Pros And Cons Of Support And Opposition For Seperate GAAP For Smes

Support and Opposition for Separate GAAP for SMEs There has been a long-standing debate concerning a separate GAAP for SMEs. On one side of the debate, proponents of a separate GAAP model for small and medium-size entities express an inability to adhere to the excessive and complex full GAAP standards. This is primarily due to costs in conjunction with compliance and a lack of applicable financial information to end-users. Conversely, opponents alternatively subscribe to a one set of GAAP standards. They voice concerns of inconsistency with varying standard applications, a potential lack of financial statement comparability between entities, and the potential for unforeseen long-term costs with a reduction in standards. Supporting

As long as there have been financial reporting requirements for businesses there has been the belief that the benefits should outweigh the costs of compliance. Now no one is suggesting that cost alone should be the primary factor in determining or following the standards of GAAP because the overall goal is to provide relevant and accurate financial accounting information to end-users to make sound business decisions. That being said, supporting views of a separate set of accounting principles make a valid point when acknowledging the different users of financial statement information. According to Cohn (2013), the primary users of private company financial information are lenders that are seeking the cash-based forms of accounting (para. 4). However, public companies typically provide financial information to investors and analysts in that larger entities are subject to additional reporting requirements and compliance with accrual-based forms of accounting (Stunda & Wills, 2015, p. 129). Despite the differences between end-users, SMEs are subject to