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‘Little GAAP’ vs. Financial Reporting Framework: As a CPA, People Expect You to Know This Crap

Welcome to the latest edition of Accumulated Deprecation, Greg Kyte's monthly column. Go here to read more of Greg's posts.

GAAP is hard. I mean it was hard. But now accounting for private companies and small- and medium-size entities (SMEs) is super easy compared with just two months ago. 
For starters, if you're a private company, the Private Company Council (PCC) was established just for you by the Financial Accounting Foundation (FAF) as a result of undue influence by the American Institute of Certified Public Accountants (AICPA). The purpose of the PCC is to …
… determine whether modifications or exceptions to existing nongovernmental U.S. Generally Accepted Accounting Principles (U.S. GAAP) are required to address the needs of users of private company financial statements.
The PCC is independent from the Financial Accounting Standards Board (FASB), but it's "recommendations will be subject to a FASB endorsement process." So it's independent, like how a U.S. territory is independent. It's FASB's Guam.
And the PCC has been incredibly efficient. It took just over a year, but on July 1, 2013, it issued three proposals for public comment that would modify GAAP for private companies. You read that right. Three. And we're talking proposals here, not actual modifications. Hell yeah.
Companies who are allowed to—and who choose to—adopt the PCC's exceptions to GAAP are still in compliance with GAAP because the PCC's GAAP exceptions don't create an OCBOA (other comprehensive basis of accounting); rather, they create a simpler GAAP within existing GAAP by adding exceptions and elective modification to GAAP. It's like how you simplify a difficult marriage by adding a concubine.
The PCC has simplified things even further by creating a private company decision-making framework. You see, you might think you're a private company and be totally wrong. So the private company decision-making framework is here to help you determine "whether and under what circumstances it is appropriate to" use Little GAAP.
Pro Tip: Don't call the PCC's GAAP-compliant system of GAAP exceptions for private companies "Little GAAP." It pisses people off.
Before Little GAAP, private companies were burdened by the onerous intricacies of GAAP. But now, thanks to the PCC's simplification efforts, private companies will be burdened by the onerous intricacies of GAAP and the detailed modifications provided by Little GAAP and the process to determine whether or not the modifications apply to them. Hell yeah.
And it gets easier.
The AICPA coerced the FAF to create the PCC via a blue ribbon panel, a form-letter-modification-and-submission campaign, and public ridicule. And once the FAF caved and established the PCC, the AICPA said, "Screw those PCC assholes. We're doing this ourselves," and on June 10, 2013, launched its Financial Reporting Framework (FRF) for SMEs.
The FRF is not GAAP. It's an OCBOA, joining the prestigious ranks of cash basis accounting and modified cash basis accounting. Unlike Little GAAP, the FRF is complete and ready to use right now, as long as your company knows how to apply it, your CPA knows how to provide assurance for it, and your bank approves of you using it.
The exceptions from, and modification to, GAAP found in the FRF are not the same as the proposed exceptions and modifications of Little GAAP, and just because the private company decision-making framework indicates that it's acceptable for your company to use Little GAAP, that doesn't necessarily mean that it's okay for your company to use the FRF. Otherwise, why would we need both? Seriously, why do we need both?
The end result of the PCC and the FRF is a long overdue simplification for private companies and SMEs, if by "long overdue simplification" you mean "questionably intentioned clusterfuck."