A Firm’s Strategy for Offering the FRF for SMEs Framework to Clients
The firm I work for, RubinBrown, prides itself on supporting small business. Our three offices are in America’s heartland – St. Louis, Kansas City and Denver. As an accountant, auditor and adviser for Main Street, private company financial reporting has always been an important issue to us. So, of course, last June we were excited to see the AICPA release its Financial Reporting Framework for Small- and Medium-Sized Entities. We quickly put in place a strategy to offer FRF for SMEsTM-based financial statement preparation to our clients who do not need GAAP-based financial statements.
For me, seeing what works for others and how they accomplish their goals helps me figure out an efficient and effective path for my own initiatives. If you are interested in expanding your firm’s services and serving your clients by using the FRF for SMEs, you may find our firm’s approach and experiences informative.
So far, we have had dozens of meetings with bankers in our three markets. We call the meetings “lunch and learn” sessions, and the bankers have been very responsive. In fact, I am not aware of any bank having declined our invitation. Typically three to six partners attend the luncheon, with at least as many bankers. We start the discussion by asking them what they currently do with items like fair value and goodwill, and showing them how much simpler things are when these items are removed from financial reporting in cases where the financial statement users are discounting, or even completely removing, these items from their internal credit-modeling process. We usually end the discussion by encouraging them to consider modifying their credit agreements to accept both GAAP and, where applicable, non-GAAP financial statements if they do not already. Banks that already have loan covenants that accept financial statements based on other comprehensive bases of accounting (i.e., non-GAAP), such as cash or tax basis, are especially receptive to hearing about the new framework.
Moreover, in January, our firm did more than a dozen year-end tax and accounting presentations to banks and each included a discussion of the FRF for SMEs. We are set to do a deep dive seminar on private company financial reporting this summer.
As far as the clients go, our firm’s engagement partners determine the appropriate time to discuss the new framework with individual clients who seem a good fit for the FRF for SMEs. We covered the FRF for SMEs at our client Year End Tax & Accounting Update Seminars in all three cities in December, and at some point we plan to meet with clients and bankers together.
To educate the lenders as well as clients, we turned to the AICPA’s financial statement users toolkit and the small business toolkit. We use several of the many resources and work from them to create our own talking points and slide deck. We provide copies as leave-behinds at the meetings. Based on feedback we are getting during the meetings, we often turn the lunch into a free-flowing discussion rather than a formal presentation. Bankers frequently ask about regulators’ reactions to the new framework, and we point out that the financial regulators have long recognized OCBOAs as acceptable accounting frameworks when GAAP is not needed.
We look forward to adding FRF for SMEs-based financial statement preparation to our range of services for small business. If you do too, I hope to have offered some helpful tips.
Share your story. What are your plans for the FRF for SMEs?
Rodney E. Rice, CPA, Partner, RubinBrown. Rodney is a partner in RubinBrown’s Assurance Services Group, a member of the firm's Professional Standards Group, partner-in-charge of RubinBrown's Denver office Assurance Services Group and a former member of the Private Companies Practice Section's Technical Issues Committee. His experience includes service to both publicly traded and privately held manufacturing and distribution companies, among others.