For many private company executives, the time it takes to put together their financial statements in accordance with U.S. accounting principles can be valuable time lost on focusing on critical business activities.

Thanks to the International Accounting Standards Board, the United States accepted last summer new international accounting rules for private companies, called International Financial Reporting Standards for Small to Medium-Sized Entities or IFRS for SMEs. IFRS for SMEs is a simplified version to the fuller set of IFRS accounting rules that the international board created.

Even though these new rules were created internationally, the American Institute of Certified Public Accountants endorsed IFRS for SMEs, which is just 230 pages instead of the existing guidelines that can add up to dozens of large phonebooks. The intended users for IFRS for SMEs are companies that are small to medium-sized non-publicly traded that typically publish general purpose financial statements.

The main reason the American Institute of Certified Public Accountants endorsed IFRS for SMEs was because it saw the need for easier accounting guidelines. For nearly 35 years, the United States has looked at the need for simplified guidelines for private companies which have different financial reporting needs than that of publicly traded companies.

Acceptance of the international standards has already encouraged the Financial Accounting Standards Board, the U.S. agency that sets accounting principles, to develop its own rules for private companies.

The new international rules have been 30 years in the making originally promoted by United Kingdom which was seeking comparability amongst the European exchanges and was therefore promoting unified global accounting guidelines. It wasn’t until 2001 when the international accounting standards board was tasked with developing the full IFRS rules.

Just four years later, the European Union began requiring its member countries publicly traded companies to use IFRS and since then 113 countries and over 12,000 public companies have adopted the IFRS rules.

Private and small companies may ask why they should change after all these years of using the U.S. accounting principles. The beauty of IFRS for SMEs is that it’s written in clear, easily translatable language which reduces the burden on company financial executives or certified public accountants trying to apply it.

With the globalization of many companies using these new rules means a unified accounting system across the continents. For example, a U.S. company looking to invest in or buy a foreign company can now easily compare apples to apples by using IFRS for SMEs.

Traditionally, in-house financial executives or outsourced accounting firms had to adhere to many overly complex GAAP rules and regulations that often didn’t apply or just didn’t make sense for a private business. Not only is the application of IFRS for SMEs more simplified, it is very different from U.S. GAAP as it is far more principals based rather rules based.

Adopting IFRS for SMEs may also provide a cost savings for a private company. Applying these new rules may now take a certified public accountant less time in auditing and a company less time preparing the annual financial statements.

While IFRS for SMEs is a huge benefit for private companies, the biggest challenge is awareness in the United States of these new rules. Considered a U.S. GAAP equivalent IFRS for SMEs is available for use but only if company executives, lenders, certified public accountants, and other relevant players take advantage of the opportunity.

Currently, the American Institute for Certified Accountants is providing training sessions for its members to get up to speed. To learn more about IFRS for SMEs, visit www.aicpa.org.