Private companies have found the increasing complexity of generally accepted accounting principles (GAAP) to be particularly burdensome. Even more complex are the proposed standards currently under consideration.
The demand is growing for simpler reporting that maintains the integrity of traditional accounting practices without the high cost-benefit ratio that GAAP imposes for small- and medium-sized entities (SMEs). With this in mind, the AICPA established a task force to produce the Financial Reporting Framework for Small- and Medium-sized Entities (FRF for SMEs) as a simpler alternative.
In its exposure draft, the task force provides a succinct description of the relevance of this framework. It states, “The FRF for SMEs is a cost-beneficial solution for management, owners, and others who require financial statements that are prepared in a consistent and reliable manner in accordance with a framework that has undergone public comment and professional scrutiny.”
FRF for SMEs was released as an exposure draft from November 1, 2012 through January 30, 2013. The AICPA plans to release the framework once the comments have been considered – possibly in the coming months. Many of those submitting comment letters agree with a simpler, less burdensome framework but still have various concerns. The exposure draft and comment letters are available on the AICPA’s website.
At present, the most relevant question remains: will banks and sureties accept financial statements prepared on the FRF for SMEs? It will be important in the coming months for SMEs to discuss this option with the users of their financial statements and their accounting professionals. If you have any questions regarding this topic, please contact a member of LaPorte’s Audit and Assurance Services Group.