By Larry L. Perry, CPA CPA Firm Support Services, LLC

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


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.


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.


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.


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.


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


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


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.


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.


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.

http://www.aicpa.org/


The End

■ What to do if you want more■ Email Larry Perry: [email protected] 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

mailto:[email protected]

http://www.cpafirmsupport.com/

http://www.accountingweb.com/

By Larry L. Perry, CPA CPA Firm Support Services, LLC

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Transcript of By Larry L. Perry, CPA CPA Firm Support Services, LLC