However, simplification has driven many recent standards and current projects under development at the Financial Accounting Standards Board (FASB). It is taking the form of precise, targeted improvements that reflect a deliberate emphasis on reducing complexity in U.S. generally accepted accounting principles.
Here is a useful briefing on the simplification initiative, including a summary of the accounting areas that have benefitted to date.
There is no doubt that simplification of accounting standards, albeit in specific areas, is a genuine development. The FASB has formally identified improving U.S. generally accepted accounting principles (U.S. GAAP) through reducing complexity as a 2015 priority. Russell Gordon, FASB Chairman, wrote, “Investors and preparers have identified complexity in GAAP as an important issue that needs to be addressed. We responded…by reorganizing our technical agenda, [and] adding a mix of long-term foundational and short-term simplification projects.” To that end, simplification is reflected in recent accounting standards, standards under development and projects on the FASB technical agenda.
RECENT ACCOUNTING STANDARDS DEMONSTRATING SIMPLIFICATION
These may all be early-adopted now and include four alternatives designed specifically as accounting “relief” for private companies. These are generally tightly-focused standards that include the following:
| Extraordinary items, ASU 2015-01 |
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| Intangible assets in a business combination, ASU 2014-18 |
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| Development stage entities, ASU 2014-10 |
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| Discontinued operations, ASU 2014-08 |
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| Variable interest entities (VIE), ASU 2014-07 |
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| Accounting for Certain Interest Rate Swaps, ASU 2014-03 |
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| Goodwill, ASU 2014-02 |
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SIMPLIFICATION IN THE ACCOUNTING PIPELINE
These topics are either proposing simplified accounting or reducing current disclosure and presentation requirements. Remember, most new accounting standards generally allow early adoption. Some are in an earlier, project stage, while others are closer to final issuance. Keep an eye on those that will reduce your time to comply with our present standards. Highlights include:
Measuring impairment in inventory
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Balance sheet presentation of deferred income taxes
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Accounting for Financial Instruments—Hedging
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Accounting for employee share-based payments
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Accounting for Measurement Period Adjustments in a Business Combination
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Accounting Issues in Employee Benefit Plan Financial Statements
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Accounting for Goodwill for Public Business Entities and Not-for-Profit Entities
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Accounting for Identifiable Intangible Assets in a Business Combination for Public Business Entities and Not-for-Profits
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LOOKING AHEAD
Although none of these developments are revolutionary, they represent incremental, practical and welcome relief for preparers, users and auditors of financial statements. And that is particularly welcome with complex emerging standards in leasing, revenue recognition and financial instruments on the accounting horizon.
ADDITIONAL RESOURCES
Look for our practical insights into accounting standards and other business topics on our Assurance and Accounting Services page. We would be pleased to discuss with you how current developments in accounting would affect your business and financial reporting. Contact us with your questions.
The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.
