You will note that a bound copy of GAAP comes in at 7,692 pages (as of 2011). By comparison, the Guinness Book of World Records' thickest book published — Agatha Christie's Miss Marple stories — comes in at 4,032 pages.
Knowing this, FASB is attempting to shave off a page or two off the beast that is GAAP in two ways.
According to the FASB, the projects included in the initiative are intended to improve or maintain the usefulness of the information reported to investors while reducing costs and complexity in financial reporting.
“We have received many suggestions from stakeholders highlighting areas in GAAP where simplification might be achievable,” FASB Chairman Russell Golden said in a written statement. “We believe we could reduce cost and complexity in many of those areas and will work to prioritize the opportunities. The board added these two agenda projects based on stakeholder feedback, representing the beginning of our simplification initiative.”
The FASB added the two projects – simplifying the measurement of inventory and simplifying income statement presentation by eliminating extraordinary items – to its agenda at its May 28 board meeting.
FASB's two projects are as follows:
- Simplifying the Measurement of Inventory. The Board tentatively decided that inventory should be measured at the lower of cost and net realizable value. This compares to existing GAAP that indicates organizations should consider net realizable value, replacement cost, and net realizable value less a normal profit margin when measuring inventory.
- Simplifying Income Statement Presentation by Eliminating Extraordinary Items. The Board tentatively decided to remove the extraordinary items concept from GAAP. This compares to existing GAAP that requires organizations to evaluate whether an event or transaction is an extraordinary item; and if it is an extraordinary item—to separately present and disclose the item.
Two down, 10,000,000,000 to go!