Jun 11

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AICPA issues Financial Reporting Framework for Small and Medium Sized Entities

The AICPA has issued a new Financial Reporting Framework (“FFR”) for Small and Medium Sized Entities (“SMEs).  These smaller enterprises are often not required to prepare financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”).  Yet all financial statements are presented in accordance with some financial reporting framework, however defined.  This new FFR provides an option for private companies that combines traditional methods of accounting with some accrual income tax methods to provide efficient, meaningful financial statements without unnecessary complexity or cost.  Specifically, the FRF for SMEs

  • “Uses  historical cost – steering away from complicated fair value measurements
  • Offers a degree of optionality – businesses can tailor the presentation of statements to their users
  • Includes targeted disclosure requirements
  • Reduces book-to-tax differences
  • Produces reliable financial statements that can be compiled, reviewed or audited”

Such reporting is intended to reflect what a business owns, owes and cash flows. Interested third parties, such as lenders, insurers and other financial statement users should be able to clearly ascertain key measures of a business and its creditworthiness, including:

  • Business profitability
  • Cash available
  • Assets to cover expenses
  • Concise disclosures

This effort by the AICPA offers a standard of reporting solution for many businesses that should meet their needs.

About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2013/06/aicpa-issues-financial-reporting-framework-for-small-and-medium-sized-entities/

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