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The Struggle to Simplify Accounting

Ed Trott, a former member of FASB writes in the CFO.com article that we need to simplify the rules. Does Ed go far enough in his simplification model? I think not, and the reason may be moderation. Too liberal a plan would elicit a autonomic negative effect; but sans that human foible, do you believe his plan is sound and is it timid, just right or a bit aggressive?

Answers

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Trott said, "The board creates complexity by trying to limit the amount of major change in standards. It has a hard time identifying a basis for a standard and sticking with that basis."

This statement is in my opinion why there is a need for a principle based set of standards, instead of the rules based standards we have now.

I agree with Mr. Trott's conclusion. Companies, and their shareholders, aren't concerned about accounting standards changing when it comes down to it because, in my opinion, the cost to change the standards would impact the net income negatively. Shareholders want their money, the market wants to benefit from the rising stock prices. Therefore, when it comes down to it, standard changing is desired, but not enough to actually do it.

It is a bit aggressive. It couldn't be done in a couple of years, in my opinion.

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