In the mid-1980s, CPAs in private industry, government and non-profit organizations, and in public practice were served a huge plate full of professional standards. The term "standards overload" was coined to describe this phenomenon. CPAs that worked for small entities and small CPA firms soon began to realize huge time expenditures to comply with these new standards, most of which were more appropriate for larger entities. Amid much table pounding and foot stomping by CPAs that worked for or served small entities, we heard the cry, Give us Little GAAP!
25 years later, we still have no Little GAAP! This may, however, be about to change! Yes, you heard me correctly. Little GAAP may be on the way. In fact, it may already be here in one form! In 2009, the International Accounting Standards Board introduced International Financial Reporting Standards for Small and Medium-Sized Entities. Including about 10% of full IFRS, IFRS for SMEs includes principles-based standards that reduces the disclosure requrements for many small for-profit and non-profit enties. You'll probably find this hard to believe. Almost immediately after these standards were published, both the AICPA and the FASB pronounced them to be GAAP! Has Little GAAP arrived? As user acceptance grows, financial statement and footnotes preparation using this principles-based, simplified version of IFRS may shrink the long lists of rules-based disclosures that are required by U.S. GAAP!
But wait! There's more! The AICPA, the Financial Accounting Foundation (FAF), FASB’s parent organization, and the National Association of State Boards of Accountancy (NASBA) are sponsoring a blue–ribbon panel that is charged with making recommendations on the future of standard setting for private companies. They will take on the issue of whether separate accounting standards are needed for private companies! In the past other groups have wrestled with questions about accounting standards for U.S. private companies, but they mostly focused on technical issues. This panel is unique in that it has support from standard setters, the CPA profession, and state regulators.
What can we do to breath life into Little GAAP? We can begin to learn more about IFRS for SMEs and how it can meet the accounting and reporting needs of small entities. We can keep our ears to the ground and watch for publications of findings by this joint panel of standard setters. Finally, we can respond to the panel when their findings are made available. We can utter the cry of nearly the last three decades, "We want Little GAAP!"