New Financial Reporting Framework for Small Business—What’s the Fuss?

Session Submission Type: Panel

Abstract

On June 10, 2013, the American Institute of Certified Public Accountants (AICPA) released the “Financial Reporting Framework for Small- and Medium-Sized Entities” (FRF-SMEs), a document aimed at providing an alternative to U.S. GAAP for small and medium sized entities (SME). With the help of working CPA professionals, an AICPA task force crafted the framework in response to the demand by smaller non-publicly-traded companies to have an alternative to U.S. GAAP that is less complex and provides financial statements that are more in line with their user base. The framework presents concise reporting requirements that are consistent with more traditional and less complex accounting methods and applications. Specifically, the framework uses historical cost instead of complex fair value measurements, provides flexibility in the presentation of the financial statements, reduces book-to-tax differences, and includes disclosure requirements that are targeted to a company’s specific user base. At the same time, the framework provides for the creation of reliable financial statements that can be compiled, reviewed and audited. Recent estimates put the number of SMEs in the United States around 20 million; therefore the potential impact of this document is widespread.

The objectives of this panel are to 1) inform accounting educators that the framework exists, 2) provide valuable background information regarding the framework’s creation, progress, and contents, 3) discuss the need for this framework in addition to the IASB SME framework, 4) allow a discussion about the impact this framework may have on the usefulness of financial statements prepared using the FRF-SMEs, 5) discuss the implications the framework will have on the accounting profession, 6) consider any changes that will be required in educating future accounting professionals, and 7) create a discussion about the future of the FRF-SMEs and SME accounting.

Sub Track

• Panel Sessions

Moderator

• Sheldon Ray Smith, Utah Valley University

Panelists

• Robert Durak, AICPA

• Jeffrey Sparks, RubinBrown LLP

• Kevin R. Smith, Utah Valley University