Nashville, Tenn. and New York (July 15, 2013)
– The National Association of State Boards of Accountancy
(NASBA) and the American Institute of CPAs
(AICPA) have issued the following joint statement:
“The AICPA and NASBA have a shared belief that current Generally Accepted Accounting
Principles (GAAP) may not always meet the needs of small private businesses and the users of their financial statements.
The Private Company Council (PCC), which was established as a result of the ‘Blue-Ribbon’ Panel on Standard Setting for Private Companies created by NASBA, the AICPA and the Financial Accounting Foundation, is currently developing an authoritative GAAP solution for private companies that we strongly support. The PCC has made excellent progress to date and both NASBA and the AICPA are committed to the PCC’s eventual success in developing a GAAP-based financial reporting model for all private companies.
As the PCC works to fulfill its mission to modify GAAP for private companies, the AICPA has developed the Financial Reporting Framework for Small- and Medium-Sized Entities
(FRF for SMEs) to provide private, owner-managed Main Street businesses a non-GAAP accounting framework that is simple to apply and cost beneficial. 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 AICPA and NASBA are committed to engaging in an effort to ensure that the FRF for SMEs, as a non-authoritative framework, is not confused with GAAP and that entities that utilize GAAP or a non-GAAP solution do so in a suitable and transparent manner. To that end, the AICPA, with NASBA input, will develop a decision-making tool to assist entities with determining whether use of the FRF for SMEs is suitable or not. Additionally, illustrative financial statements and disclosures will be developed to distinguish FRF for SMEs-based financial statements from GAAP-prepared statements.
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.”