This article brought to my attention that there has been a calling for a separate set of standards for private companies. This is the first I heard about the issue, but apparently it has been an ongoing fight between private industry and the Financial Accounting Foundation (FAF). There was recently a vote by the FAF that rejected a proposed independent board that would modify and make exceptions to current GAAP for certain issues for private companies.
I understand and agree with the need for a modified GAAP for private companies because GAAP is focused on the reporting needs of external users of financial statements. In regards to private companies, the current GAAP contains accounting standards that are often irrelevant or too complex for private companies. Often, the cost of using the current standards outweighs the benefits for private companies. A modified GAAP, would allow for private companies to present more relevant and useful information geared towards the users of private company financial information at a benefit which is greater than the cost.
Although I agree with need for a modified GAAP for private companies, I see a problem; How do you incorporate the new standards into practice and academia?
I agree with the need for a modified private company GAAP, but the one big hurdle mentioned above is the reason I think another set of GAAP rules is far away from occurring especially with current ongoing convergence with IFRS. What do you think?