Does FASB Need An Advisory Committee On Reducing Complexity? PwC Thinks So...
In a June 28, 2011 Point of view article entitled, “Reducing Complexity,” audit firm PwC called for the formation of an advisory committee by the Financial Accounting Foundation, to advise the FASB on reducing complexity in accounting standards.
Accounting and financial reporting complexity continues to increase, presenting challenges for investors, preparers and auditors. While some complexity is necessary, complicated scope provisions, exceptions to general principles, and overly detailed guidance often make standards difficult to understand, interpret, and apply. New standards continue to be issued, further adding to complexity.
In our Point of view on reducing complexity in financial reporting, we note unnecessary complexity diminishes the value of accounting and reporting for investors, who may look elsewhere for information. Complexity is also costly for preparers (and investors who ultimately bear such costs), and the costs may not be commensurate with the benefits to investors.
Given the above, we recommend the Financial Accounting Foundation establish an advisory committee to the Financial Accounting Standards Board (FASB) focused on complexity. The committee, comprised of a variety of stakeholders, would advise the FASB on sources of complexity in existing accounting standards and standards under development, and help propose balanced solutions that improve the quality of information for investors while reducing complexity.
Read more about PwC's recommendations vis-a-vis other past and present efforts to reduce complexity in financial reporting, here.