SEC's advisory committee on improvements to financial reporting (CIFR), which had its second open meeting on Friday, suggested standard-setters could reduce complexity by swinging away from industry-specific rules in favour of activity-specific guidance to cut back on accounting literature.

The subcommittee noticed the existing system had multiple ways to account for the same economic transaction and suggested the Financial Accounting Standards Board (FASB) analyse all of its industry-specific rules and decide which ones should be kept.

Robert Herz, FASB chairman, an observer of the CIFR meetings, said the concept would be in line with the convergence project between his board and the International Accounting Standards Board (IASB). Fewer of IASB's standards were aimed at specific industries, he said.

Robert Pozen, CIFR chairman, said it was ‘quite a dramatic proposal’ and the subcommittee appeared to favour the suggestion that it was ‘more important what an activity is than what the entity is’, but reducing industry-specific rules would likely take a long time. CIFR will make final recommendations to SEC next August.

Further reading:

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Protest against scrapping ‘bottom line’ figures