Having been involved in
I have to say that I believe the opposite is happening. Reading (interpreting) accounts is getting harder to do, as more and more intricate rules are introduced. In just the last 20 years, we have seen significant changes, including the introduction of stock compensation standards, revised fair value accounting, rewrites of revenue recognition rules, to name just a few. The changes have become intricate and mind-numbing, and there’s no sign of it stopping: revenue recognition was just revamped yet again, and new lease accounting for operating leases is likely to be introduced too.
The bottom line is that unless you have a sophisticated understanding of accounting, you probably are unable to fully understand the accounts and what they mean to the health of the business. I don’t believe I am the only one who thinks the rules are going too far, and I understand sophisticated accounts! Every time I listen to a public company announce its quarterly financial results, I hear the CEO or
I’m not saying cash-based accounting is the way to go. That is accounting at its simplest but that, too, doesn’t give a true picture of a company’s financial health. The reality is a simplified disclosure process is in desperate need. Maybe if this was introduced, companies would stop releasing pro-forma results, and I wouldn’t keep being asked to interpret accounting results into meaningful information. Unfortunately, seeing the proposed new rules on the horizon, it looks like it’s going to get worse before it gets better, which is unfortunate.
Hopefully, the FASB will see sense soon, and start to simplify. Unfortunately, I don’t think it’s going to happen. Until it does, I expect to hear more and more complaints that financial statements are becoming more difficult to interpret. That to me is doing the U.S. accounting profession a major disservice.