FASB LAUNCHES INITIATIVE TO SIMPLIFY ACCOUNTING STANDARDS
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.
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 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.
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 firstname.lastname@example.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 www.fasb.org.