American Institute of CPAs president and CEO Barry Melancon has written to the leaders of the state CPA societies in response to an announcement from the National Association of State Boards of Accountancy urging private companies not to use the AICPA’s recently unveiled Financial Reporting Framework for Small and Medium-sized Entities.
The AICPA unveiled FRF for SMEs on Monday, saying it provided an Other Comprehensive Basis of Accounting, or OCBOA, system for private companies that aren’t required to use U.S. GAAP (see AICPA Releases Non-GAAP Reporting Framework). However, NASBA chair Gaylen Hansen warned private company accountants that using a non-GAAP system could weaken the financial reporting of private companies (see NASBA Tells Private Companies: Don’t Use AICPA Financial Reporting Framework). NASBA argued that FRF for SMEs represents non-authoritative guidance and would be difficult to regulate or enforce. It prefers that accountants instead rely on the work of the Private Company Council, which is working with the Financial Accounting Standards Board under the auspices of the Financial Accounting Foundation to come out with modifications to U.S. GAAP that can be used by private company accountants. FASB endorsed three of the PCC’s proposals on the same day that the AICPA released FRF for SMEs (see FASB Backs Proposals for Simplifying Private Company Accounting).
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