Released in October 2014 by the American Institute of CPAs (AICPA) Accounting and Review Committee, the Statement Standards for Accounting and Review Services No. 21 (SSARS 21) is considered the most substantial change to accounting standards since the 1970s. SSARS 21 went into effect on December 15, 2015.
Prior to SSARS 21, it was extremely difficult to know when the Compilation standard was required. While the old accounting literature stated that an Accountant was in the Compilation standard when hired to perform a Compilation, it also stated that they were in the Compilation standard whenever they prepared or presented financial statements to a client or third-party. This created a lot of confusion.
Previously, preparing financial statements involved sitting down with the client with everything done on paper. The adoption of cloud computing and other applications have made this process fairly complex. While cloud computing has made it possible for clients to have increased access to financial statements, it has also made it virtually impossible to tell whether these statements were prepared by an accountant, management, or the computer application itself. The old SSARS literature simply doesn’t work in this type of situation.
In the past, every time a client requested a financial statement from their accountant, they were forced into a Compilation as well. SSARS 21 eliminates this additional service. It modernizes the literature to take into account the actual needs of modern day clients.
SSARS removes the judgement calls and guesswork involved with the old accounting standards. Today, a Compilation only takes place when the client requests it.
SSARS 21 consists of four sections:
AR-C Sections 60 and 90 remain mostly unchanged from former statements. The release of SSARS 21 shortens and simplifies AR-C Section 80. This section states that Compilation standards only apply when a company requests a Compilation, rather than when the CPA submits financial statements to the client, management, or a third-party.
AR-C Section 70 represents the newest change. This section applies whenever a company requests a CPA prepared financial statement.
Much like a Compilation, a CPA prepared financial statement is a non-assurance service. What makes it different from a Compilation is the fact that a CPA prepared financial statement does not require an accompanying report or disclosure regarding the CPA’s independence. The only disclosure required is a legend on each page stating that assurance is not provided. CPA prepared financial statements are ideal for privately-held and family owned wineries that do not require a report.
SSARS 21 makes it possible for Allen Wine Group to provide cost-effective services to our valued clients. Please contact us for more information about CPA prepared financial reports.