Academic journal article ABA Banking Journal

New Accounting Framework Useful Tool for Lenders

Academic journal article ABA Banking Journal

New Accounting Framework Useful Tool for Lenders

Article excerpt

A new accounting option for small and mid-sized enterprises (SMEs) could be a competitive tool for banks. Or, when looked at another way, it's an option bank lenders should be aware of so as not to be at a disadvantage in prospecting for business in the SME space.

Rolled out last year by the American Institute of Certified Public Accountants (AICPA), the Financial Reporting Framework for Small- and Medium-Sized Entities is a "special purpose framework," one of several non-GAAP accounting frameworks. GAAP accounting (generally accepted accounting principles) is required for all public and large private companies, but many other private companies can use what used to be called "other comprehensive bases of accounting," or OCHBOA. Some of these include cash basis, modified cash basis, tax basis, and regulatory basis--most of which have been around for decades. According to an AICPA spokesperson, a survey found that many SME companies needed something more than cash basis or tax basis financial statements, but didn't need to go all the way to GAAP. The new SME framework is more robust than other non-GAAP options, without adding unnecessary complexity, the spokesperson stated. Another thing that sets apart the new framework from other non-GAAP options is that it is fully documented. A 200-page document spells it out (see link at the end of the story). …

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