Financial Reporting Framework - Linkenheimer LLP CPAs & Advisors

Business Owners, Your Financial Statements Are Trying To Tell You Something

Business owners are commonly and rightfully urged to regularly generate financial statements in compliance with Generally Accepted Accounting Principles (GAAP). One reason why is external users of financial statements, such as lenders and investors, place greater trust in financial reporting done under the rigorous standards of GAAP.

But that’s not the only reason. GAAP-compliant financial statements can reveal details of your company’s financial performance that you and your leadership team may otherwise not notice until a major problem has developed.

Earnings are only the beginning

Let’s begin with the income statement (also known as the profit and loss statement). It provides an overview of revenue, expenses and earnings over a given period.

Many business owners focus only on earnings in the income statement, which is understandable. You presumably went into business to make money. However, though revenue and profit trends are certainly important, they aren’t the only metrics that matter.

By Linkenheimer LLP|2024-03-27T18:19:50+00:00March 27th, 2024|business, Financial Reporting Framework|0 Comments

Let Your Financial Statements Guide You To Optimal Business Decisions

Now that 2022 is up and running, business owners can expect to face a few challenges and tough choices as the year rolls along. No matter how busy things get, don’t forget about an easily accessible and highly informative resource that’s probably just a few clicks away: your financial statements.

Assuming you follow U.S. Generally Accepted Accounting Principles (GAAP) or similar reporting standards, your financial statements will comprise three major components: an income statement, a balance sheet and a statement of cash flows. Each one contains different, but equally important, information about your company’s financial performance. Together, they can help you and your leadership team make optimal business decisions.

Revenue and expenses

The first component of your financial statements is the income statement. It shows revenue and expenses over a given accounting period. A commonly used term when discussing income statements is “net income.” This is the income remaining after you’ve paid all expenses, including taxes.

It’s also important to check out “gross profit.” This is the income earned after subtracting the cost of goods sold from revenue. Cost of goods sold includes the cost of direct labor and materials, as well as any manufacturing overhead […]

By Linkenheimer LLP|2022-01-28T19:27:09+00:00January 28th, 2022|business, Financial Reporting Framework, tax planning|0 Comments

Bridging the Gap Between Budgeting and Risk Management

At many companies, a wide gap exists between the budgeting process and risk management. Failing to consider major threats could leave you vulnerable to high-impact hits to your budget if one or more of these dangers materialize. Here are some common types of risks to research, assess and incorporate into adjustments to next year’s budget:

Competitive. No business is an island (or a monopoly for that matter). The relative strength and strategies of your competitors affect how your company should shape its budget. For this reason, gathering competitive intelligence and acting accordingly is a must.

For example, if a larger competitor has moved into your market, you may need to allocate more funds for marketing and advertising. Then again, if a long-time rival has closed up shop, you might be able to keep those costs the same (or even lower them) and channel more money into production as business picks up.

Compliance.

By Linkenheimer LLP|2020-09-03T20:03:26+00:00November 26th, 2019|business, Financial Reporting Framework|0 Comments

Financial Reporting Framework (FRF) for Small to Medium Sized Entities (SMEs)

All financial statements are prepared in accordance with a FRF e.g. Generally Accepted Accounting Principles (GAAP) in the United States of America, and International Financial Reporting Standards (IFRS).

The FRF for SMEs framework is a new accounting option for preparing streamlined, relevant financial statements for privately held, owner-managed, and smaller- to medium-sized for-profit private entities, that need reliable, financial statements, when GAAP financial statements are not required.

The FRF for SMEs framework is constructed of accounting principles that are especially suited and relevant to a typical SME. Examples include the following:

The FRF for SMEs framework uses historical cost as its measurement basis and steers away from complicated fair value measurements.

The framework does not require complicated accounting for derivatives, hedging activities, or stock compensation. Moreover, the FRF for SMEs framework disclosure requirements are targeted, providing users of financial statements with the relevant information they need while recognizing that those users can obtain additional information from management if they desire.

The FRF for SMEs framework consists of traditional accounting principles and accrual income tax accounting methods which are very familiar to lenders. The FRF for SMEs framework is intended to be utilized by entities whose lenders base their decisions principally on reliable […]

By Linkenheimer LLP|2020-09-03T20:05:48+00:00November 5th, 2013|CPA, Financial Reporting Framework, frf, Linkenheimer, Santa Rosa, Small to Medium Sized Entities, sme, steve miksis|0 Comments