AICPA Framework for Small Business

On June 10, the American Institute of CPAs announced the new framework to help small businesses with their financial reporting. The new framework is to provide a new accounting option for small- and medium-size entities. While these new accounting option are not required as US Generally Accepted Accounting Principles (GAAP) they will help to streamline relevant financial information for statements for privately held, owner-managed businesses..

The purpose of the new framework for small- and medium-size business is to help prepare financial statements clearly and concisely. The report shows the business’s profitability, cash available, assets to cover expenses and concise disclosures. The framework provides a report that makes it easy for lenders, insurers and other people that use the financial statement.

With a blend of traditional accounting and accrual income tax methods, the framework uses historical cost, target disclosure requirements, options to presenting the information, and reduces book-to-tax differences. This new framework expands options for CPAs and other companies for providing consistent, cost-beneficial financial statements.

The framework was developed by a group of CPA professionals that are experts in understanding the needs of private company financial statements. There has also been public and professional scrutiny to improve the new framework for any users.

Almost half (46%) of the 200 CPA firms surveyed are familiar with the new framework and half of them expect their client to use the new framework. There are a few critics to the new framework, but the opinion remains that the framework will help provide less complexity for the daily business.