For a number of years now, practitioners and small businesses have argued that the increasingly complex and ever-changing accounting standards written with large, publicly traded companies in mind are leaving the small business owner behind. As a result, the Financial Accounting Standards Board (FASB) and the American Institute of CPAs (AICPA) have made competing proposals about what to do about the issue.
In May 2012, the Financial Accounting Foundation, which oversees FASB established the Private Company Council (PCC) to determine whether exceptions or modifications to GAAP were need to address the issue. On July 1, 2013, FASB issued 3 exposure drafts developed by the PCC. These exposure drafts, if passed, would change Generally Accepted Accounting Principles and become part of the reporting hierarchy. The three proposals would affect how intangible assets are recognized, while the second would change the way goodwill is written off and the third affects accounting for interest rate swaps.
The AICPA, on the other hand, is taking a completely different approach – proposing a reporting framework other than GAAP. While not a new approach -“other comprehensive bases of accounting” or “OCBOA’s” have existed for as long as there have been accounting requirements – the AICPA is proposing a different framework from the typical cash and tax basis of accounting models currently in use. On June 10, 2013, the AICPA released a new, optional reporting framework that provides an alternate GAAP for small and medium sized businesses. By presenting the framework as an alternate to GAAP, no changes in existing GAAP is required. The AICPA anticipates that the framework would be updated every three or four years.