The International Accounting Standards Board is conducting a project titled IFRS for Private Entities, the objective of which is to develop a comprehensive International Reporting Standard for private entities. This project was prompted by a survey conducted in 2003 which showed strong support from standard setters around the world for the development of global standards for private entities. A discussion paper was issued the following year followed by an exposure draft in February 2007.
The project is nearing completion with a final standard scheduled to be voted upon by the end of this year. Release of the standard is expected in the first quarter of 2009.
With the AICPA’s recognition of the IASB as an accounting standards setter earlier this year, the door is open for U.S. private companies to adopt IFRS. Ultimately, market forces will drive acceptance of IFRSs by private companies in the U.S., whether the decision is to adopt full IFRS or the streamlined IFRS for Private Entities. If the SEC allows, or even mandates, IFRS for public companies, this will certainly influence the market demand by private companies.
The private entity IFRS provides an alternative to full IFRS and U.S. GAAP. If you work for a private entity exploring the ramifications of IFRS adoption, the new standard will be a much less complex alternative than full IFRS. IFRS for Private Entities is based on full IFRS, but simplified for private entities. Modifications include recognition and measurement simplifications and reduced disclosures. The new standard is being designed to be mostly stand-alone so cross references to full IFRSs will be minimal.
While listening to an update on the private entities project in a September webcast; I wondered if the standard may become too compact. The exposure draft which contains the entire standard is only 254 pages long, though the final standard is expected to be somewhat longer. On the other hand, maybe a concise standard will be a welcome alternative to many private companies. Ultimately, market acceptance will depend on whether or not the final standard is viewed as a high quality option to either full IFRS or U.S. GAAP.
Have you looked at the IFRS for private entities? What do you think?
