There are various complications in accounting, which is okay where the transaction is complex or no details available to make the estimates. In situations where this is not the case, much of the accounting complexities that exist are unnecessary. Here are some of the accounting complexities and how to avoid them.
Complexities induced by corporate preparers
In the course of preparing financial statements, corporate preparers will most probably incorporate their intent, which will change depending on various situations, in measurement standards and recognition. Corporate preparers also focus on particular provisions with the aim of ironing out the impact of economic changes in the course of time instead of identifying the changes as they occur.
The solution lies in adapting flexibility in financial reporting management and embracing change accordingly.
Complexities induced by FASB
Limiting the amount of significant change in standards by the Financial Accounting Standards Board (FASB) introduces accounting complexities, and the board experiences difficulties in identifying a basis for a standard and maintaining that basis as well. The result is development of a standard that limits amount of change. Accounting concepts that guide the FASB in developing these standards are also incomplete. The solution is improvement of these accounting concepts, and addressing the issue of retaining current standards by FASB.
Experience complexities
Most FASB members have professional experience that is similar to that of preparers, and that means that their role requires a balance between experience and their duties, which they do not recognize. The solution is in discovering how to balance the two to inject simplicity.
Talk to us now for more bookkeeping tips and accounting advice!
