To GAAP or not to GAAP
Financial reporting is sort of like coffee; if you want a cup of coffee, you can go to Dunkin Donuts, Starbucks or any other coffee shop. For financial reporting you could use GAAP, but you could also use other special purpose frameworks which include the income tax basis, cash basis, and also, a fairly new concept, the AICPA’s Financial Reporting Framework for Small and Medium Sized Entities.
GAAP could be very complex sometimes. GAAP also might not be suitable to your needs. Let’s not forget that the large corporations out there (i.e. Apple or Facebook) use GAAP. You, as a small business, do not have the same type of transactions as these companies, so GAAP might not be the best option.
As an owner, manager or any other type of supervisor role, you are probably looking at your financial statements to see your liquidity or your cash flow. GAAP may not provide the information you are looking for. In GAAP there are various types of adjustments and transactions that do not provide such information in a way that is usable to you.
The new AICPA framework might be geared towards you. It is mainly for owner and managers. As owners/managers you depend on reliable financial statements to assess your performance, determine what you own, and understand your cash flows.
If you have any questions about any of the various types of financial reporting frameworks feel free to contact our office. We can help you better understand financial reporting as well as help you decide which framework fits your needs.
By: Chris Gagliardi, CPA
Feel free to contact Chris by calling (516) 542-6300, ext. 6881, or emailing him at firstname.lastname@example.org