BIG GAAP/LITTLE GAAP

We were once the world leader in a lot of things but it seems here lately we are always the last one to the dance. For example, the accounting profession in the US has been arguing for years about whether we should have two sets of accounting standards; one for public companies and another for private companies. To our chagrin the International Accounting Standards Board (IASB) accomplished in a couple of years what we have been unable to do in decades; establish GAAP for non-public companies.

Late last year, the AICPA and the Financial Accounting Foundation (FAF) announce the formation of a blue-ribbon panel to address how accounting standards in the US can best meet the needs of users of private company financial statements. The formation of this panel represents the latest in a series of developments related to the big GAAP/little GAAP debate.

Also in January the Private Company Financial Reporting Committee (PCFRC) sent the chair of the FAF a letter in which it recommended that the FAF address the issue of private company accounting in the context of the FASB’s mission. The PCFRC also indicated its preference for a separate, stand-alone set of accounting standards for private companies in the US. When announcing the formation of the blue-ribbon panel, the president of the FAF indicated that the FAF had heard from the PCFRC and many others about the need to address the issue of private company GAAP. Although the panel is not yet fully staffed, it’s expected to issue recommendations sometime this year. It shouldn't take a year; they have a complete set of non-public company GAAP standards prepared for them by the IASB. The panel is expected to provide recommendation to the future of accounting standard-setting for private companies, including whether there is a need for separate standalone accounting standards for those companies.

Do you think that if the IASB had not issued their International Financial Reporting Standards for Small to Medium Sized Entities (IFRS for SMEs) that we would have a blue-ribbon panel trying to address the issue? I don't, what do you think?