On August 16, 2001, the Financial Accounting Standards Board issued its 143rd statement. The prospect of complying with yet another statement has fueled concerns about âstandards overload,â sending some practitioners in search of a kinder, simpler solution to generally accepted accounting principles (GAAP). As a private-sector standard-setter, FASB has looked to statements as a key source of funding since its inception in 1973. But critics say this business model leads to too many statements and the standards are becoming overly complex, adding up to mountains of paper and a language likened to alphabet soup.
Mountains of Paper
In addition to FASB's statements, preparers of financial statements must comply with the statements issued by the Accounting Principles Board (APB), FASB's predecessor organization, and decisions made by a growing number of de facto accounting standard-setters. These include the Emerging Issues Task Force (EITF) which addresses 5-10 issues every other month, the Derivatives Implementation Group (DIG) which has addressed over 200 issues since its inception in 1998, the Accounting Standards Executive Committee (AcSEC), the SEC (through its Staff Accounting Bulletins, regulations committee, staff announcements, and speeches), and most recently, the International Accounting Standards Board (IASB).
Some practitioners say the sheer volume of information is such that they find it difficult to keep up. CPAs are grateful that technology lightens their load, as today's accounting standards generally reside on servers and CDs instead of books. But even technology can't remedy what some see as a deteriorating image. Once viewed as professionals respected for their judgment, today's accountants and auditors fear they are evolving into a generation of librarians whose role is to look up answers to questions in digital rule books.
Suggested solutions discussed at the July 2001 Financial Accounting Standards Advisory Council (FASAC) meeting range from codification to simplification. Codification would involve compiling all the professional literature in one place where it is organized by topic and more easily retrievable than sources currently available. Simplification would involve rewriting the standards to emphasize basic principles rather than provide detailed guidance. Some have suggested that simplification be taken a step further to include a total reconsideration of all the disclosure requirements. They say today's footnotes provide so much information that they are rarely read or used as a basis for decision-making. Others have called for sunset reviews of standards, under which after a period of time, standards would automatically be reviewed to determine continued relevancy. Still others have called for elimination of older guidance, such as the opinions and research bulletins issued by the APB. After all, they say, with 143 FASB statements to contend with, how many accountants can still recite their APBs? And more to the point, why should they have to? Why can't FASB issue some sort of omnibus statement instead?
FASB's stated mission is to establish and improve financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information. Some would argue that this mission can't be accomplished without addressing the perception of standards overload and returning to a kinder, simpler and more user-friendly set of GAAP. Do you agree? What steps do you think should be taken?