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FRF for Smes Illustrative Financial Statements

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FRF for Smes Illustrative Financial Statements Illustrative Financial Statements This section of Financial Reporting Framework for Small- and Medium-Sized Entities Implementation Resources contains sample financial statements intended to illustrate financial statements prepared under the FRF for SMEs accounting framework. Sample financial statements, including notes to the financial statements, are presented below. The set also contains financial statements based on accounting principles generally accepted in the United States of America (U.S. GAAP). During the AICPA staffs outreach efforts related to the FRF for SMEs accounting framework, users of financial statements and other stakeholders asked for comparisons of financial statements prepared under the framework to those prepared under U.S. GAAP. These are presented for comparative purposes. These sample financial statements are included for illustrative purposes and are not intended to establish reporting requirements. Furthermore, the dollar amounts shown are illustrative only and are not intended to indicate any customary relationship among accounts. The sample financial statements do not include all of the accounts and transactions that might be found in practice. The notes indicate the subject matter generally required to be disclosed, but should be expanded, reduced, or modified to suit individual circumstances and materiality considerations. In the following illustrative financial statements based on the FRF for SMEs accounting framework, it is presumed that the management of Alpha Contractors, Inc. and subsidiary evaluated the financial reporting needs and responsibilities of their business and determined that the FRF for SMEs accounting framework was a suitable accounting option to use in the preparation of their financial statements. Alpha Contractors, Inc. and Subsidiary Comparative Financial Statements December 31, 20X2 and 20X1 Based on the FRF for SMEs Accounting Framework Primary differences between the Alpha Contractors illustrative financial statements based on the FRF for SMEs accounting framework and those based on U.S. GAAP are in the financial statements based on the FRF for SMEs accounting framework, Alpha Contractors adopts the taxes payable method for accounting for income taxes. In the U.S. GAAP presentation, Alpha Contractors is required to follow the deferred taxes method, including the accounting guidance for uncertainty in income taxes, and makes the related disclosures. the financial statements based on the FRF for SMEs accounting framework do not include the "Impairment of Long-Lived Assets" disclosure in the summary of significant accounting policies that is contained in the U.S. GAAP-based financial statements. The FRF for SMEs accounting framework does not require impairment testing of long-lived assets. Note: No supplemental schedules, which are commonly prepared to accompany or supplement the basic financial statements, have been prepared as part of this illustration. Independent Auditors Report To the Stockholders Alpha Contractors, Inc. and Subsidiary We have audited the accompanying consolidated financial statements of Alpha Contractors, Inc. and Subsidiary, which comprise the consolidated statements of assets, liabilities, and equity as of December 31, 20X2 and 20X1, and the related consolidated statements of revenue, expenses, and retained earnings, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Financial Reporting Framework for Small- and Medium-Sized Entities issued by the American Institute of Certified Public Accountants, described in Note 1; this includes determining that the Financial Reporting Framework for Small- and Medium-Sized Entities is an acceptable basis for the preparation of the financial statements in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Companys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alpha Contractors, Inc. and Subsidiary, as of December 31, 20X2 and 20X1, and the results of its operations and its cash flows for the years then ended in accordance with the Financial Reporting Framework for Small- and Medium-Sized Entities, described in Note 1. Basis of Accounting We draw attention to Note 1 of the financial statements, which describes the basis of accounting. The financial statements are prepared in accordance with the Financial Reporting Framework for Small- and Medium-Sized Entities, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. [Signature of Accounting Firm] Greenville, South Carolina February 18, 20X3 Alpha Contractors, Inc. Consolidated Statements of Assets, Liabilities, and Equity (FRF for SMEs Accounting Framework Basis) December 31, 20X2 and 20X1 Assets 20X2 20X1 Cash and cash equivalents $304,400 $221,300 Contracts receivables 3,789,200 3,334,100 Costs and estimated earnings in excess of billings on 156,900 100,600 uncompleted contracts Inventory 89,700 99,100 Prepaid charges and other assets 118,400 83,200 Total current assets 4,458,600 3,838,300 Advances to and equity in joint venture 205,600 130,700 Note receivable, related company 175,000 150,000 Property and equipment, net of accumulated 976,400 1,019,200 depreciation and amortization Total long term assets 1,357,000 1,299,900 Total assets $5,815,600 $5,138,200 See independent accountants audit report and notes to consolidated financial statements. Liabilities and Shareholders' Equity Liabilities 20X2 20X1 Current maturities of notes payable $110,300 $110,300 Current portion of lease obligations payable 62,250 57,250 Accounts and retentions payable 2,543,100 2,588,500 Billings in excess of costs and estimated earnings on 242,000 221,700 uncompleted contracts Accrued loss on uncompleted contract 76,700 - Other accrued liabilities 88,600 114,600 Total current liabilities 3,122,950 3,092,350 Notes payable, less current maturities 357,800 468,100 Lease obligations payable, less current portion 135,350 194,050 Long-term accrued liabilities 154,200 26,200 Total long term liabilities 647,350 688,350 Total liabilities 3,770,300 3,780,700 Shareholders' equity Common stock$1 par value, 500,000 authorized 300,000 300,000 shares, 300,000 issued and outstanding shares Retained earnings 1,745,300 1,057,500 Total shareholders' equity 2,045,300 1,357,500 Total liabilities and shareholders' equity $5,815,600 $5,138,200 See independent accountants audit report and notes to consolidated financial statements. Alpha Contractors, Inc. Consolidated Statements of Revenues, Expenses, and Retained Earnings (FRF for SMEs Accounting Framework Basis) Years Ended December 31, 20X2 and 20X1 20X2 20X1 Contract revenues earned $9,630,800 $6,225,400 Cost of revenues earned 7,436,100 4,951,300 Gross profit 2,194,700 1,274,100 Selling, general, and administrative expense 895,600 755,600 Income from operations 1,299,100 518,500 Other income (expense) Equity in earnings from unconsolidated joint 49,900 5,700 venture Gain on sale of equipment 10,000 2,000 Interest expense (net of interest income of (69,500) (70,800) $8,800 in 20X2 and $6,300 in 20X1) Total other expense (9,600) (63,100) Income before current year tax expense 1,289,500 455,400 Income tax expense 451,700 300,900 Net income 837,800 154,500 Retained earnings, beginning of year 1,057,500 1,053,000 1,895,300 1,207,500 Less: Dividends paid (per share $.50 [20X2]; 150,000 150,000 $.50 [20X1]) Retained earnings, end of year $1,745,300 $1,057,500 See independent accountants audit report and notes to consolidated financial statements. Alpha Contractors, Inc. Consolidated Statements
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