Is it Time for Private Company GAAP?

SKR+Co. Alert

Is it Time for Private Company GAAP?

By Mike Rowe, Audit Partner

January 25, 2011

Generally Accepted Accounting Principles (GAAP) have become increasingly complex over the past decade. Many of the new accounting standards are issued primarily to address the needs of the users of public company financial statements. Private companies have been saying for years that their financial reporting needs are different from those of large public companies, as the users of their financial statements are different. As a result, consideration is being given to creating separate accounting rules for private companies.

The following are arguments both for and against private company GAAP.

Proponents

Those in favor of creating a private company GAAP raise the following issues about the existing rules:

• Excessive Complexity
• Non-compliance
• Lack of Relevance

Opponents

Opponents of a private company GAAP raise the following issues with private company GAAP:

• Costs to Create and Implement
• Lack of Consistency and Comparability

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