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Generally Accepted Accounting Principles: The Big GAAP vs. Little GAAP Debate

 
  Arthur F. Rothberg, Managing Director, CFO Edge, LLC  
   
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  Article Summary  
Generally Accepted Accounting Principles, or GAAP, is considered to be the standard for financial accounting in the U.S. GAAP is used to guide accountants through the business of recording, summarizing, and preparing financial statements.

This article focuses on the application of GAAP as it relates to private versus public companies. It has been noted that many of the GAAP elements that apply to public companies have lesser utility for private ones. Many owners of privately held businesses simply find GAAP too complex or unnecessary, and thus opt not to use it.

Included are looks at the differences between Big GAAP and Little GAAP, as well as how the Private Company Financial Reporting Committee (PCFRC) and the International Financial Reporting Standards for Small and Medium Sized Entities (IFRS for SMEs) fit into the discussion.

The application of GAAP is often described as complex and confusing. It, therefore, is an area where Los Angeles executives may want to consider engaging with an outsourced CFO services firm for interpretation and implementation.

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