AICPA Introduces New Standard for Financial Statements

AICPA FRFEarlier this month the American Institute of Certified Public Accounts (AICPA) announced what they are describing as a simpler way to create financial statements. This is a new special purpose framework that they are proposing called the Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SME’s). This framework is intended to give companies a better way to describe company finances to interested parties such as banks or potential investors.

FRF for SMEs has been developed by the staff of the AICPA for small and medium sized entities and is not based upon Generally Accepted Accounting Principles (GAAP). The new framework is based upon a blend of traditional accounting principles and accrual income tax methods of accounting. It has been designed to provide management with a degree of flexibility that is needed to better meet the needs of the end user of their financial statements.

Here is the link to the full 200+ page document:

http://www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/PCFR/DownloadableDocuments/FRF-SME/FRF-SMEs-Framework.PDF

We have found the documentation provided by the AICPA presents the subject matter in an easy to read and clear format. Additionally, it provides an excellent review of the principals and concepts of accounting for the depreciation of capital assets. While almost 50 percent of the documentation touches on some aspect of depreciation, the primary chapters relating to the accounting for depreciation can be found in chapters 13 – 15 and 25 – 31. We have also found that, from a purely depreciation point of view, there is virtually nothing new that will change how any SMEs account for and report depreciation.

So the FRF for SME’s has been developed as an alternative to GAAP that provides consistent and simpler financial statements for small and medium sized entities. If your company meets the criteria of this framework then it is well worth exploring as a reporting alternative. It potentially saves your accounting department valuable time by following a new set of reporting standards endorsed by the AICPA.

What do you think? Let us know in the comments section below.

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