The American Institute of CPAs, also known as AICPA, is the largest organization of accountants in the country. As a member of the AICPA, you have access to conferences and special events where you can network with other accountants. The AICPA recently released its new financial reporting framework, but not everyone in the field agrees this is the best choice for smaller companies.
Generally accepted accounting principles, or GAAP, refers to a specific system or framework that larger companies follow when it comes to financial records. Small businesses typically don't use these same principles because the financial reporting framework includes steps and concepts that only apply to larger companies. Experts believe that millions of companies will switch to the new framework because it's more cost effective for accountants working for smaller companies.
According to Roby Brock, this financial reporting framework is best for small businesses where the owner serves as the manager. The framework is essentially a simplified version of the principles used by larger companies, and it lets businesses create a simple plan that shows exactly how much debt the company has, the amount of assets it owns, and the amount of cash the company has on hand. You don't need to work with complicated forms, worry about hedging, or work with forms that deal with derivatives. You are under no obligation to use this framework for your own company, and there are some flaws with this system.
The National Association of State Boards of Accountancy is one of the big organizations that found fault with this financial reporting framework. The organization recommends that private companies look for alternatives rather than use AICPA's system. NASBA suggests that private companies use one of the GAAPs presented by the Financial Accounting Standards Board. These GAAPs come from three different organizations that modified the financial reporting framework used for larger businesses to fit the needs of smaller companies. NASBA believes that by reducing the amount of work needed, accountants might lose track of financial information that they need. In a press release, NASBA also expressed concern that the new framework would weaken the amount of available information and potentially go against the recommendations of state boards. AICPA responded, claiming that the framework was a better fit for small companies and would help those companies save money.
As an accountant, you need to stay ahead of the financial situation of your company, including cash flow, assets, and debts. The new framework suggested by the AICPA can help you reduce the amount of time you spend figuring out those details. Though the NASBA spoke out against this financial reporting framework, it helps you record financial transactions and keep track of the information your company needs internally and the information it wants to make public.
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