On June 10, 2013, the American Institute of Certified Public Accountants (AICPA) issued "Financial Reporting Framework for Small and Medium-Sized Entities," which provides qualifying for-profit, privately-held businesses a new alternative framework for financial statements.    

This new framework is not based on accounting principles generally accepted in the United States of America (GAAP). It is, however, a "special purpose framework," which is commonly referred to as "other comprehensive bases of accounting" and is similar to cash basis, tax basis, regulatory basis or other non-GAAP bases of accounting that financial institutions receive from their customers. The AICPA notes that "the framework is a new accounting option for preparing streamlined, relevant financial statements for privately-held owner-managed businesses that are not required to use GAAP." 

Eligibility Requirements

The AICPA did not come out and define who could specifically utilize this new framework other than say that the framework can be used by smaller to medium-sized for-profit private entities that need reliable financial statements when GAAP financial statements are not required. The framework uses historical cost and avoids complicated fair value measurements. Along those lines, the framework does not require complicated accounting for stock options, derivatives or hedging activities. The AICPA believes this framework will be relevant to financial institution lenders because it will include comprehensive accounting principles that are relevant and simplified to prepare.

Applicable to Your Customers

This new non-GAAP reporting option is currently available to be utilized by small and medium for-profit private entities. This framework is not intended to be used by financial institutions for their own financial reporting. We encourage all financial institutions to review the new framework and consider its applicability to customers. The framework is available here on the AICPA website.  

If you have any questions, please contact your local Eide Bailly professional.