It’s been under discussion since I was in college. I hear tell it has been discussed for around 40 years.
What is “it”?
Small GAAP. Some set of accounting rules that aren’t as complicated as GAAP and are more useful for smaller, simpler organizations. Something without fair value, variable interest entities, or derivative accounting so complex you need a new master’s degree to understand it.
There are two versions of a small GAAP on the horizon. One from FASB and the other from the AICPA.
This week the AICPA released the exposure draft of Proposed Financial Reporting Framework for Small- and Medium-Sized Entities. At the moment that’s going to be called FRF for SMEs.
I think this is going to be a very big deal.
The concept, as described at the CalCPA A&A conference earlier this week, is this a very small body of knowledge, approximately 200 pages in length. It will be rather stable, perhaps changing every few years. I’ll have more to say on the conference later.
At the moment just work with the vague concept that this might be the way things were circa 1974. You remember FASB was founded in 1973.
You can find the exposure draft here.
There is a great FAQ document here. It provides a short description of FRF-SMEs:
The Financial Reporting Framework for Small- and Medium-sized Entities (FRF for SMEs) is a self-contained special purpose framework intended for use by privately held small-to-medium-sized entities (SMEs) in preparing their financial statements. The FRF for SMEs draws upon a blend of traditional methods of accounting with some accrual income tax methods.
Who are the expected users of the framework? From the FAQ:
The FRF for SMEs is being developed for smaller- to medium-sized, owner-managed, for-profit entities that need reliable financial statements where internal or external users have direct access to the owner-manager and GAAP financial statements are not required.
The exposure draft is 252 pages long. The actual text of the framework is 217 pages plus a 16 page glossary and 9 page table of contents.
The AICPA has a special web page set up for the framework.