Get Ready for AICPA's Financial Reporting Framework for SMEs

Larry Perry
CPA Firm Support Services, LLC
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On November 1, 2012, the AICPA issued an Exposure Draft entitled Proposed Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs).  Following are some of the features of this framework:

1.The FRF for SMEs includes a combination of accrual and income tax accounting methods.

2. It is a less complicated and less costly framework when U.S. GAAP based financial statements are not required.

3. It is not proposed as an authoritative framework and its use is not required.

4. Management of SMEs would have the option of choosing the FRF for SMEs as its applicable reporting framework.

5. Key features that make the framework highly useful in satisfying the needs of financial statement users include:

  • It is designed based reliable and comprehensive accounting principles.
  • The primary measurement basis is historical cost.
  • Relevant information is included in footnote disclosure which are fewer than under U.S. GAAP.
  • Accounting methods are traditional and understandable by most users of financial statements.
  • Fewer reconciling items are necessary to reconcile book income with tax income.
  • The framework is based on principles applicable to most industries for incorporated and unincorporated entities.
  • It addresses only the typical financial statement matters encountered by SMEs.

The FRF for SMEs will likely not change frequently and will be a stable framework which will be available with implementation guidance which will include illustrative financial statements, a disclosure checklist and application guidance and examples.  The comment period for the Exposure Draft ended on January 30, 2013 and its issuance is expected this year.

I am currently authoring a book to be published by Wiley & Sons in 2014 entitled Performing Audits, Reviews and Compilations for Entities Using FRF for SMEs.  The book will incorporate practice aids from Wiley's Advantage Audit, engagement documentation for small and medium size audits.  I will begin to discuss a simplified approach to small and medium sized audits, and sections of the FRF for SMEs, in my future blogs.  To be notified of the release date of my book, please register for my newsletter on my website,

About Larry Perry

Larry Perry

Larry Perry, CPA, is managing member of CPA Firm Support Services LLC.


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