FASB LAUNCHES INITIATIVE TO SIMPLIFY ACCOUNTING STANDARDS
Norwalk, CT, June 10, 2014—As part of
its initiative to reduce complexity in accounting standards, the Financial
Accounting Standards Board (FASB) added two short-term projects to its agenda to
simplify Generally Accepted Accounting Principles (GAAP).
The initiative
involves the Board adding narrow-scope projects to its agenda that stakeholders
have identified as opportunities to simplify GAAP in a relatively short time
period. The projects included in the initiative are intended to improve or
maintain the usefulness of the information reported to investors while reducing
costs and complexity in financial reporting.
The FASB is in the process
of researching several simplification ideas identified by stakeholders. At the
May 28, 2014 Board meeting, the Board added the following two projects to its
agenda:
- Simplifying the Measurement of Inventory. The Board
tentatively decided that inventory should be measured at the lower of cost and
net realizable value. This compares to existing GAAP that indicates
organizations should consider net realizable value, replacement cost, and net
realizable value less a normal profit margin when measuring inventory.
- Simplifying Income Statement Presentation by Eliminating
Extraordinary Items. The Board tentatively decided to remove the
extraordinary items concept from GAAP. This compares to existing GAAP that
requires organizations to evaluate whether an event or transaction is an
extraordinary item; and if it is an extraordinary item—to separately present
and disclose the item.
“We have received many suggestions from
stakeholders highlighting areas in GAAP where simplification might be
achievable,” said FASB Chairman Russell G. Golden. “We believe we could reduce
cost and complexity in many of those areas and will work to prioritize the
opportunities. The Board added these two agenda projects based on stakeholder
feedback, representing the beginning of our simplification
initiative.”
Stakeholders who have suggestions and potential solutions to
simplify existing GAAP for all public companies, private companies,
not-for-profit organizations, and employee benefit plans can email their
suggestions to fasbcomments@fasb.org.
About the Financial Accounting Standards
Board
Since 1973, the Financial Accounting Standards Board has
been the designated organization in the private sector for establishing
standards of financial accounting and reporting. Those standards govern the
preparation of financial reports and are officially recognized as authoritative
by the Securities and Exchange Commission and the American Institute of
Certified Public Accountants. Such standards are essential to the efficient
functioning of the economy because investors, creditors, auditors, and others
rely on credible, transparent, and comparable financial information. For more
information about the FASB, visit our website at http://www.fasb.org/.