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3/26/2014 www.cpafirmsupport.com
Financial Reporting Framework for Small- and Medium-Sized Entities Series: Part 1--Statement of Financial Position
By Larry L. Perry, CPA
CPA Firm Support Services, LLC
3/26/2014 www.cpafirmsupport.com
Learning Objectives
■ To learn the presentation concepts for the statement of financial position under the FRF for SMEs.
■ To understand the basic principles in the FRF for SMEs for presentations and disclosure of current assets and liabilities.
■ To learn alternative presentations of the statement of financial position.
3/26/2014 www.cpafirmsupport.com
A Non-Authoritative, Special-Purpose Framework
■ A combination of traditional accounting methods from special purpose frameworks such as the cash basis and the income tax basis.
■ A historical cost basis with some modifications for market values.
■ Specific, simplified footnote disclosures.■ Uncomplicated, consistent and principles-based
accounting.■ A consolidation model that excludes variable interest
entities.■ Management and the users of financial statements
decide if it fairly presents an entity’s financial position and results of operations.
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Basic Financial Statement Titles
■ For the FRF for SMEs, other common financial statement titles are:■ Statement of Assets, Liabilities and Equity■ Statement of Revenues and Expenses■ Statement of Cash Flows■ Notes to Financial Statements
■ Other descriptive titles may also be used.
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Presentation of Statement of Financial Position■ Alternative descriptive titles of the statement may be
used (avoid conflicts with U.S. GAAP).■ Basis of preparation (FRF for SMEs) should be
clearly disclosed.■ Comparative statements are considered most
meaningful but not required (single period presentation may be most cost-beneficial in first period).
■ A classified statement should be used.■ Reference to an independent accountant’s report and
notes to financial statement is required.
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Current Assets Accounting Issues
■ Cash and cash equivalents■ Accounts and notes receivable■ Inventories■ Prepaid expenses■ Deferred income tax assets■ Refundable income taxes■ Costs and estimated earnings in excess of
billings on uncompleted contracts
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Current Liabilities Accounting Issues
■ Current portion of LTD and capital lease obligations■ Short term loans and notes payable■ Trade accounts payable■ Accrued expenses■ Current income taxes payable■ Deferred income taxes liabilities (current portion)■ Deferred revenues (current portion)■ Billings in excess of costs and estimated earnings on
uncompleted contracts
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Other Accounting Issues
■ Financial assets and liabilities are recognized at the time of a transaction or contract.
■ Derivatives arrangements are disclosed and recognized upon settlement.
■ Assets and liabilities may be offset when legal right exists.
■ Transfers of financial assets are de-recognized when control ceases; liabilities when payment is made or satisfied otherwise.
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Disclosures for Financial Assets and Liabilities■ Carrying amounts should be disclosed separately.■ Amounts due to or from related parties should be
disclosed separately.■ Long-term receivables and payables due beyond one
year should be presented separately.■ Transfers of financial assets—see text.■ Long-term obligations—see text.■ Derivatives—see text.■ Income—see text.
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Statement of Assets, Liabilities and Equity (Statement of Financial Position)■ See the illustrative statement and related
footnotes in the text.■ The AICPA has provided illustrative, detailed
statements in its Tool Kits at www.aicpa.org.■ To use the FRF for SMEs:
■ Management and users of an entity’s financial statements must agree on the framework.
■ The FRF should be an appropriate presentation of financial position and results of operations for the entity.
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The End
■ What to do if you want more■ Email Larry Perry: larry@cpafirmsupport.com with
questions■ Visit www.cpafirmsupport.com for webcast resources■ Register for free email newsletter on CPA Firm Support
website■ Read Larry Perry’s weekly articles/blog, Today’s World
of Audits, at www.accountingweb.com under the A&A Articles and Blog tabs for accounting and auditing subjects for small- and medium-sized entities