As the convergence era comes to a close, the FASB has turned its attention to improving existing guidance through its simplification initiative. PwC's Cathy Benjamin explains the goals of this initiative and how companies can prepare.
Hi, I’m Cathy Benjamin, a director in PwC's National Office.
You may be focused on the new “big 3” accounting standards...revenue, leasing and financial instruments...,
But did you know that as the convergence era comes to a close...the FASB has turned its attention to improving existing guidance through its simplification initiative?
Let me tell you a little more about it.
The goal of this initiative is to reduce cost and complexity while maintaining or improving the usefulness of financial statements. In a complex world, this initiative should be welcomed by all.
But change can be hard. Even changes that are intended to simplify things in the long-term can result in more work and cause volatility in financial reporting in the short-term.
The good news is implementing changes to accounting standards isn't new territory, and with proper planning, the process can go smoothly.
So here are a few reminders to help you prepare.
First, involve a cross functional team.
Think beyond your accounting and IT departments. Accounting changes may have broader impacts, so you may need to involve a cross-functional team to navigate through the changes.
Next, consider changes to systems, processes and controls.
The implementation of any new accounting guidance could impact systems, processes and controls, even when they're meant to simplify the process. It's important to get a jump start on understanding these impacts to ensure the required changes are implemented and tested in a timely manner.
Finally, consider investor relations.
Nobody likes surprises, so in addition to educating internal parties, certain impacts may need to be communicated externally too. Communicating expected volatility, impacts to key financial metrics or changes in accounting for certain transactions on a timely basis will be important.
So as you continue to focus on the big 3 accounting standards, remember to keep an eye on the simplification projects. With proper planning, you can effectively manage through them and take advantage of their benefits.
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