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Will simpler also be better?

by Maria L. Murphy, CPA | Jul 06, 2015   ()

It should be no surprise that accounting standards have become more complex over the years. Transactions have become increasingly challenging as new products and services emerge and financial instruments become more complicated in a global economy. Meanwhile, financial statement users’ demands for more information in a more timely fashion have caused standard setters to create more disclosure requirements to provide additional transparency. As the amount of information in financial statements has grown, “simplification” and “reducing complexity” have become themes in recent years for regulators and accounting standard setters.

Standard setters and regulators are acutely aware that investors can be confused and preparers overwhelmed by the complexity of accounting standards and by the content and volume of information presented in financial statements. FASB, the International Accounting Standards Board, and the SEC all have ongoing projects related to simplification and reducing disclosure overload (see the sidebar “The Pursuit of Simplification”). The Financial Accounting Foundation’s Private Company Council (PCC) has been working to modify GAAP for private companies to reduce unnecessary complexity, and the AICPA’s Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs) has been designed to give preparers a simple, cost-effective way to present non-GAAP financial statements.

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Source: Journal of Accountancy

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