Comment Period Expires for Proposed Financial Reporting Framework for SMEs
The comment period for the AICPA’s Proposed Financial Reporting Framework for Small- and Medium-Sized Entities (SMEs) ended Jan. 30, 2013. The Financial Reporting Framework for SMEs will provide a special purpose framework of accounting that blends traditional methods of accounting with income tax methods. The framework is intended to serve as a less complex and less costly alternative to generally accepted accounting principles in the United States (U.S. GAAP) and is intended for smaller-to-medium-sized, owner-managed, for-profit entities where users of the financial statements have direct access to the owner-manager. The framework is for entities that are not required to have U.S. GAAP financial statements.
Once the final document is released, owner-managed entities may wish to consider this alternative. Owner-managers should consult with their CPA practitioners, lenders and other users of the financial statements prior to changing the accounting framework of their companies. See the AICPA resource page for additional information.
FASB Issues ASU on Balance Sheet Offsetting
The FASB issued Accounting Standards Update (ASU) No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, to clarify the scope of ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2013-01 indicates that ASU 2011-11 applies only to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that either offset in accordance with specific criteria included in Section 210-20-45 or Section 815-10-45 of the Codification or are subject to a master netting arrangement or similar agreement. Ordinary trade receivables and payables are not in the scope of ASU 2011-11, which was intended to provide comparable information about balance sheet offsetting between financial statements prepared on the basis of U.S. GAAP and financial statements prepared on the basis of International Financial Reporting Standards.
Entities with derivative arrangements described above will be impacted by this update. Entities are required to apply the amendments for fiscal years beginning on or after Jan. 1, 2013, the same effective date as ASU 2011-11, and should provide the required disclosures retrospectively for all comparative periods presented.
FSAB Issues ASU on Amounts Reclassified Out of Accumulated Other Comprehensive Income
The FASB has also issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the reporting of reclassifications out of accumulated other comprehensive income (AOCI). The ASU requires entities to provide information about amounts being reclassified out of AOCI by component of other comprehensive income. The ASU further requires the presentation of significant amounts reclassified out of AOCI by respective line items of net income, if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. The presentation must be in one location but may be provided in the notes to the financial statements or in the statement where net income is presented. For amounts not required to be reclassified in their entirety to net income under U.S. GAAP, an entity must cross-reference to other disclosures providing additional detail about these amounts.
ASU 2013-02 will impact all entities that report items of other comprehensive income, but does not substantially change the information being presented. For nonpublic entities, the update is effective prospectively for reporting periods beginning after Dec. 15, 2013, with early adoption permitted.