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McNair, McLemore, Middlebrooks & Co., LLC Charles B. Hall, CPA, CFE, Macc chall@mmmcpa.com
OCBOA
OCBOA
Cash basis
Modified cash basis Tax basis
OCBOA
Other meaning other than GAAP
OCBOA
OCBOA
Basis determines how transactions are recognized and measured.
E.g., Cash basis does not recognize a transaction until cash is received or disbursed E.g., Modified cash basis may capitalize property and equipment and then depreciate the asset E.g., Tax basis will recognize a transaction as it would be recognized on the tax return
OCBOA
OCBOA
OCBOA is permissible by:
SAS 62, Special Reports - Auditing Standard SSARS 19 - Compilation Standard
Auditing Standards
SAS 62 describes the following OCBOAs:
Governmental regulatory provisions Income tax basis Cash basis Definite set of criteria having substantial support
Auditing Standards
SAS 62 prohibits issuing a special report unless one of the foregoing descriptions applies to the financial statements
SSARS 19
Defines OCBOA as a definite set of standards having substantial support underlying the preparation of financial statements
Reporting
Use OCBOA titles in the financial statements
E.g., Statement of Assets, Liabilities and Equity - Tax Basis
Cash Basis
Balance sheet Cash Equity Can use a single statement titled Statement of Cash Receipts and Cash Disbursements
Cash Basis
Purchase of a building is shown a cash outflow and not an asset on the balance sheet A loan for the purchase of the building is shown as a cash inflow rather than a debt on the balance sheet
Cash Basis
The purchase of $10,000,000 investment is shown as a cash outflow and not as an investment asset
Cash Basis
Use the following captions in the Statement of Cash Receipts and Disbursements:
Cash receipts
Cash disbursements
Consider use of selected disclosure (i.e., single note) explaining the basis of accounting
When possible, use the tax basis of accounting rather than the modified cash basis (tax-basis accounting provides a reason for your recognition or nonrecognition of all items)
Accrual basis
Partnerships, LLCs and Nonprofits are not described by the IRS as income tax returns
Report information
Closing Comments
Where possible, use tax-basis of accounting without disclosure
No disclosures required No cash flow statement Tax return and statements are the same (less confusion)
Closing
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