Last week I attended our FEI (Financial Executives International) Chapter meeting and our special speaker was Robert Herz, the recently retired Chairman of the FASB (Financial Accounting Standards Board).
He shared many insights into what is happening in the world of GAAP (Generally Accepted Accounting Principles) and International Standards.
I will not share all the technical items he shared, as that part of what we CPA’s do can be a little boring, but I thought he had a few really key points that would impact business leaders.
First, he re-affirmed that some form of IFRS (International Financial Reporting Standards) is coming (although probably not next year). He also indicated what will be adopted would probably not be as uniform as some in the world would desire, but likely the beginning stages of a somewhat consistent international accounting standard. He recognizes that this means significant changes to American businesses.
He also discussed many of the current and contemplated changes to GAAP including the recent exposure draft on revenue recognition. While this won’t significantly impact a lot of industries, there could be some major impacts on how certain industries recognize revenue (including Construction Contractors and Software Developers). Other significant areas he mentioned included lease accounting, financial statement presentation, and a variety of others. Some will happen soon while others will be further down the road. But one thing is certain: things will continue to change for the next few years!
Another point he discussed was private company GAAP. Many privately held businesses desire a set of accounting rules that just apply to them and to not be forced to comply with all the rules that apply to large publicly held companies. He shared why he thought this was not going to happen. He likes the idea of having one set of rules (a common language) for all and some additional special rules for publicly held companies (like SEC and PCAOB rules). I am sure many readers of this blog would prefer some relief of all the “big company” rules, but it seems like FASB is not supporting this change.
Overall it was a very good presentation by Mr. Herz and I wish him well in retirement.
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