Convincing Third Party Users
Many third party users of an SME’s financial statements require GAAP basis financial statements. For example, credit agreements with lending institutions often refer to the need to have financial statements prepared in accordance with GAAP, even though they may not be as useful in some cases as statements prepared under another principles-based framework, such as the FRF.
The FRF for SMEs will not have the official or authoritative status of GAAP. However, it can be much more useful and practical for all parties involved. There is much more room for professional judgment.
Keep in mind that this is still just an Exposure Draft, and is still open for comment and public scrutiny until January 30, 2013. A final document is expected in late spring of 2013. Because this proposed framework will provide a substantial cost benefit to SMEs, we endorse it. Companies should be talking with their lending institutions now in order the gain their approval when the framework does become final. Having a framework tailored to smaller enterprises will help to ease their financial burden and the use of other resources in financial reporting, and will provide more meaningful financial information for all parties involved.
Have questions about this new AICPA exposure draft? Contact our Cleveland, Akron and Tampa Accounting & Auditing team at 440-449-6800.