Accrual-basis financial statements are considered by many to be the gold standard in financial reporting. But with the increasing cost and complexity of today’s accounting rules — in particular, the updated lease guidance that went into effect last year — some private companies are seeking a simpler alternative to U.S.
The updated lease accounting standard is currently in effect for private companies. After several postponements during the pandemic, the Financial Accounting Standards Board (FASB) voted unanimously to move forward with the changes. That means private companies and private not-for-profit entities that follow U.S. Generally Accepted Accounting Principles (GAAP) must adopt
In recent years, accounting rule makers have issued guidance that requires certain items on the balance sheet to be reported at “fair value.” Here are some answers to frequently asked questions about this standard of value and how it’s measured. What is fair value? Under U.S. Generally Accepted Accounting Principles
Small businesses may start off using the cash-basis method of accounting. But many eventually convert to accrual-basis reporting to conform with U.S. Generally Accepted Accounting Principles (GAAP). Which method is right for you? Cash Method Under the cash method, companies recognize revenue as customers pay invoices and expenses when they
The COVID-19 pandemic is still adversely affecting many businesses and not-for-profit organizations, but the effects vary, depending on the nature of operations and geographic location. Has your organization factored the effects of the pandemic into its financial statements? You might not have considered this question since last year if your
A complete set of financial statements for your business contains three reports. Each serves a different purpose, but ultimately helps stakeholders — including managers, employees, investors and lenders — evaluate a company’s performance. Here’s an overview of each report and a critical question it answers. 1. Income statement: Is the
Businesses need financial information that’s accurate, relevant and timely. The Securities and Exchange Commission requires publicly traded companies to follow U.S. Generally Accepted Accounting Principles (GAAP), often considered the “gold standard” in financial reporting in the United States. But privately held companies can use simplified alternative accounting methods. What’s right
Many types of businesses — such as homebuilders and manufacturers — turn raw materials into finished products for customers. Production is a continuous process. So, any work that’s been started but isn’t yet completed before the end of the accounting period is reported as work in progress (WIP) under U.S.
Timing counts in financial reporting. Under the accrual method of accounting, the end of the accounting period serves as a strict “cutoff” for recognizing revenue and expenses. However, during the COVID-19 pandemic, managers may be tempted to show earnings or reduce losses. As a result, they may extend revenue cutoffs
Businesses and not-for-profit entities capitalize machines, furniture, buildings, and other property, plant and equipment (PPE) assets on their balance sheets. Here’s a refresher on some common questions about how to properly report these long-lived assets under U.S. Generally Accepted Accounting Principles (GAAP). What’s included in book value? PPE is reported
