New AICPA framework Unveiled

The American Institute of CPAs announced, in June, a new framework the will provide a new accounting option to help small- and medium-sized businesses provide financial reports for specific entities. These new options are not currently required by the US Generally Accepted Accounting Principles (GAAP), but they will help to streamline financial information reports for privately held, owner-managed businesses.

The new framework was developed by a group of CPA professionals with vast knowledge and understanding of the needs of private companies’ financial statements. While there has been some scrutiny over the new framework, it was designed to make it easier for small- and medium-sized businesses to produce accurate, reliable financial statements. These statements show the business’s profitability, cash availability, assets to cover expenses and concise disclosures. The framework makes it easier to the businesses to create reports for lenders, insurers, and other people who require financial statements.

To help create these reports, the framework uses a blend of traditional accounting and accrual income tax methods. By using the historical cost and target disclosure requirements, the report provides options for presenting the information to various entities. It reduces book-to-tax differences while expanding options for CPAs and other companies to provide consistent, cost-beneficial statements.

After a survey of 200 CPA firms, many of them were familiar with the new framework and half of them expected their clients would use the framework. With the option of the new framework, many companies will use it to help them have less complexity in their daily business. As the framework is used more, time will tell if it will be the best for the companies that use the new framework.