You may be noticing a change in the appearance of your company’s financial statements.
On October 23, 2014, the Accounting Review Service Committee issued Statement on Standards for Accounting and Review Services (SSARS) No. 21, Statement on Standards for Accounting and Review Services: Clarification and Recodification.
SSARS 21 is effective for reviews, compilations and engagements to prepare financial statements for periods ending on or after December 15, 2015, but can be implemented prior to that date.
Also added by SSARS 21 was another type of financial statement that CPA’s can issue called Preparation of Financial Statements. These financial statements replace the old Management-Use-Only statements and can be distributed to third parties if needed. Preparation of Financial Statements applies when the accountant is engaged to prepare financial statements but is not engaged to perform an audit, review or compilation on those financial statements.
Another big change constructed by SSARS 21 is the format of the standard Accountant’s Compilation Report. Prior to SSARS 21, the Standard Compilation Report was three paragraphs. The Standard Compilation Report under SSARS 21 is only one paragraph with no headings.
SSARS 21 also requires the accountant to obtain an engagement letter signed by both the accountant and the client’s management for all reviews, compilations and engagements to prepare financial statements. An engagement letter is a letter that states the terms and conditions of the engagement.
Click here for a Journal of Accountancy article which further details SSARS 21.
Please contact us if you have questions on how your business’ financial statements will be changing.