The effective date of each section of SSARS #21 is for financial statements for periods ending on or after December 15, 2015.
On a practical basis, for most accountants that means your clients with fiscal years ending December 31, 2015 will be the first set of reports for which you must apply SSARS 21. I have to simplify effective dates to keep them straight, so here goes: SSARS 21 applies for 12/31/15 balance sheets.
That means you will need to apply SSARS 21 for work performed in early 2016 on 12/31/15 financials.
Early implementation allowed
The transition date applies to each section of the pronouncement. Reviews, compilations, and preparation of financial statements are each in a different section. Noticeable difference in this document is that each section is allow to be implemented early.
A speaker at a CPE conference I attended pointed out that SSARS 21 could be early implemented on a client by client basis. I read through the document and couldn’t find anything that contradicts that idea. Thus, you could implement early for this review client and those couple of comp clients, but not the rest. This provides latitude to apply the new rules in the manner that makes most sense for your particular situation.
Implications of early implementation option
There are a few different ways the early implementation could be applied to make life easier.
Switch all ‘management use only’ reporting to preparation service soon – If you prepare a number of financial statements under what’s called the management use only or SSARS 8 reporting option (if you are doing so, you know what that means; if not, don’t worry) it might make sense to switch over to the preparation of financial statement service earlier than when you implement the rest of the standard.
I perceive CPAs will really like the preparation service once it is understood. My guess is making the jump from SSARS 8 to preparation might make life easier for accountants. Would also allow your clients to send their reports to lenders.
Natural lull in workload – There may be a natural slow time in your review and comp work during 2015 in which it might make sense to jump to SSARS 21. At some point in the year, all the comp and review work performed under SSARS 19 might be done. It might make sense to switch all subsequent work during 2015 to SSARS 21.
For monthly compilation clients, there may be a point in 2015 where it would make sense to transition all clients in advance of the year-end crunch. This might allow preparing the new engagement letters and setting up the accountant’s reports at a time that is more convenient than when otherwise gearing up for all the other year-end work.
2015 engagements picked up in 2016 – Lots of CPAs will pick up clients in 2016 with fiscal years ending earlier that 12/15/15.
Which standards do you apply when a client with 9/30/15 year-end hires you in February 2016? Do you apply SSARS 21 to all the other work you have in progress but use SSARS 19 for this one engagement? That means remembering two sets of requirements and keeping track of different wording for the reports.
An alternative would be to early implement SSARS 21 for that engagement. Doing so would eliminate the need to keep track of documentation and reporting under both standards – you could mentally file away SSARS 19 and focus solely on SSARS 21. Seems to me the biggest advantage would be that you would not have to remember which format of the accountant’s report is needed on which engagement as you wrap up lots of reports to get them out the door.
Clients not ready until 2016 – You may have some clients with balance sheet dates in late fall 2015 that you know will not be ready for the review until after the first of the year. Might be worthwhile to make an early transitioning for SSARS 21 with clients for whom you expect to be doing the work in 2016. Again, that means you won’t need to keep two sets of reports in mind.
What do you think? How else could early implementation help you?