On November 1, 2012, the American Institute of Certified Public Accountants (AICPA) issued an exposure draft of its proposed Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs). The FRF for SMEs is intended to provide a financial reporting alternative for private companies not required to prepare US GAAP financial statements. It is a self-contained, special purpose framework that uses historical cost as its primary measurement basis. The AICPA requests that preparers, auditors, and users of the financial statements of privately owned SMEs submit comments on the proposed framework by January 30, 2013. This In brief article highlights the key features of the proposed framework and what's next.
On November 1, 2012, the American Institute of Certified Public Accountants (AICPA) issued an exposure draft of its proposed Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs). The exposure draft also describes the circumstances leading to the creation of the framework. Refer to the AICPA website for more information.
The AICPA is seeking comments on the proposed framework from preparers, auditors, and users of the financial statements of privately owned SMEs.
The FRF for SMEs is intended to provide a financial reporting alternative for private companies not required to prepare US GAAP financial statements.
What are the key features of the framework?
The FRF for SMEs is a self-contained, special purpose framework. It is not US GAAP. The framework uses historical cost as its primary measurement basis.
The framework can be used across industries by incorporated and unincorporated entities. It does not contain industry-specific guidance and only attempts to address matters typically encountered by SMEs. Additionally, the FRF for SMEs has fewer required disclosures than US GAAP and it attempts to reduce the adjustments needed to reconcile tax return income with book income.
Implementation guidance in the form of examples, illustrative financial statements, a disclosure checklist, and similar tools will be provided by the AICPA in a companion document when the final framework is issued.
Will the framework be authoritative?
The framework is not proposed as an authoritative document, and the AICPA has no authority to require the use of the FRF for SMEs by any entity. Accordingly, there will be no effective date and management may elect when to begin using it once released.
The framework is designed for privately owned, for-profit smaller enterprises that are not required to prepare US GAAP financial statements.
Stakeholders should provide input on the document by January 30, 2013. The AICPA intends to release the final framework in the first half of 2013.
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact William Schramm (1-973-236-4586) or Dieter Wulff (1-973-236-4856) in the National Professional Services Group.
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