Accounting - Research Paper Example

l not only affect the reporting style and responsibility of the public companies but will also affect the private companies of the United States since both the public and private companies relied upon the GAAP for the preparation of their financial statements. It is a notable fact that even today some of the US private companies apply the IFRS to meet their reporting requirements, particularly the companies that have foreign related parties or investors that use the IFRS. There has been a debate over the past few years that the extensive reporting requirements of US GAAP have increased the cost of reporting for both the public and private companies although some of the more composite requirements may not even apply on the private companies.

The AICPA (American Institute of Chartered Public Accountants) has carried out certain studies to observe the relevance and fulfillment of requirements of the users of the financial statements of private companies as to whether the US GAAP compliance is beneficial to the users. The study has resulted in the fact that some of the more extensive and complex requirement of the US GAAP have more cost than benefit to the users. This may be because the users of financial statements of public company and the private company have different objectives as the public company financial statement users are mainly investors while the private company users are more concerned with management and short-term affairs of the company.

This debate has also given rise to a further debate hat whether a standalone reporting standards be prepared to meet the requirements of the private companies as some countries have already put forward this point. In this regard, the IASB has already begun working on reporting standards for Medium and Small Enterprises which are known as the IFRS for Private Entities. These IFRS for private entities only cover those entities that are exempt from public accountability which has made it relevant for any entity that