New Financial Reporting Framework

FRF-SMEs_logo

On June 10th 2013, the AICPA released the Financial Reporting Framework for Small and Medium-Sized Entities (aka FRF for SMEs).  The Framework, which is effective immediately, can be found here [PDF]: http://bit.ly/1a8u6Xg

The use of FRF for SMEs is optional and will benefit companies by allowing a simplified, more cost-efficient framework on which to prepare financial statements.   It is not considered GAAP (generally accepted accounting principles).  However, in concept, it is akin to “GAAP-lite” and provides another comprehensive basis of accounting similar to the cash or tax bases.   It is available for use by owner-managed entities and is not recommended for not-for-profit entities.

The framework is based on accrual accounting concepts, but requires less fair value accounting, simplifies many of the complexities introduced into GAAP in recent years and will eliminate items such as accounting for variable interest entities, derivatives, stock compensation, and comprehensive income.  It also simplifies lease accounting and revenue recognition, allows amortization of intangibles and makes deferred taxes optional.

Users of FRF for SMEs will need education to get up to speed.  KatzAbosch will be hosting an educational seminar in September, as well as private roundtable sessions (please contact Graham Dodge to schedule a roundtable session: gdodge@katzabosch.com, 410-307-6388).  Materials such as the aforementioned framework guide and videos are quickly becoming available via AICPA’s website here:  http://bit.ly/WDRceO

We are hopeful that most financial statement users (such as banks) will accept this framework as a welcome change that will make preparing financial statements less time consuming and complex.

For any questions regarding FRF for SMEs, please contact Claudia Wolter, CPA, CCIFP, CCA, and co-chair of KatzAbosch’s Audit & Accounting Services Group at 410-828-CPAs or cwolter@katzabosch.com.

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