OCBOA 101: LESS COMPLICATED, LESS COSTLY FINANCIAL REPORTING
With the increasing complexity of addressing accounting and reporting matters to comply with accounting principles generally accepted in the U.S. (U.S. GAAP), many financial statement preparers look for less complicated, less time-consuming and less costly alternatives for their financial reporting needs.
When acceptable from the perspective of financial statement users, one widely used alternative is to prepare financial statements using an “other comprehensive basis of accounting” (OCBOA).
Some practical reminders:
- OCBOA statements can be audited, reviewed or compiled.
- They are simpler and more cost-effective to prepare.
- Disclosures in OCBOA statements need to either parallel disclosures in U.S. GAAP-based statements or communicate the substance of disclosures that would have been included in the U.S. GAAP-based statements.
- OCBOA statements should include a policy note describing the other comprehensive basis of accounting and clearly delineating the primary substantive differences between the OCBOA and U.S. GAAP.
- There is no difference in disclosure requirements between audited financial statements and those that are reviewed or compiled.
- In modifying cash-based statements, preparers need to exercise care not to go so far with the modifications as to have the statements essentially prepared on a U.S. GAAP basis with departures from that basis of accounting.
- OCBOA financial statement titles need to be modified to clearly indicate the basis of accounting used in the statements.
- A statement of cash flows is not required in OCBOA financial statements.
With decades of experience preparing financial statements, Davis & Hodgdon Associates CPAs can answer any questions you have regarding financial statements and OCBOA. We can help you sort it all out, so please call 802-878-1963 or email [email protected]for more information.