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 reporting option which we believe will help Main Street businesses.
How Does It Work? The 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. 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 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.
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. We are happy to discuss this option with your stakeholders and to discuss whether the framework will provide a more efficient and effective reporting option for your company.
Source: AICPA FRF for SMEs Toolkit