Nov 05, 2012

Finally a Cliff Notes Version of GAAP?

By Allison M. Henry, CPA, CGMA, PICPA Vice President - Professional & Technical Standards
Wow! As promised in May 2012, the AICPA actually released its version of private company GAAP on Nov. 1, a special purpose framework, which it is calling the Financial Reporting Framework for SMEs. While it is a lot to print, at 252 pages, consider yourself lucky. The unruly FASB Codification is rumored to be somewhere around 10,000 pages. The new proposal creates a separate reporting framework for small- and medium-sized entities that emphasizes reliability (historical cost principles) and matching.

Sound familiar? These are the fundamental principles many of us were taught in accounting classes. They are as accepted as baseball and apple pie.

Other exciting provisions include a shortcut method for accounting for goodwill, no variable interest entity consolidation, reduced disclosure requirements, applicability across multiple industries and types of organizations, and reduced adjustments to reconcile book-to-tax income. The explanatory memorandum includes a statement that the framework is intended to be a “static framework that will not undergo frequent changes.”

Can you dare to dream?

So, is this finally the answer for private companies and their CPAs who are tired of implementing new standards that do not add value to their businesses or provide useful information to lenders? Or will this new option add a layer of complexity to your accounting practice? PICPA’s A&A Committee is working on a response to the exposure document, and is interested in hearing from you.

Listen in as Bob Durak, Director, Private Company Financial Reporting, discusses the Financial Reporting Framework for Small- and Medium-Sized Entities.

The A&A Committee will be reviewing the exposure document at its upcoming meeting on Nov 16. Responses are due to the AICPA by Jan. 31, 2013.

The AICPA has developed a resource page for the new framework, which includes a background on the framework, articles, FAQs, a video, and other resources.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.