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Financial Reporting Framework for Small- and Medium-Sized Entities Series: Part 1--Statement of Financial Position. By Larry L. Perry, CPA CPA Firm Support Services, LLC. Learning Objectives. To learn the presentation concepts for the statement of financial position under the FRF for SMEs.

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Financial Reporting Framework for Small- and Medium-Sized Entities Series: Part 1--Statement of Financial Position

By Larry L. Perry, CPA

CPA Firm Support Services, LLC

learning objectives
Learning Objectives
  • To learn the presentation concepts for the statement of financial position under the FRF for SMEs.
  • To understand the basic principles in the FRF for SMEs for presentations and disclosure of current assets and liabilities.
  • To learn alternative presentations of the statement of financial position.

a non authoritative special purpose framework
A Non-Authoritative, Special-Purpose Framework
  • A combination of traditional accounting methods from special purpose frameworks such as the cash basis and the income tax basis.
  • A historical cost basis with some modifications for market values.
  • Specific, simplified footnote disclosures.
  • Uncomplicated, consistent and principles-based accounting.
  • A consolidation model that excludes variable interest entities.
  • Management and the users of financial statements decide if it fairly presents an entity’s financial position and results of operations.

basic financial statement titles
Basic Financial Statement Titles
  • For the FRF for SMEs, other common financial statement titles are:
    • Statement of Assets, Liabilities and Equity
    • Statement of Revenues and Expenses
    • Statement of Cash Flows
    • Notes to Financial Statements
  • Other descriptive titles may also be used.

presentation of statement of financial position
Presentation of Statement of Financial Position
  • Alternative descriptive titles of the statement may be used (avoid conflicts with U.S. GAAP).
  • Basis of preparation (FRF for SMEs) should be clearly disclosed.
  • Comparative statements are considered most meaningful but not required (single period presentation may be most cost-beneficial in first period).
  • A classified statement should be used.
  • Reference to an independent accountant’s report and notes to financial statement is required.

polling question no 1
Polling Question No. 1
  • It is acceptable to use descriptive titles for financial statements, such as balance sheet or statement of income.
    • A. True
    • B. False

current assets accounting issues
Current Assets Accounting Issues
  • Cash and cash equivalents
  • Accounts and notes receivable
  • Inventories
  • Prepaid expenses
  • Deferred income tax assets
  • Refundable income taxes
  • Costs and estimated earnings in excess of billings on uncompleted contracts

current liabilities accounting issues
Current Liabilities Accounting Issues
  • Current portion of LTD and capital lease obligations
  • Short term loans and notes payable
  • Trade accounts payable
  • Accrued expenses
  • Current income taxes payable
  • Deferred income taxes liabilities (current portion)
  • Deferred revenues (current portion)
  • Billings in excess of costs and estimated earnings on uncompleted contracts

polling question no 2
Polling Question No. 2
  • Which of the following are policies for the FRF for SMEs?
    • A. Refundable income taxes don’t have to be recorded.
    • B. FIFO, LIFO and average cost methods can’t be used.
    • C. Only the deferred taxes method may be used.
    • D. The completed contract method is required.
    • E. None of the above

other accounting issues
Other Accounting Issues
  • Financial assets and liabilities are recognized at the time of a transaction or contract.
  • Derivatives arrangements are disclosed and recognized upon settlement.
  • Assets and liabilities may be offset when legal right exists.
  • Transfers of financial assets are de-recognized when control ceases; liabilities when payment is made or satisfied otherwise.

disclosures for financial assets and liabilities
Disclosures for Financial Assets and Liabilities
  • Carrying amounts should be disclosed separately.
  • Amounts due to or from related parties should be disclosed separately.
  • Long-term receivables and payables due beyond one year should be presented separately.
  • Transfers of financial assets—see text.
  • Long-term obligations—see text.
  • Derivatives—see text.
  • Income—see text.

polling question no 3
Polling Question No. 3
  • Under the FRF for SMEs, all assets and liabilities must be presented at their gross amounts and none can be offset.
    • A. True
    • B. False

statement of assets liabilities and equity statement of financial position
Statement of Assets, Liabilities and Equity (Statement of Financial Position)

See the illustrative statement and related footnotes in the text.

The AICPA has provided illustrative, detailed statements in its Tool Kits at

To use the FRF for SMEs:

Management and users of an entity’s financial statements must agree on the framework.

The FRF should be an appropriate presentation of financial position and results of operations for the entity.



polling question no 4
Polling Question No. 4

When U.S. GAAP or prescribed format financial statements are not required, the FRF for SMEs may be the best framework.

A. True

B. False



the end
The End
  • What to do if you want more
    • Email Larry Perry: with questions
    • Visit for webcast resources
    • Register for free email newsletter on CPA Firm Support website
    • Read Larry Perry’s weekly articles/blog, Today’s World of Audits, at under the A&A Articles and Blog tabs for accounting and auditing subjects for small- and medium-sized entities