Academic journal article Journal of Accountancy

FASB Makes Small Businesses Larger

Academic journal article Journal of Accountancy

FASB Makes Small Businesses Larger

Article excerpt

It ain't over till it`s over. In the November issue, the Journal reported that a Financial Accounting Standards Board exposure draft would exempt business with less than $10 million in assets from Statement no. 107, Disclosures about Fair Value of Financial Instruments ("FASB Comes Through for Small Business,"). At that time, it was expected this figure would not change during the exposure process. However, the FASB has voted unanimously to raise the small business exemption limit to $100 million.

"Along the way, some issues changed everyone's minds," John Hepp, a FASB project manager, told the journal. According to Hepp, the FASB staff realized that a criterion for exemption based on the amount of financial instruments rather than on total assets would be more pertinent. Using total assets as the criterion works against entitles such as grocers, whose asset size is determined by merchandise inventory, not financial instruments. A criterion based on financial instruments was considered but ultimately rejected because a total asset criterion is easier to apply and could accomplish much of the same effect. "We were trying to keep the exemption simpler to apply than the statement itself."

Also, Hepp said a larger total asset criterion addresses some of the concerns of smaller banks and financial institutions. Many bankers had argued for a $150 million total asset cutoff, similar to that required by the Federal Deposit Insurance Corporation for certain disclosures. …

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