July 30, 2013
A New Financial Reporting Option that Helps Small Companies
Many privately held businesses in the United States do not need GAAP-based financial statements and may currently be using a special purpose framework, such as the income tax or cash bases of accounting, for their financial reporting. However, Main Street businesses and users of their financial information looking for comprehensive and consistent financial statements may want to explore the Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEsTM ) accounting option. The American Institute of CPAs has created this financial reporting option that provides useful, relevant information to owners of private companies and other stakeholders in a consistent, simplified, cost-effective way. Our firm is pleased to provide this new reporting option which we believe will help Main Street businesses.
How Does It Work?
The newly released FRF for SMEs is a great choice for owner-managers who need financial statements that reliably report what they own, what they owe and cash flows. The FRF for SMEs is simple yet grounded on solid principles; consistent yet flexible; and is not unnecessarily complex yet provides financial statement users with the information they truly need.
Here are some highlights of the FRF for SMEs
· The FRF for SMEs was designed to deliver financial statements that provide useful, relevant information in a consistent, simplified way.
· While many small businesses today use cash or tax-basis special purpose frameworks as an alternative to GAAP (and can continue to do so), the FRF for SMEs is an option providing comprehensive information that closely aligns with how businesses are run.
· FRF for SMEs has been subject to professional scrutiny and input from the public.
· FRF for SMEs is made up of traditional accounting principles blended with accrual income tax accounting methods, offering a reliable framework that can be consistently applied.
· FRF for SMEs will be a stable framework, revised only as needed to incorporate significant developments in financial reporting.
· As a result of all these factors, it will be easier for small and medium sized companies - and the users of their financial statements - to familiarize themselves with the FRF for SMEs.
The CPA profession is working to raise awareness of the new framework among banks and other lenders, sureties, venture capitalists and other financial statement users, to ensure they are educated on the value and benefits of the FRF for SMEs. Our firm has many informational materials on the FRF for SMEs available for our clients and colleagues in the business community, including a flyer, PowerPoint presentation, newsletter article and video. We are happy to share these resources with your stakeholders and to answer any questions regarding the framework.
A Commitment to Main Street Businesses
CPAs have created the FRF for SMEs because we are committed to meeting the needs of Main Street businesses. As your trusted advisors, we strive to anticipate and address your business needs. We know that small company owners rely on CPAs to deliver the information and advice they require to make critical decisions and we believe the FRF for SMEs can help. Please contact us for more information about FRF for SMEs and to discuss how it may work in your business, review sample financial statements and answer questions you may have.
If you have any questions on how this may affect you or your business please feel free to contact us at 616-776-6457.
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