Release of SSARS No. 22 Concludes Clarity Projectby
A newly issued Statement on Standards for Accounting and Review Services (SSARS) provides performance and reporting requirements and application guidance for accountants engaged to perform a compilation of pro forma financial information.
The new standard, SSARS No. 22, was issued on Sept. 23 after the Accounting and Review Services Committee (ARSC) of the American Institute of CPAs (AICPA) completed its project to clarify and revise all existing compilation and review standards in the Codification of Statements on Standards for Accounting and Review Services (AR sections of the AICPA Professional Standards).
The ARSC approved the clarity project in May 2010 to make the standards easier to read, understand, and apply.
SSARS No. 22, Compilation of Pro Forma Financial Information, clarifies and supersedes SSARS No. 14 of the same title, as amended (AICPA, Professional Standards, AR Section 120), and takes effect for compilation reports on pro forma financial information dated on or after May 1, 2017.
“The objective of the accountant in a compilation of pro forma financial information is to apply accounting and financial reporting expertise to assist management in the presentation of pro forma financial information and report in accordance with this section without undertaking to obtain or provide any assurance on the pro forma financial information,” the new standard states.
When performing a compilation of pro forma financial information, the accountant should take the following steps:
1. Comply with the requirements set forth in paragraphs .13-.16 of AR-C Section 80, Compilation Engagements, adapted as necessary.
2. Obtain an understanding of the underlying transaction or event.
3. Ascertain that management has fulfilled its agreement pursuant to paragraph 7b of this section to include the following in any document that contains the pro forma financial information:
- The complete financial statements of the entity for the most recent year (or for the preceding year if financial statements for the most recent year are not yet available) or such financial statements are readily available.
- If pro forma financial information is presented for an interim period, either historical interim financial information for that period (which may be in condensed form) or that such interim information is readily available.
- In the case of a business combination, the relevant financial information for the significant constituent parts of the combined entity.
4. Ascertain that management has fulfilled its agreement pursuant to paragraph 7c of this section to ensure that the financial statements of the entity (or, in the case of a business combination, of each significant constituent part of the combined entity) on which the pro forma financial information is based have been subjected to a compilation, review, or an audit engagement.
5. Ascertain that management has fulfilled its agreement pursuant to paragraph 7d of this section to include the accountant’s compilation or review report or the auditor’s report on the financial statements (or have readily available) in any document containing the pro forma financial information.