The American Institute of CPAs (AICPA) announced today that an exposure draft on its proposed Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs) is now available for comment.
More than twenty million privately owned small- and medium-sized entities in the United States that are not currently required to prepare US generally accepted accounting principles (GAAP)-based financial statements will soon have a new streamlined and cost effective financial reporting framework available to them.
The FRF for SMEs is another comprehensive basis of accounting (also known as a special purpose framework) which, when finalized, will offer small- and medium-sized enterprises a reliable, relevant, and simplified financial reporting solution that addresses marketplace demands. Comments are due by January 30, 2013.
"The AICPA has heard from privately held businesses, including the CPAs and bankers serving those companies, about their long overdue need for financial reporting relief," stated Barry C. Melancon, CPA, CGMA, AICPA president and CEO. "Stakeholders involved with private small- and medium-sized business entities' financial reporting have made it known that they are looking for an alternative to the current financial reporting systems outside of GAAP. Responding to the needs of Main Street businesses, the Institute's new framework will be available during the first half of 2013."
The Institute's FRF for SMEs will be a less complicated and less costly system of accounting for SMEs that do not need GAAP-based financial statements. The FRF for SMEs will be a cost-beneficial solution for owner-managers and others who need financial statements that are prepared in a consistent and reliable manner in accordance with a framework that has undergone public comment and professional scrutiny.
The accounting principles comprising the FRF for SMEs are intended to be the most appropriate for the preparation of SME financial statements based on the needs of the financial statement users and cost-benefit considerations. Accounting principles in the FRF for SMEs will be responsive to the well-documented issues and concerns stakeholders currently encounter when preparing financial statements for SMEs.
"The AICPA has developed a financial reporting framework for small- and medium-sized entities that will fill the gap in guidance that many companies need to allow them to prepare meaningful financial statements on a basis where GAAP is not required," commented David Morgan, chairman, AICPA FRF for SMEs Task Force, managing partner, Lattimore, Black, Morgan & Cain, Nashville, Tennessee. "For many small companies, this will save time and costs while also producing financial statements that are more relevant to business owners and lending institutions. I believe this new framework will allow CPAs to deliver a product to their privately held business clients that is more in line with their needs."
Source: November 1, 2012, AICPA