Monday, August 10, 2009

"IFRS for Small Biz--Should We or Shouldn't We?"

The Private Company Financial Reporting Committee (PCFRC), a joint venture of the FASB and AICPA, scruntized the proposed financial standards for small business ("IFRS for SMEs") of the International Financial Standards Board (IASB) this past week. PCFRC chair Judy O'Dell played close to the vest, saying that the only decision made is that FASB should consider whether or not to adopt IFRS for smaller businesses in the future. The discontinuance of LIFO was given as a disadvantage of IFRS for SMEs, while the amortization of goodwill (vs. impairment evaluations) was cited as a potential benefit of IFRS for SMEs.

Though I can see some benefit to the goodwill amortization approach (which could be done as a separate pronouncement since it was GAAP less than 10 years ago), in general I see even less use for international financial accounting standards for small businesses (UNLESS they are heavily import-export oriented) than for large multinationals. An appropriate approach: permit explicit cost-benefit decisions in applying specialized pronouncements to smaller businesses; consider allowing amortization of goodwill for smaller businesses and finally, permit smaller businesses to choose IFRS but do not require IFRS for smaller businesses until there is information on the impact of IFRS on voluntary adopters.


Anonymous Anonymous said...

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9:18 PM  
Blogger Judy O'Dell said...

I'm glad that you are following the work of the PCFRC. We have a discussion paper posted on our website which outlines 5 possible scenarios for private companies once public companies go to IFRS. We were interested that the UK has decided to adopt IFRS for SME. Minutes from out last meeting will be posted shortly to the webiste.

12:19 PM  

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