AICPA's Proposed FRF for SMEs-Comparative Financials and Policies Disclosures

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Comparative Statements

As with other reporting frameworks, financial statements may be prepared in a comparative format; however, they are not required by this framework. Comparative statements are ordinarily considered the most meaningful presentation. In some circumstances, such as a significant change in an entity’s chart of accounts, comparative statements may not be the most meaningful or practical.  Such changes ordinarily would not be a change in accounting principle but, if comparative statements are presented, prior periods’ information should be reclassified to conform to the current period.

Disclosure of Accounting Policies

Accounting policies are normally disclosed in the first note to the financial statements for all reporting frameworks.  Recurring policies and other information is included to enable readers of financial statements to understand the financial position and results of operations of a reporting entity. Accounting policies disclosures are outlined in various chapters of the proposed FRF for SMEs. General guidance for these disclosures in the first note is summarized below.

  • This basis of presentation should be described in the notes to financial statements, including a brief description of how this basis differs from U.S. GAAP. Following is an illustrative note patterned after the note in the proposed framework:

The accompanying financial statements have been prepared in accordance with the Financial Reporting Framework for Small- and Medium-Sized Entities issued by the American Institute of Certified Public Accountants. This framework differs from accounting principles generally accepted in the United States of America in that it generally does not utilize fair value accounting.

  • An operating cycle different than one year should be described.
  • Reclassifications of prior year information for comparative presentations should be disclosed.
  • Accounting policies significant to an entity’s operations should be described, along with management’s reasoning when deciding among alternative principles.

In 2014, Wiley & Sons will publish my book, Performing Audits, Reviews and Compilations for Entities Using the AICPA’s Financial Reporting Framework for Small and Medium-Size Entities. The contents of this book will contain references to, and illustrations from, Wiley & Sons’ Advantage Audit, an electronic documentation system for audits, reviews and compilations in numerous industries.  The book will contain guidance and illustrations for documentation on audits of small- and medium-size entities using this and other reporting frameworks.  To receive advance information on the progress of my book, you may sign up for my future newsletters at


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