Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
MHM Executive Education Series:
New Accounting Framework Impacting
the AEC Industry
Presented by:
Mike Loritz and Matt Ryb...
 To view this webinar in full screen mode, click on view
options in the upper right hand corner.
 Click the Support tab ...
 This webinar is eligible
for CPE credit. To receive
credit, you will need to
answer periodic polling
questions throughou...
Today’s Presenters
Mike Loritz, CPA
Shareholder
913.234.1226 | mloritz@cbiz.com
Mike has 17 years of experience in public ...
The information in this Executive Education Series
course is a brief summary and may not include all the
details relevant ...
Today’s Agenda
1
2
3
5
AICPA FRF for SME’s - Background
Private Company Council – Activities
FRF for SME’s & Architecture,...
FRF FOR SME’S -
BACKGROUND
Why was the Framework Developed?
Special Purpose Frameworks (OCBOA):
US GAAP Not Required
GAAP not required and not the be...
FRF for SMEs Private Company Council
- Not GAAP - Special - GAAP
Purpose Framework - Modify GAAP for private
- Complementa...
 Approximately 200 pages
 Self-contained
 Excess narrative avoided
 Avoidance of bright lines
 Use of professional ju...
 Developed for smaller- to medium-sized, owner-managed,
for-profit entities where internal or external users have
direct ...
 Owners-Managers
Depend on reliable financial statements to:
 Confirm assessments of performance
 Determine what they o...
- Entity does not operate in an industry that has highly
specialized accounting guidance
- such as financial institutions ...
Public Statements Critical of the Framework:
 FAF President – Teresa Polley
 National Association of State Boards of
Acc...
PRIVATE COMPANY COUNCIL
ACTIVITIES
The PCC has two principal responsibilities:
1. The PCC will determine whether exceptions or
modifications to existing non-...
 The PCC will conduct a review of
existing U.S. GAAP and identify
standards that it will consider for
possible exceptions...
PCC Issue No. 13-01A, Accounting for Identified
Intangible Assets in a Business Combination
 The PCC is attempting to red...
PCC Issue No. 13-01B, Accounting for Goodwill
Subsequent to a Business Combination
 In a return to “the past”, goodwill w...
PCC Issue No. 13-01B, Accounting for Goodwill
Subsequent to a Business Combination
 The requirement to perform a hypothet...
PCC Issue No. 13-02, Applying Variable Interest Entity Guidance to
Common Control Leasing Arrangements
 Exempts private c...
PCC Issue No. 13-03, Accounting for Certain Receivable-Variable,
Pay-Fixed Interest Rate Swaps
 The intent is to simplify...
FASB Endorsement
 While the FASB did raise questions pertaining to the proposed
alternatives, it unanimously endorsed eac...
FRF FOR SME’S &
ARCHITECTURE, ENGINEERING &
CONSTRUCTION
 F/S Concepts
 General Principles of F/S
Presentation & Acct Policies
 Transition
 Statement of Financial Position
 C...
 Subsidiaries
 Consolidation and NCI
 Joint Ventures
 Leases
 Related Party
 Subsequent Events
 Business Combinatio...
Does not include:
 Earnings per share guidance
 Segment reporting
 Other comprehensive income
 Interim reporting
 Sto...
Chapter 1
 Introduces the financial statement concepts
 Similar to the FASB Concept Statements
 Discusses concepts incl...
Chapter 2
 Establishes specifics of financial statements and comparative
information
 Provides guidance on the disclosur...
Chapter 3 - Transition
 Requires an entity to prepare an opening statement of financial
position at the date of transitio...
 Less than 20% ownership
 Presumed investor does not have significant influence
 Greater than 20% ownership
 Rebuttabl...
No Concept of Variable Interest Entities (VIEs)
 Consolidation is not appropriate when an entity has a
limited right and ...
Recognition and Presentation
 Does not require consolidation
 An entity should make an accounting policy choice to
eithe...
 Closely aligned with
requirements of U.S. Income
Tax Code
 Criteria for capitalizing a
lease for tax purposes
generally...
Lease Accounting
25.08 A lease that transfers
substantially all the benefits
and risks of ownership
related to the leased
...
 In the case of rendering of services and long-
term contracts and modifications to those
contracts, performance should b...
Percentage of Completion Method
 Used when performance consists of the execution of more
than one act, and revenue would ...
Percentage of Completion Method
 Measurement
 Amount of work accomplished
 Measures of performance that are reasonably ...
Completed Contract Method
 Used when the entity cannot reasonably estimate the
extent of progress toward completion.
 If...
Contract-Related Claims
 Recognition…only if it is probable that the claims will
result in additional contract revenue an...
Contract-Related Claims
 If the foregoing requirements are met, revenue from
contract-related claims should be recorded o...
 Sureties, and loan agreements still require U.S. GAAP
financial statements
 State DOT and state licensing board require...
FRF FOR SME’S – OTHER
CONCEPTS
 Depreciation should be recognized in a rational and
systematic manner appropriate to the nature of the item
with a limit...
 Straight-line method
 Constant charge as a function over time
 Variable charge method
 An increasing charge method ma...
 Goodwill is not tested for impairment.
 Goodwill should be amortized:
 the same period as that used for federal income...
 Assets acquired and liabilities assumed are measured
at their acquisition date market values. Certain
exceptions exist.
...
Accounting Policy Election
 An entity should make a policy election to account for
defined benefit plans
 Current contri...
Accounting Policy Election
 An entity should make an accounting policy election to account
for income taxes using either
...
Certain Financial Assets and Liabilities
At each reporting date,
an entity should
measure:
a. Investments in equity
instru...
Derivatives
 Recognize net cash paid or received at settlement
 Disclosures
 Face or contract amount (or notional princ...
Learning Center Slide No. 68
DISCLOSURE CONSIDERATIONS
 Significant accounting policies (Note 1)
 Changes in accounting policies
 Nature of operations
 Use of management est...
 Policy in determining the composition of cash and cash
equivalents.
 Restrictions on cash
 Details regarding business ...
 Consolidation policies
 Basis of accounting for joint ventures along with
additional information.
 Basis used to accou...
 Intangible asset carrying amount by major asset class,
aggregate amortization expense, amortization method
and life
 Po...
 Deferred compensation plans
 Guarantees
 Revenue recognition policies and components
 Income tax – if deferred method...
 Multi-employer plans –
 Name and description of plan
 If withdrawal is probable or reasonably possible, whether it
wou...
 Financial statements are prepared in accordance with
FRF for SMEs
 Primary differences between FRF for SMEs and GAAP
 ...
 In the year of adoption of FRF for SMEs –
 If prior year financial statements are restated and
presented-
 Amount of e...
 Substantially the same as GAAP based financial
statements
 Supplementary information permitted
 Contract schedules
 C...
Accounting Policies (Chapter 2)
The accompanying financial statements have been prepared in
accordance with the Financial ...
Questions?
Today’s Presenters
Mike Loritz, CPA
Shareholder
913.234.1226 | mloritz@cbiz.com
Mike has 17 years of experience in public ...
Connect with Mayer Hoffman McCann
linkedin.com/company/
mayer-hoffman-mccann-p.c.
@mhm_pc
youtube.com/
mayerhoffmanmccann
...
Upcoming SlideShare
Loading in …5
×

Webinar slides: New Accounting Framework Impacting the Architecture, Engineering & Construction Industry

686 views

Published on

The AICPA’s proposed Financial Reporting Framework for Small and Medium-Sized Entities (FRF for SMEs) may result in the application of a more simplified set of accounting principles for certain entities. Architecture, engineering and construction (AEC) entities with relatively few financial statement users who also have ready access to management may be able to simplify their financial reporting requirements if the FRF for SME’s, as proposed, meets the requirements of the entity’s financial statement users.

One aspect of the FRF for SMEs is the elimination of industry specific guidance, which may result in significant diversity in practice. The current framework under US GAAP includes many areas of industry specific guidance applicable to the AEC industry, and as a result, application of the proposed FRF for SME’s could lead to significant changes in practice.

What you'll learn
During this course, AEC and accounting experts from Mayer Hoffman McCann will discuss:

The definition of a SME
The objective of the FRF for SMEs, including a comparison to US GAAP
Potential impact of FRF for SMEs on financial statements in the AEC industry

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

Webinar slides: New Accounting Framework Impacting the Architecture, Engineering & Construction Industry

  1. 1. MHM Executive Education Series: New Accounting Framework Impacting the AEC Industry Presented by: Mike Loritz and Matt Rybowicz August 8, 2013
  2. 2.  To view this webinar in full screen mode, click on view options in the upper right hand corner.  Click the Support tab for technical assistance.  If you have a question during the presentation, please use the Q&A feature at the bottom of your screen. Before We Get Started…
  3. 3.  This webinar is eligible for CPE credit. To receive credit, you will need to answer periodic polling questions throughout the webinar.  External participants will receive their CPE certificate via email immediately following the webinar. CPE Credit
  4. 4. Today’s Presenters Mike Loritz, CPA Shareholder 913.234.1226 | mloritz@cbiz.com Mike has 17 years of experience in public accounting with diversified financial companies and other service based companies, including banking, broker/dealer, investment companies, and other diversified companies ranging from audits of public entities in the Fortune 100 to small private entities. He is a member of MHM's Professional Standards Group, providing accounting knowledge leadership in the areas of derivative financial instruments, investment securities, share-based compensation, fair value, revenue recognition and others. Matt Rybowicz, CPA Senior Manager 913.234.1062 | rybowicz@cbiz.com Matt has more than 13 years of experience in public accounting and is currently a Senior Manager in the Leawood, Kansas office. He plans, executes and directs external audits for a variety of construction industry clients. Matt focuses on complex and/or specialized issues in the construction industry, develops and maintains productive relationships with clients, and is a part of the firm’s national construction audit methodology taskforce. In addition to providing attest and accounting services to clients, Matt is actively involved in local and national construction organizations and has presented at many local and national events including the CICPAC annual member conference, National association of independent sureties training and the Kansas City Builders Association Construction Management Academy.
  5. 5. The information in this Executive Education Series course is a brief summary and may not include all the details relevant to your situation. Please contact your MHM service provider to further discuss the impact on your financial statements. Disclaimer
  6. 6. Today’s Agenda 1 2 3 5 AICPA FRF for SME’s - Background Private Company Council – Activities FRF for SME’s & Architecture, Engineering & Construction 4 FRF for SME’s – Other Concepts 5 Disclosure considerations
  7. 7. FRF FOR SME’S - BACKGROUND
  8. 8. Why was the Framework Developed? Special Purpose Frameworks (OCBOA): US GAAP Not Required GAAP not required and not the best solution for many small- and medium-sized entities IFRS for SMEs Lack of familiarity, higher learning curve, not US-centric, form of GAAP Other Special Purpose Frameworks Tax or modified cash basis may be inappropriate or insufficient for some SMEs/users
  9. 9. FRF for SMEs Private Company Council - Not GAAP - Special - GAAP Purpose Framework - Modify GAAP for private - Complementary to companies efforts by FAF’s PCC - AICPA fully supports the work of the PCC, FAF and FASB to address the private company environment Framework is Separate from FAF and PCC
  10. 10.  Approximately 200 pages  Self-contained  Excess narrative avoided  Avoidance of bright lines  Use of professional judgment Principles-based, Standalone, Compact Principles- based Standalone Compact
  11. 11.  Developed for smaller- to medium-sized, owner-managed, for-profit entities where internal or external users have direct access to the owner-manager and GAAP financial statements are not required.  The AICPA has no authority to require the use of the FRF for SMEs for any entity. Therefore:  Issued June 10, 2013 - The FRF for SMEs has no effective date  An owner-manager can decide to use the FRF for SMEs at any time  An owner-manager should make that decision in conjunction with those who may use the entity’s financial statements. AICPA Framework for SMEs
  12. 12.  Owners-Managers Depend on reliable financial statements to:  Confirm assessments of performance  Determine what they owe/own  Understand cash flows  Users External financial statement users who have direct access to management  Non-issuers No intent of going public Who Is It Designed For?
  13. 13. - Entity does not operate in an industry that has highly specialized accounting guidance - such as financial institutions and governmental entities - The entity does not engage in overly complicated transactions - The entity does not have significant foreign operations - Financial statement users may have greater interest in cash flows, liquidity, statement of financial position strength and interest coverage Characteristics of Typical Entities
  14. 14. Public Statements Critical of the Framework:  FAF President – Teresa Polley  National Association of State Boards of Accountancy (see NASBA Tells Private Companies: Don’t Use AICPA Financial Reporting Framework)  Institute of Management Accountants (IMA)  Risk Management Association (RMA) Controversy
  15. 15. PRIVATE COMPANY COUNCIL ACTIVITIES
  16. 16. The PCC has two principal responsibilities: 1. The PCC will determine whether exceptions or modifications to existing non-governmental U.S. Generally Accepted Accounting Principles (U.S. GAAP) are required to address the needs of users of private company financial statements. 2. The PCC will serve as the primary advisory body to the Financial Accounting Standards Board (FASB) on the appropriate treatment for private companies for items under active consideration on the FASB’s technical agenda. Private Company Council
  17. 17.  The PCC will conduct a review of existing U.S. GAAP and identify standards that it will consider for possible exceptions or modifications. The PCC will develop, deliberate, and vote on proposed exceptions or modifications, which must be approved by a two-thirds vote of all PCC members (super majority). PCC Agenda Setting and Due Process for Existing U.S. GAAP  Proposed modifications or exceptions to U.S. GAAP approved by the PCC will be provided to the FASB for a decision on endorsement. If endorsed by a simple majority of FASB members, the proposed modifications will be exposed for public comment.
  18. 18. PCC Issue No. 13-01A, Accounting for Identified Intangible Assets in a Business Combination  The PCC is attempting to reduce the number of intangible assets that are recognized.  Only intangible assets that arise from either a non cancelable contract or legal right will be subject to recognition.  Private companies will measure the value of an asset that originates from a non cancelable contract by considering only the contract’s remaining non cancelable term. Private Company Council
  19. 19. PCC Issue No. 13-01B, Accounting for Goodwill Subsequent to a Business Combination  In a return to “the past”, goodwill will once again be amortized over an estimated useful life, which cannot exceed ten years.  Goodwill will not longer be subject to an annual impairment test, rather, a “triggering event” model will be used. Impairment testing would be required when an event or circumstances occur that indicate that it is more likely than not the fair value of the entity is below its carrying value.  The goodwill impairment test will be performed at the entity level. Private Company Council
  20. 20. PCC Issue No. 13-01B, Accounting for Goodwill Subsequent to a Business Combination  The requirement to perform a hypothetical “purchase price allocation” is removed. The amount of impairment recognized is simply the difference between the fair value of the entity and its carrying value. Private Company Council
  21. 21. PCC Issue No. 13-02, Applying Variable Interest Entity Guidance to Common Control Leasing Arrangements  Exempts private companies from applying consolidation guidance for variable-interest entities (VIEs) under common control leasing arrangements.  Exemption requirements include  Nonpublic entity and legal entity are under common control  Nonpublic entity has a lease arrangement with VIE  Substantially all of the entity’s business activities consist of leasing or supporting leasing activities.  Required disclosures:  Lease terms  “related party” rent expense  Future commitments  Outstanding debt and significant liabilities of related party lessor.  Key terms of debt arrangement  Key terms of explicit interest in leasing entity Private Company Council
  22. 22. PCC Issue No. 13-03, Accounting for Certain Receivable-Variable, Pay-Fixed Interest Rate Swaps  The intent is to simplify the accounting for certain derivative transactions involving an interest rate swap where variable rate debt is converted to fixed rate debt.  If certain criteria are met, the swap is combined with the related debt instrument which effectively results in a fixed rate borrowing.  Derivative accounting is not required.  A “simplified short-cut method” is also available that makes it easier to apply hedge accounting. Certain criteria must be met. Private Company Council
  23. 23. FASB Endorsement  While the FASB did raise questions pertaining to the proposed alternatives, it unanimously endorsed each of the accounting alternatives approved by the PPC (Issue 13-01 and 13-03).  The proposed alternatives are expected to be exposed for public comment where FASB’s questions may be addressed.  Subsequent to the public comment process, the PCC will redeliberate the accounting alternatives.  PCC accounting alternatives will be subject to “final endorsement” by the FASB. Private Company Council
  24. 24. FRF FOR SME’S & ARCHITECTURE, ENGINEERING & CONSTRUCTION
  25. 25.  F/S Concepts  General Principles of F/S Presentation & Acct Policies  Transition  Statement of Financial Position  Current assets/liabilities  Special Accounting for Certain Financial Assets & Liabilities  Statement of Operations  Statement of Cash Flows  Accounting Changes, Estimates, Errors  Equity, Debt & Other Investments  Risks and Uncertainties  Inventories  Intangible Assets  Property, Plant & Equipment  Long-Lived Assets & Disc Ops  Commitments  Contingencies  Equity  Revenue  Retirement and Other Postemployment Benefits  Income Taxes Comprehensive and Relevant Framework
  26. 26.  Subsidiaries  Consolidation and NCI  Joint Ventures  Leases  Related Party  Subsequent Events  Business Combinations  Push-Down Accounting  Nonmonetary Transactions  FX Translation  Glossary Comprehensive and Relevant Framework (cont.)
  27. 27. Does not include:  Earnings per share guidance  Segment reporting  Other comprehensive income  Interim reporting  Stock compensation  Many of the complex issues associated with debt/equity Comprehensive and Relevant Framework
  28. 28. Chapter 1  Introduces the financial statement concepts  Similar to the FASB Concept Statements  Discusses concepts including the following:  Measurement  Materiality  Recognition  Qualitative Characteristics  Understandability  Relevance  Reliability  Comparability Financial Statement Concepts
  29. 29. Chapter 2  Establishes specifics of financial statements and comparative information  Provides guidance on the disclosure of accounting policies  Requires an entity to state prominently in the notes to the financial statements that the FRF for SME’s is the basis for the presentation General Principles
  30. 30. Chapter 3 - Transition  Requires an entity to prepare an opening statement of financial position at the date of transition to the FRF for SMEs framework  Requires an entity to:  Recognize all assets and liabilities whose recognition is required  Not recognize items as assets or liabilities if the framework does not permit recognition  Reclassify items that it recognized previously as one type of asset, liability, or component of equity but are now recognized as a different type of asset, liability, or component of equity under the framework  Apply the framework when measuring all recognized assets and liabilities  Requires certain disclosures including the amount of each charge or credit to equity at the date of transition Transition
  31. 31.  Less than 20% ownership  Presumed investor does not have significant influence  Greater than 20% ownership  Rebuttable presumption that significant influence exists  If significant influence exists = equity method  Equity method accounting is similar to the existing GAAP guidance  However, allows the reversal of previously recognized impairments Equity Method Investments (Investments)
  32. 32. No Concept of Variable Interest Entities (VIEs)  Consolidation is not appropriate when an entity has a limited right and ability to determine or influence the strategic policies of another entity but does not control it.  A holding of an interest in an entity that is not a subsidiary qualifies as an investment.  Either equity method or cost basis Subsidiaries & Consolidation
  33. 33. Recognition and Presentation  Does not require consolidation  An entity should make an accounting policy choice to either: a. Consolidate its subsidiaries or b. Account for its subsidiaries using the equity method Parent-only (unconsolidated) financial statements are permitted. Subsidiaries & Consolidation
  34. 34.  Closely aligned with requirements of U.S. Income Tax Code  Criteria for capitalizing a lease for tax purposes generally matches criteria in FRF for SMEs  Evaluation of capital vs. operating leases are the same as US GAAP  Retains “rules” based approach Lease Accounting
  35. 35. Lease Accounting 25.08 A lease that transfers substantially all the benefits and risks of ownership related to the leased property from the lessor to the lessee should be accounted for as a capital lease by the lessee and as a sales-type of direct financing lease by the lessor 25.09 A lease in which the benefits and risks of ownership related to the leased property are substantially retained by the lessor should be accounted for as an operating lease by the lessee and lessor
  36. 36.  In the case of rendering of services and long- term contracts and modifications to those contracts, performance should be determined using either the percentage of completion method or the completed contract method, whichever relates the revenue to the work accomplished.  Very limited discussion of multiple element deliverables  Limited, but similar, guidance on gross vs. net reporting of revenues Revenue
  37. 37. Percentage of Completion Method  Used when performance consists of the execution of more than one act, and revenue would be recognized proportionately by reference to the performance of each act.  Determination using a rational and consistent basis  Sales values  Associated costs  Extent of progress  Number of acts  Practical Expedient  Services are provided by an indeterminate number of acts of a specific period of time, revenue should be recognized on a straight-line basis over the period, unless there is evidence that some other method better reflects the pattern of performance. Long-term contracts
  38. 38. Percentage of Completion Method  Measurement  Amount of work accomplished  Measures of performance that are reasonably determinable  Relate as directly as possible to the activities critical to the completion of the contract  Measures  Output measures  Units produced  Project milestones  Input measures  Cost  Labor hours  Machine use  Amounts billed are not an appropriate basis unless they reflect the work accomplished Long-term contracts
  39. 39. Completed Contract Method  Used when the entity cannot reasonably estimate the extent of progress toward completion.  If both of the following conditions are met:  Completed contract method is used for income tax reporting purposes  The financial position and results of operations…would not vary materially from those resulting from the use of the percentage of completion method (for example, in circumstances in which an entity has primarily short-term contracts). Long-term contracts
  40. 40. Contract-Related Claims  Recognition…only if it is probable that the claims will result in additional contract revenue and if amounts can be reliably estimated, as evidenced by satisfying the following conditions:  There is a legal basis for the claims.  Additional costs are caused by circumstances that were unforeseen at the contract date and are not the result of contractor performance deficiencies.  Costs associated with the claims are identifiable or otherwise determinable and are reasonable in view of the work performed  Evidence supporting the claims is objective and verifiable. Long-term contracts
  41. 41. Contract-Related Claims  If the foregoing requirements are met, revenue from contract-related claims should be recorded only to the extent that contract costs relating to the claims have been incurred. Cost attributable to claims should be treated as costs of contract performance as incurred.  A practice such as recording revenues from claims only when the amounts have been received or awarded may be used. Long-term contracts
  42. 42.  Sureties, and loan agreements still require U.S. GAAP financial statements  State DOT and state licensing board requirements  ESOP considerations  Future changes accounting changes (i.e. Leases, revenue recognition) could drive companies to revisit framework. Other AEC Considerations
  43. 43. FRF FOR SME’S – OTHER CONCEPTS
  44. 44.  Depreciation should be recognized in a rational and systematic manner appropriate to the nature of the item with a limited life and its use by the entity. Depreciation recognized is the greater of:  the cost, less salvage value over the life of the asset or  the cost, less residual value over the useful life of the asset  Allows for the subsequent reversal of impairments  Analysis is still performed using undiscounted cash flows  Asset group concept is the same as GAAP  Allows capitalization of finance costs Property, Plant & Equipment — Depreciation
  45. 45.  Straight-line method  Constant charge as a function over time  Variable charge method  An increasing charge method may be used when an entity can obtain a constant rate of return on the investment in the asset.  A decreasing charge method may be appropriate when the operating efficiency of the asset declines over time. PP&E – Different Depreciation Methods
  46. 46.  Goodwill is not tested for impairment.  Goodwill should be amortized:  the same period as that used for federal income tax purposes or  if not amortized for federal income tax purposes then a period of 10 years. Goodwill
  47. 47.  Assets acquired and liabilities assumed are measured at their acquisition date market values. Certain exceptions exist.  An entity should make an accounting policy election to account for an intangible asset acquired either separately from goodwill or by not recognizing the intangible assets separately from goodwill (subsuming into goodwill the value of the intangible asset)  All intangible assets are considered to have a finite useful life and are amortized over that estimated useful life Business Combinations
  48. 48. Accounting Policy Election  An entity should make a policy election to account for defined benefit plans  Current contribution payable method  One of the accrued benefit obligation methods Current Contribution Payable Method  Only the contribution attributable to the current year is expensed Accrued Benefit Obligation Methods  Immediate recognition approach  Deferral and amortization approach Defined Benefit Plans
  49. 49. Accounting Policy Election  An entity should make an accounting policy election to account for income taxes using either  the taxes payable method or  the deferred income taxes method Taxes Payable Method  Under the taxes payable method, only current income tax assets and liabilities are recognized  Current income taxes, to the extent unpaid or refundable, should be recognized as a liability or asset  The liability for current income taxes included in the balance sheet is the cost (benefit) or current income taxes for current and prior periods less amounts already paid in respect of these income taxes Income Taxes
  50. 50. Certain Financial Assets and Liabilities At each reporting date, an entity should measure: a. Investments in equity instruments at cost, less any reduction for impairment, b. All other financial assets at amortized cost; and c. Financial liabilities at amortized cost • An entity should measure investments in equity instruments held for sale at market value. • Changes in market value should be recognized in net income in the period incurred. • Impairments may be reversed.
  51. 51. Derivatives  Recognize net cash paid or received at settlement  Disclosures  Face or contract amount (or notional principal amount if there is no face or contract amount)  The nature and terms — including a discussion of the credit and market risk of those instruments  A description of the entity’s objectives for holding the derivatives  The cash requirements of those instruments Financial Instruments
  52. 52. Learning Center Slide No. 68
  53. 53. DISCLOSURE CONSIDERATIONS
  54. 54.  Significant accounting policies (Note 1)  Changes in accounting policies  Nature of operations  Use of management estimates  Significant estimates  Changes in accounting estimates if material  Concentrations  Operating cycle if longer than 1 year  Details about any reclassification from previously issued comparative statements  Corrections of errors Disclosures – Consistent with GAAP
  55. 55.  Policy in determining the composition of cash and cash equivalents.  Restrictions on cash  Details regarding business combinations and disposals of business units  Investing or financing transactions that do not require the use of cash presented either on the face of the statement of cash flows or notes to the financial statements.  Information regarding each material business combination. Disclosures – Consistent with GAAP
  56. 56.  Consolidation policies  Basis of accounting for joint ventures along with additional information.  Basis used to account for investments  Nonmonetary exchanges  Inventory accounting policies including classifications.  Cost of each major category of property and equipment, total accumulated depreciation, depreciation methods, life, and depreciation charged to income  Contingency gains and losses Disclosures – Consistent with GAAP
  57. 57.  Intangible asset carrying amount by major asset class, aggregate amortization expense, amortization method and life  Policy for accounting for start-up costs.  Capital lease information including payments estimated in each of the next 5 years  Operating lease minimum lease payments for each of the five succeeding years  Subsequent events  Commitments  Defined contribution plans Disclosures – Consistent with GAAP
  58. 58.  Deferred compensation plans  Guarantees  Revenue recognition policies and components  Income tax – if deferred method is elected  Related party transactions Disclosures – Consistent with GAAP
  59. 59.  Multi-employer plans –  Name and description of plan  If withdrawal is probable or reasonably possible, whether it would give rise to an obligation  Cost recognized in the period  Taxes payable method policy  Stock issued to employees in lieu of cash compensation (measurement and disclosure) Disclosures – Not Consistent with GAAP
  60. 60.  Financial statements are prepared in accordance with FRF for SMEs  Primary differences between FRF for SMEs and GAAP  Does not require quantification – very broad discussion The accompanying financial statements have been prepared in accordance with the Financial Reporting Framework for Small- and Medium-Sized Entities issued by the American Institute of Certified Public Accountants. This framework, unlike accounting principles generally accepted in the United States of America, generally does not make use of fair value accounting provides more flexibility in the areas of accounting for income taxes and consolidations etc. Disclosures – Additional Items
  61. 61.  In the year of adoption of FRF for SMEs –  If prior year financial statements are restated and presented-  Amount of each change or credit to equity  Explanations of material adjustments to the statement of cash flows  Any election to use the exemption for retrospective application  Derecognition of financial assets and liabilities  Estimates  Non-controlling entities  Basis used to account for unconsolidated subsidiaries along with additional information Disclosures – Additional Items
  62. 62.  Substantially the same as GAAP based financial statements  Supplementary information permitted  Contract schedules  Cost of goods sold schedules  General and administrative expense Presentation
  63. 63. Accounting Policies (Chapter 2) The accompanying financial statements have been prepared in accordance with the Financial Reporting Framework for Small- and Medium-Sized Entities issued by the American Institute of Certified Public Accountants. This special purpose framework, unlike generally accepted accounting principles (GAAP) in the United States of America, does not require the recognition of deferred taxes. We have chosen the option to recognize only current income tax assets and liabilities. Other primary differences would be described as necessary. Disclosures – Accounting Policies
  64. 64. Questions?
  65. 65. Today’s Presenters Mike Loritz, CPA Shareholder 913.234.1226 | mloritz@cbiz.com Mike has 17 years of experience in public accounting with diversified financial companies and other service based companies, including banking, broker/dealer, investment companies, and other diversified companies ranging from audits of public entities in the Fortune 100 to small private entities. He is a member of MHM's Professional Standards Group, providing accounting knowledge leadership in the areas of derivative financial instruments, investment securities, share-based compensation, fair value, revenue recognition and others. Matt Rybowicz, CPA Senior Manager 913.234.1062 | rybowicz@cbiz.com Matt has more than 13 years of experience in public accounting and is currently a Senior Manager in the Leawood, Kansas office. He plans, executes and directs external audits for a variety of construction industry clients. Matt focuses on complex and/or specialized issues in the construction industry, develops and maintains productive relationships with clients, and is a part of the firm’s national construction audit methodology taskforce. In addition to providing attest and accounting services to clients, Matt is actively involved in local and national construction organizations and has presented at many local and national events including the CICPAC annual member conference, National association of independent sureties training and the Kansas City Builders Association Construction Management Academy.
  66. 66. Connect with Mayer Hoffman McCann linkedin.com/company/ mayer-hoffman-mccann-p.c. @mhm_pc youtube.com/ mayerhoffmanmccann gplus.to/mhmpc blog.mhm-pc.com slideshare.net/mhmpc facebook.com/mhmpc

×