A new Deloitte survey of more than 220 private company financial professionals indicates support for having separate accounting standards for private and public companies. And, with the International Accounting Standards Board's (IASB) just-released International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs), Deloitte expects more private companies to support separate accounting standards.

Private companies from various industries and sizes participated in the Deloitte survey, with small and mid-size firms (less than $1 billion in revenues) respondents representing approximately 77 percent of the total number of respondents. More than half (51 percent) of SME respondents indicated they believe there should be separate accounting standards for public and private companies. Smaller companies (less than $100 million in revenues) were more supportive of separate standards, with 55 percent believing there should be separate standards.

Despite the support for separate standards, interest potentially could swell further, with more focus on education around the IASB standards as well as perceived overall benefits of IFRS for private companies. Forty-three percent of SME respondents selected "no" or "don't know" when asked about awareness of the IASB project on IFRS for SMEs. Moreover, since U.S. private companies may use IFRS for financial reporting (subject, for example, to terms of loan agreements or other contractual requirements), IFRS for SMEs may offer a viable option and be used instead of U.S. Generally Accepted Accounting Principles (GAAP).

Approximately one-third (31 percent) of respondents from companies with revenues from $500 million to $1 billion said they did not know when they would consider adopting IFRS for SMEs. Now that IFRS for SMEs is a reality, this number will grow.

"Some private companies are still not aware of the IASB's efforts in addressing the needs of private companies," said D.J. Gannon, partner, Deloitte & Touche LLP and leader of Deloitte's IFRS Center of Excellence. "Private companies that adopt IFRS for SMEs stand to benefit from simplified reporting requirements, greater comparability of performance for investors, lenders and other financial statement users and a reduced burden of financial statement preparation."

Top areas of U.S. GAAP that were not considered relevant to decision making among SME respondents include: share-based payments (this may be because private companies typically don't grant shares), FASB Interpretation 46R - Consolidations and fair value measurement. Those same respondents viewed fair value measurement, accounting for income taxes and FIN 46R - Consolidations as the top three areas of U.S. GAAP in need of simplification. Accounting for income taxes was an issue selected by respondents perhaps because of the complexity of U.S. requirements, and in particular the accounting for uncertain tax provisions. The IASB has addressed many of these topical issues in developing IFRS for SMEs, adapting them from full IFRS.

"Given today's economic and financial environment, we're seeing a fundamental shift in accounting and financial reporting toward global standards," noted Gannon. "This shift is not limited to public companies. Private companies, in particular mid-size ones, may want to reevaluate their approach to financial reporting and carefully weigh their financial reporting alternatives."