StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Executive summaries of Should Small Businesses Adopt New Accounting Standards - Essay Example

Cite this document
Summary
The American Institute of Certified Public Accountants (AICPA) Director Bob Durak defines small and medium sized businesses (SMEs) as those businesses that are usually managed by their owners. This means that they operate as sole proprietorship businesses. Such businesses do not…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.3% of users find it useful
Executive summaries of Should Small Businesses Adopt New Accounting Standards
Read Text Preview

Extract of sample "Executive summaries of Should Small Businesses Adopt New Accounting Standards"

EXECUTIVE SUMMARIES OF SHOULD SMALL BUSINESSES ADOPT NEW ACCOUNTING STANDARDS Introduction The American Institute of Certified Public Accountants (AICPA) Director Bob Durak defines small and medium sized businesses (SMEs) as those businesses that are usually managed by their owners. This means that they operate as sole proprietorship businesses. Such businesses do not necessarily require financial reporting based on the GAAP method. The users of their financial statements have easy access to the business management; either by phone or e-mail.

With this definition in mind, one is in a better position to understand the changed financial reporting framework for SMEs and determine whether or not they should be adapted. The AICPA financial reporting framework (FRF) revolves around various accounting terms such as debts, credit, risks, profits and losses as well as all assets and liabilities belonging to a business. Bob argues that the current financial reporting framework is an improvement of the previous frameworks. According to him, the improvement is meant to make it easier for SMEs to prepare their financial statements in a much simpler and consistent manner.

For instance, with the current reporting framework business A and B can compare their financial statements over the years as they are prepared under specific guidelines as provided by the AICPA. The new financial reporting framework guides the SMEs on preparation of full financial statements. These include the statement of financial position, statement of changes in equity, statement of cash flows and statement of operations. The SMEs are also guided on how to prepare relevant notes that serve as supporting references to the financial statements.

AICPA emphasizes on the need of preparing financial statements; for the benefit of the management as well as external users such as bankers and financiers. The purpose of improving on the accounting standards is to ensure that the financial statements of a business capture its economic performance, the economic obligations, resources and equity as well as changes on the same. Bob recommends adaption of this framework as it offers simpler methods of accounting. In an interview with Bob, Patrick notes that the current financial reporting framework is a bit complex for small and medium sized businesses as it entails detailed financial reporting most of which is only necessary for big industries.

Bob adds that this is the main reason as to why the financial reporting framework was reviewed. He argues that they had the troubles SMEs go through in compliance with this tiring framework in mind as they redrafted it. The main goal for the redrafting the framework was to provide more dependable financial statements for the management of SMEs and any other user of the accounts. The current reporting framework ensures consistency among various SMEs and it does not dwell on the tax basis and cash basis of accounting as applied in the GAAP method of reporting.

Conclusion AICPA reports that this financial reporting framework is not meant for big companies or government entities. Instead, it has been specifically drafted to cater for the needs of all SMEs in the country. This reporting framework is more comprehensive and it has been proven to be efficient in the businesses that have already adapted it. It is for this reason the Bob tries to reach out to other medium businesses to do the same instead of weighing down themselves with reporting frameworks that are meant for big businesses.

ReferenceShould Small Businesses Adopt New Accounting Standards? By Patrick Clark June 12, 2013

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Executive summaries of Should Small Businesses Adopt New Accounting Essay”, n.d.)
Retrieved from https://studentshare.org/finance-accounting/1637085-executive-summaries-of-should-small-businesses-adopt-new-accounting-standards
(Executive Summaries of Should Small Businesses Adopt New Accounting Essay)
https://studentshare.org/finance-accounting/1637085-executive-summaries-of-should-small-businesses-adopt-new-accounting-standards.
“Executive Summaries of Should Small Businesses Adopt New Accounting Essay”, n.d. https://studentshare.org/finance-accounting/1637085-executive-summaries-of-should-small-businesses-adopt-new-accounting-standards.
  • Cited: 0 times

CHECK THESE SAMPLES OF Executive summaries of Should Small Businesses Adopt New Accounting Standards

Contemporary Issues in Management Accounting

This is a research paper relating to the field of accounting and finance.... The main aim and objective of this research is to address the various contemporary issues in management accounting and to give consulting advice to new business entrants on issues relevant to finance and accounting.... Apart from this, the paper also focuses on contemporary issues in management accounting being faced by today's organizations across the globe. ...
38 Pages (9500 words) Assignment

Differences between the UK and US Accounting Ethics Standards

This includes not only accounting standards, but also UK company law.... accounting standards derive from… The chief standard-setter is the accounting standards Board (ASB), which issues standards called Financial Reporting Standards (FRSs).... ach of the current UK accounting standards are explained below... The ASB has a formal exposure process for proposed standards.... From 2005, this framework changed as a result of European law requiring that all listed European companies report under International Financial Reporting standards (IFRSs)....
23 Pages (5750 words) Essay

The UK Combined Code and Financial Performance in the UK Banks

This research is intended to find out the answer of the question that; Does the UK combined code on the effective board structure add value to the financial performance in the UK banks?...
20 Pages (5000 words) Essay

The Driving Forces in the Changing Role of Accountants

Hence, it is significant and vital for the accounting profession to recognise the major factors and forces that are likely to shape the future.... his research study makes an attempt to offer a balanced picture on the effect of changing roles of the accounting professionals in the ensuing 5 to 10 years.... The main research question will be “what are the driving forces in the changing roles of the accounting professionals in the coming decade and what the opportunity and confronts will it foster for the accounting professionals?...
22 Pages (5500 words) Literature review

The Analysis of the Financial Accountability

Financial accounting is the field of accounting that deals with the summary, analysis and reporting of financial transactions in a business (Ryan, 2004, 43-45).... They prepare the business final accounts which are for use by stockholders, suppliers, commercial banks and non… k financial institutions, employees and government agencies especially the tax department....
7 Pages (1750 words) Essay

Strategic Management Accounting: Manac Plc

The research paper “Strategic Management accounting: Manac Plc” will detail the various techniques that can be used by the companies to assist the companies to better their financial resource planning and also to develop a well-structured company.... hellip; The author states that there are several different modes that can be considered for the term standard and it is essential to note that the term 'standard' can mean not only cost but also revenue, and both physical as well as nonphysical elements i that are involved in the process of a firm....
12 Pages (3000 words) Case Study

Accountant Internship Report

This study “Accountant Internship Report” unites experiences and observations incorporated by the author during his internship in Amana group of companies (Dubai, UAE).... The author presents assigned to him weekly duties and responsibilities, the company's organizational chart, products, and services....
30 Pages (7500 words) Admission/Application Essay

Industry Trend Report on Accounting Services

This work "Industry Trend Report on accounting Services" describes major problems and opportunities in the accounting service industry.... nbsp;… Globally, the accounting services industry generates close to $435 billion in revenue.... Even though accounting services are required worldwide, Europe and the US are the two greatest markets due to the concentration of both small and international companies.... nbsp; accounting services industry is among the fastest-growing industries because it is recession-proof, and it keeps getting hotter as a result of the increasing influx of companies or businesses that need such a service....
12 Pages (3000 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us