Private, for profit businesses have few choices when it comes to financial reporting for purposes of securing a loan or a surety credit. These entities must adhere to the U.S. Generally Accepted Accounting Principal (GAAP) statements or they will run the risk of not qualifying for credit. However, GAAP often requires a great deal more information than is actually needed to understand the performance of their business.
The Sarbanes Oxley Act and other mandated financial reporting regulations for large and publicly traded companies have trickled down and started to hamper the ability of Small and Medium Sized (SME) entities to provide financial reports that are truly meaningful to their owners, lenders and sureties.
The American Institute of Certified Public Accountants (AICPA) has come up with a new Financial Reporting Framework (FRF) that will be a less complicated and therefore a less costly reporting option for these SME’s.
In the past, my suggestion to clients looking for surety credit was that they use a CPA, not a tax accountant or tax preparer for their financial presentation to a surety. However, under the suggested new framework for SME’s they would have the option to use these other “non-certified” practitioners. Will the sureties or lenders embrace this change after pushing for GAAP CPA statements for so long? Time will tell.
At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.