Last week, the International Accounting Standards Board released a simplified version of the International Financial Reporting Standards targeted specifically to private companies. According to CFO.com, the new standard has only 230 pages, where the full version is more than 2,500 pages long.
To trim down the standards, the International Accounting Standards Board removed the provisions that have no application to private entities. For instance, there are no references to earnings per share, segment reporting or "special accounting for assets held for sale." Similarly, the new version requires fewer disclosures in financial statement footnotes, and in situations where the full version offers several choices of accounting method, the new one simply prescribes the method that should be used.
CFO.com writer David McCann explains:
For example, several options for financial instruments - including available-for-sale, held-to-maturity, and certain fair-value options - aren't included in the pared-down standard. Neither is the revaluation model for property, plant, and equipment and for intangible assets.
IASB's Paul Pactor, the director of standards for SMEs, says the adoption rate in the United States may be slower than it is in Europe, but there will still be plenty of interest.
Some private company CFOs in the U.S., however, are hesitant. Ron Box, the CFO at a Birmingham, Ala.-based company, says simply, "I will consider adopting the new standard when the primary users of financial statements are fully educated in it and can intelligently evaluate it...Prematurely adding a new set of accounting rules to this mix could be very counterproductive."
The IASB says IFRS for private companies is "separate from" the full version and can be adopted regardless of whether the jurisdiction in question has adopted the full version.