AICPA unveils framework designed for streamlined reporting


The AICPA on Monday launched the Financial Reporting Framework for Small- and Medium-Sized Entities (FRF for SMEs), 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.

AICPA President and CEO Barry Melancon, CPA, CGMA, said in a news release that the PCC and the new FRF for SMEs give private business owners two additional options for their financial reporting.

“Where GAAP is required, the Private Company Council is working to expand GAAP financial reporting options for private business,” Melancon said. “Some private businesses, typically smaller or those with less complex business models, will see the AICPA’s framework as an effective alternative to other existing financial reporting options. Larger, more sophisticated private businesses may, in the future, choose to use GAAP for private companies, and still others with unique user needs, regulation or intentions to go public might use GAAP for public companies.”

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.

The framework also provides a degree of optionality with the intent of allowing small businesses to appropriately communicate their situations to financial statement users, with the needs of those users in mind. In addition, the framework:

  • Includes targeted disclosure requirements.
  • Reduces book-to-tax differences.
  • Produces reliable financial statements that can be compiled, reviewed or audited.

The framework, which is about 200 pages, was produced by AICPA staff and a task force of experts. An exposure draft was issued Nov. 1, and comments of stakeholders were reviewed before the framework was prepared for its final release. More information is available on an AICPA webpage devoted to the framework.

“I think this new accounting framework is exactly what business owners, CPAs and community bankers have been looking for as a viable and reliable alternative to the options already available,” Rich Caturano, chairman of the AICPA board of directors, said in a news release. “The FRF for SMEs expands the accounting options for CPAs and private companies, while providing comprehensive, consistent and cost-beneficial financial statements.”

Ken Tysiac ( ) is a JofA senior editor.

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