Money Talk: New Financial Reporting Introduced for Small Businesses
In June, the American Institute of CPAs (AICPA) introduced a new framework of standards that some say might help reduce costs and streamline financial reporting for small businesses. The jury is out on whether or not it will be accepted by lenders and others who need to determine credit-worthiness of businesses.
The AICPA’s Financial Reporting Framework for small/medium-sized businesses is a new accounting option for preparing streamlined, relevant financial statements for privately held, owner-managed businesses that are not required to use Generally Accepted Accounting Principles (GAAP) like many large U.S. companies.
Supposedly, it will allow small businesses to prepare financial statements that clearly and concisely report what a business owns, what it owes and its cash flow.
The new framework uses only historical cost as a basis for valuing assets and liabilities, not current market value. It also doesn’t include more-complex accounting, such as off-balance-sheet entities, derivatives or hedging. The process attempts to make goodwill accounting less complicated. While not many our print media clients are into derivatives or hedging, many of them have separate entities that own real estate or equipment, and many have complained about the seemingly illogical method to report goodwill.
Print and packaging company owners should talk their CPAs and to lenders, insurers and regulators to see if the new framework satisfies their requirements.
The new accounting framework was developed by a working group of experts from the CPA profession. According to the AICPA, it has also undergone public comment and professional scrutiny, and incorporates significant feedback from CPAs, bankers and other relevant stakeholders.
The new framework, if eventually accepted, could be beneficial for companies who might choose to adopt it. The AICPA does not have any authority to compel companies to use it nor does it have the authority to dictate standards set by banks, insurance companies or other regulators who might require more in depth information.
It is advisable to talk to your CPA firm to see if the new reporting measures can help you report your printing and packaging company. Contact me if you need help.
About Stuart Margolis, CPA, MT
Stuart Margolis is a preeminent financial expert for print media and packaging. Most notably, he is recognized for profit optimization that enables companies to grow through increased sales, capacity expansion, acquisition, and cost optimization. Methodologies developed in his books: A Printer’s Chart of Accounts and A Printer’s Guide to Profits 1-2-3: The Key to Value-Added Financial Management are implemented by thousands of companies nationwide. Stuart compiles the annual Printing Industries of America Financial Ratio Reports which are utilized as the industry’s premier benchmarking tool.
A Certified Public Accountant, Stuart holds a Bachelor’s Degree from the University of Pennsylvania Wharton School of Business in Economics and Accounting and a Master’s Degree in Taxation from Villanova University.
He is an active member and consultant for Printing Industries of America and GAA. In 2010, Stuart received the esteemed Printing Industry of New England Most Influential Person Award.
About Margolis Partners
Margolis Partners has long been recognized as the financial expert for family-owned businesses with a specialty in the printing, packaging and allied graphic communications industries, assisting thousands of companies with strategic and financial management, valuation, mergers/acquisitions, accounting, audit and tax services. The firm is noted for its expertise in enabling companies to optimize profits. Proudly, it is the purveyor of the industry’s Value-Added Principles of Management, and compiles the annual Printing Industries of America Ratios, the printing industry’s premier financial benchmarking tool.
