Even though accounting records go back hundreds of years, there was little effort to develop accounting standards until the 1900s. The first major effort to develop accounting standards in the United States came in 1939 when the American Institute of Certified Public Accountants formed the Committee on Accounting Procedures. As the number of standards increased, an issue called "standards overload" emerged.

Essentially, the charge of "standards overload" is that there are too many accounting standards and that the standards are too complicated. Many individuals charging that standards overload is a problem maintain that more professional judgment should be allowed in financial accounting.

Some individuals take a position that selected standards should not apply to nonpublic companies. Others take a position that "little" companies should be exempt from selected standards.

There has been some selective exclusion from standards in the past. Examples of selective exclusion are the following:

1. Statement of Financial Accounting Standards No. 21, "Suspension of the Reporting of Earnings per Share and Segment Information by Nonpublic Enterprises." "Although the presentation of earnings per share and segment information is not required in the financial statements of nonpublic enterprises, any such information that is presented in the financial statements of nonpublic enterprises shall be consistent with the requirements of APB Opinion No. 15 and FASB Statement No. 14."

2. Statement of Financial Accounting Standards No. 33, "Financial Reporting and Changing Prices."

This statement required supplemental reporting on the effects of price changes. Only large public companies were required to present this information on a supplementary basis.

Required

a. Financial statements should aid the user of the statements in making decisions. In your opinion, would the user of the statements be aided if there were a distinction between financial reporting standards for public vs. nonpublic companies? Between little and big companies?

b. In your opinion, would CPAs favor a distinction between financial reporting standards for public vs. nonpublic companies? Discuss.

c. In your opinion, would small business owner-managers favor a distinction between financial reporting standards for small and large companies? Discuss.

d. In your opinion, would CPAs in a small CPA firm view standards overload as a bigger problem than CPAs in a large CPA firm? Discuss.

e. Comment on standards overload, considering Statement of Financial Accounting Concepts No. 1, "Objectives of Financial Reporting by Business Enterprises." Particularly consider the following objective:

Financial reporting should provide information useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. The information should be comprehensible to those having a reasonable understanding of business and economic activities and willing to study the information with reasonable diligence.