New Reporting Standards for Private Companies Coming
In an effort to create financial reporting that is more relevant and cost effective for private companies, the American Institute of CPAs (AICPA) has released a proposed draft of a new framework that, when finalized, is expected to offer small and mid-sized businesses more streamlined and cost effective financial reporting options.
According to the AICPA, some 20 million privately owned entities not currently required to prepare U.S. generally accepted accounting principles (GAAP) will benefit from the framework.
The draft, Financial Reporting Framework for Small and Medium-Sized Entities, includes two key differences over existing standards, according to a Journal of Accountancy interview with AICPA Vice President of Professional Standards and Services Chuck Landes:
The new framework focuses on historical cost, because research has indicated that the end users of financial statements for smaller businesses are most interested in cash flow, which fair value accounting does not impact.
More options are being built into the framework that will allow smaller businesses to tailor presentation of financial statement data so it is both cost effective to produce and more relevant to the end user.
Comments on the draft are due Jan. 30, 2013, and the framework is expected to be completed in the second quarter of 2013, so stay tuned for more information as the framework enters its final stages.