Prof. William F. O’Brien, CPA, has a great survey of the major accounting issues in our future and some suggestions on how to absorb the change that is on the way. His article, Surf’s Up! Wave of Financial Reporting is Coming, is in the January/February edition of California CPA magazine.
Major issues he describes are:
Private company GAAP – The FAF has proposed a new board that would identify specific exemptions from GAAP for private companies. This new board would be under the voting control of FASB. The AICPA was not amused. Mr. O’Brien’s comment:
The group would identify standards for consideration, exceptions and modifications, but its final recommendations would need to be approved by FASB. While FASB supported FAF’s position, the AICPA expressed “profound disappointment” with the proposal and urged its membership to write letters to the Foundation during the comment period, which ends Jan. 14.
IFRS for SMEs – there is a scaled-down version of IFRS which is called IFRS for small and medium enterprises. It skips some of the complex rules that don’t apply to small entities, reduces disclosures, and will only be revised every three years. This is a simple alternative to GAAP and IFRS and is available now as an applicable financial reporting framework.
There are some rather massive challenges in adopting IFRS for SMEs in small companies. There aren’t likely to be very many small companies who have a clue about these accounting standards, there are probably few auditors who understand them enough to audit those f/s, and probably few banks who would understand financials using that basis of accounting, and fewer still who would accept those reports.
Financial statement presentation – His great one sentence summary:
Simply stated, the proposed financial statement presentation aligns each of the principal statements with the operating-investing-financing activities framework of the Statement of Cash Flows.
I’ve mentioned that idea here ,
Projects underway – Oh, don’t forget the massive changes to GAAP that are on the near horizon:
What will change first: revenue recognition, lease accounting or financial instrument reporting requirements?
How to cope?
Professor O’Brien devotes most of his article to a plan to deal with this massive change. His major points:
- Discover Your Resources
- Know What’s Going On
- Find What Works for You
- Develop a Working Model
- Review Covenants and Contracts
- Maintain Strategic Focus
- Have an IT Plan
- Put Everyone on the Same Page
- Be Active in the Profession
- Don’t Procrastinate
Check out the full article. Great survey of what’s ahead and a roadmap to cope.