Financial statements are created based on specific rules known as a financial reporting framework. This framework sets the standards for measuring, recognizing, presenting, and disclosing important items in the statements.
Examples include GAAP (Generally Accepted Accounting Principles) in the USA, IFRS (International Financial Reporting Standards), and special purpose frameworks (OCBOA).
The FRF for SMEs is a new option tailored for small, privately owned businesses that don’t have to use GAAP. It merges traditional accounting methods with certain income tax methods. Developed by experienced CPAs and AICPA staff, the AICPA introduced the FRF for SMEs in June 2013.