA
Many small and medium size businesses often find themselves knee deep in complex accounting issues that arise from normal operations. Often, this complexity lends itself to the need for specialists in very narrow fields that the entity does not have nor finds it has the means to obtain. Larger entities may have the expertise, but lament the costs and complexities involved with complying with these standards.
In response, the Financial Accounting Standards Board (FASB) launched its Simplification Initiative to reduce the cost and complexity of financial reporting in 2014. From a broad perspective, this initiative is to make improvements through a series of targeted, narrow-scope projects. The narrow scope nature of these projects causes them to move more quickly through the standard-setting process. This initiative carried through 2015 and into 2016.
Business transactions are most certainly more complex today than a decade or two ago. Although this has certainly caused the accounting standards to become more complex, it is not the only reason. Other reasons often cited include shifting priorities, new ideas and targeted ‘fixes’ that have unintended consequences elsewhere.
In addition to the Simplification Initiative, FASB is also working with the Private Company Council (PCC) to reduce complexities for private entities. The PCC and the Simplification Initiative are not formally linked, but both have the common goal of reducing complexity and costs in financial reporting. In many instances the PCC has acted as a springboard for efforts to reduce complexity in the standards for all entities, not just private companies.
Since its launch, the following projects have been completed through the end of 2015 under the initiative and many are available for early adoption:
Presentation of debt issue costs
Measurement dates for defined benefit plans
Balance sheet classification of deferred taxes
Additionally, FASB its work on new projects under this directive in 2016 and we certainly encourage their efforts in this regard.