AICPA, NASBA to collaborate on decision-making tool for small business accounting framework


The AICPA plans to develop a decision-making tool to assist entities with determining whether the new small business accounting framework suits their needs.

The National Association of State Boards of Accountancy (NASBA) will have input in the development of the tool, according to a joint statement released by the AICPA and NASBA on Monday.

The tool will be designed to help ensure that entities that use a non-GAAP solution do so in a suitable and transparent manner, according to the joint statement.

Illustrative financial statements and disclosures also will be developed to distinguish between financial statements based on the new framework and GAAP-prepared statements. The goal is to make sure the new framework is not confused with GAAP.

The AICPA has developed the Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs) for use by private, owner-managed businesses when GAAP financial statements are not required. The framework was designed to provide financial statement users with useful, relevant information in a simplified, consistent, cost-effective way.

NASBA has opposed the AICPA’s efforts to develop and implement the framework, but the joint statement signals a willingness to collaborate with the AICPA to help businesses decide when it’s appropriate to use the new framework. In June, NASBA issued a statement saying that as a result of the progress by the Private Company Council (PCC) in developing standards unique to private companies within GAAP, private companies should not consider adopting the FRF for SMEs.

But in Monday’s joint statement, NASBA joined the AICPA in saying that as the PCC works to fulfill its mission to modify GAAP for private companies, the AICPA has developed a non-GAAP framework that is simple to apply and cost beneficial for private, owner-managed businesses to apply.

“We believe that preparers and users of private company financial statements should responsibly assess the accounting approach to meet their current and future needs depending on individual company facts and circumstances,” the joint statement said.

The statement also said the PCC has made excellent progress to date, and that the AICPA and NASBA are committed to the PCC’s eventual success in developing a GAAP-based financial reporting model for all private companies. “CPAs who report on financial statements prepared in accordance with GAAP, or a special purpose framework, such as the FRF for SMEs, will be held to the highest standards of professional practice by U.S. Boards of Accountancy,” the statement read.

Market awareness

A recent survey by Thomson Reuters showed that there appears to be a market for the FRF for SMEs as the AICPA continues its efforts to boost awareness of the framework. Almost half (46%) of accounting professionals participating in a survey in May said they are aware of the framework.

More than half (56%) of respondents in the survey of 213 accounting firms said they expect that one or more of their clients will consider using the FRF for SMEs. Acceptance by lenders was thought to be the biggest challenge for the framework, with 40% of those familiar with the FRF for SMEs identifying lender acceptance as the biggest obstacle.

Robin Barnett, a CPA with Kittell Branagan & Sargent in Vermont, said in the survey report that clients and financial statement users may be unaware of the FRF for SMEs, but that it could be a great fit for some of the firm’s client base.

“There are millions of small businesses in the U.S., so I have to believe there is a demand for it,” Barnett said.

Ken Tysiac ( ) is a JofA senior editor.


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