Financial Reporting Format for Small and Medium Sized Entities
The AICPA has issued an FAQ on the Financial Reporting Framework (“FRF”) for Small and Medium Sized Entities (“SMEs”) that contains a relatively short design phase. The FAQ states the following facts:
- The FRF is being developed by a working group of the AICPA that has experience in financial reporting for small and medium private companies
- The FRF for SMEs will be drafted in 2012 and issued in the first half of 2013
- The FRF for SMEs will be a standalone framework and will draw on traditional accounting methods
- The AICPA does not have the authority to require the use of the FRF for SMEs for a reporting entity, therefore there is no effective date
- As the project progresses, more information will be made available
What does this mean to you?
The FRF for SMEs is meant to be a cost beneficial and stream-lined reporting option where US GAAP financial statements are not required.
Often lending relationships are not based on financial statement reliance alone. In those situations, FRF for SMEs can be a viable option. We will continue to keep you apprised of the content of the FRF for SMEs as the project progresses. However, we suggest that you discuss the contents of your lending agreement, including financial covenant calculations and reporting requirements, with your financial advisors and lenders. You may be able to build flexibility into your lending documents to enable you to use the FRF for SMEs and gain all of the advantages.