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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.
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A Non-Authoritative, Special-Purpose
Framework
■ A combination of traditional accounting methods from
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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:
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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
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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 derecognized 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
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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:
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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: [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
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