GAAP for Small and Medium Businesses

 

The AICPA on Monday launched the Financial Reporting Framework for Small- and Medium-Sized Entities, a new option for small business financial reporting.
Designed to help smaller, privately held, owner-managed businesses, the FRF for SMEs accounting option is intended for businesses that do not need to prepare GAAP-compliant financial statements. The framework was built to help owner-managed businesses provide relevant, streamlined reporting for users of their financial statements.
The framework complements the efforts of the Financial Accounting Foundation (FAF) to create exceptions and modifications to GAAP through the recently formed Private Company Council (PCC). The AICPA said in a news release that it fully supports the efforts of FAF, FASB and the PCC to address the private company environment through changes in GAAP.

The FRF for SMEs is meant to help small businesses prepare financial statements that clearly and concisely report what a business owns, what it owes, and its cash flow. The framework focuses on delivering financial statements that are robust but relevant and avoid  unnecessary complexity and cost.
Key measures of a business and its creditworthiness that will be reported in financial statements prepared under the framework will include profitability, cash available, and assets to cover expenses. The FRF for SMEs uses historical cost as a primary measurement basis, steering away from potentially expensive fair value measurements.