This publication discusses the movement toward IFRSs and its implications for private company financial reporting in the United States. It also discusses some financial reporting issues that may be unique to private companies (also known as small and medium-sized entities, or SMEs), and the efforts of the IASB to develop a set of global standards geared specifically to private companies, the IFRS for SMEs
. Finally, the paper discusses the potential benefits and challenges of using either IFRSs or IFRS for SMEs, as well as, some key questions and considerations for private company financial statement users and preparers. Also included is a comparison of financial reporting under proposed IFRS for SMEs with US GAAP in selected areas. Click to:
Here is an excerpt from the report:
The benefits of global standards are not limited to public companies, as markets are also becoming integrated for private companies, both large and small. More and more private companies are looking to do business across borders and obtain financing from foreign sources. Reduced complexity, greater transparency, increased comparability, and improved efficiency are all potential benefits of IFRS and IFRS for Private Entities*. Both IFRS and IFRS for Private Entities also may reduce the burden of financial reporting on private companies, thereby reducing compliance costs.
Not only might private companies benefit from a common set of reporting standards, but the users of their financial statements, particularly those in different jurisdictions, would likely benefit as well. Users such as lenders, vendors, customers, venture capitalists, and non-management owners will need to understand only one set of standards in their dealings with private companies in different jurisdictions....
IFRS or IFRS for Private Entities may be a welcome alternative to US GAAP for many private companies. The factors that drive the choice of a reporting standard, however, are unique to each company's objectives and growth strategies. In making the choice, private companies will likely benefit from carefully evaluating the options and measuring the potential costs and benefits.
*Shortly after this publication went to press, the IASB decided that the final name of the standard will be IFRS for SMEs.