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The course covers the whole spectrum of personal financial statements: accounting standards, engagement and representation letters, compilation performance standards, disclosures, reporting, documentation, and engagement administration. If you prepare personal financial statements for individuals, you will find this course a reliable guide through the maze of professional standards and practice issues.
Highlights include the difference between personal financial statements and personal financial plans; internal use vs. third-party use statements; accounting and disclosure issues; accountants’ reports and more.
Objectives:
Identify the steps to prepare and report on personal financial statements in conformity with all applicable current professional standards
Prerequisite: Experience with compilations
733501
Overview
Course Objectives
Introduction
Personal financial statements are prepared for individuals either to formally organize and plan
their financial affairs in general or for specific purposes, such as obtaining credit, income tax
planning, retirement planning, gift and estate planning, or public disclosure of their financial
affairs. Users of personal financial statements rely on them in determining whether to grant
credit, in assessing the financial activities of individuals, in assessing the financial affairs of
public officials and candidates for public office, and for similar purposes. Personal financial
statements include the financial statements of an individual or a group of related individuals,
such as a husband and wife or a family. This course discusses the authoritative guidance for compiling and reporting on personal
financial statements.
Organization
This course covers the authoritative guidance for preparing personal financial statements in
accordance with generally accepted accounting principles. In addition, this course covers the
performance and reporting requirements that are applicable when an accountant compiles
personal financial statements. The course is a combination of discussion, examples to illustrate the concepts, plus thoughtful questions and answers and cases to test the understanding of the concepts covered in the course.
The course is organized as follows:
Chapter 1: Personal Financial Statements – Overview and Authoritative Guidance – Explores the authoritative guidance for personal financial statements, including SOP 82-1 and the AICPA Audit Guide, Personal Financial Statements.
Chapter 2: Engagement Planning and Administration – Discusses several administrative issues related to compilation of personal financial statements, including client acceptance.
Chapter 3: Primary Financial Statement Considerations – This chapter covers key issues in preparing personal financial statements, including form and style of presentation.
Chapter 4: Determining Estimated Current Values – Discusses GAAP for personal financial statements, which is estimated current value, and how to determine these values.
Chapter 5: Disclosures in Personal Financial Statements – This chapter covers the common disclosures included in personal financial statements.
Chapter 6: Compilation Procedures – This chapter covers issues involving the performance standards within SSARS.
Chapter 7: Reporting on Compiled Personal Financial Statements – This chapter covers common reporting concerns, including uncertainties, supplementary information, and prescribed forms.
Conclusion
This manual is designed to be a permanent reference tool. We hope your reading of this manual
enriches your professional learning experience. Note. We use the terms he and she alternately throughout the course (except when a particular
person is mentioned) since both sexes are well represented in the accounting and auditing areas.
Chapter 1
Personal Financial Statements – Overview and Authoritative Guidance
Learning Objectives
Introduction
Personal financial statements are prepared for individuals either to formally organize and plan
their financial affairs in general or for specific purposes, such as obtaining credit, income tax
planning, retirement planning, gift and estate planning, or public disclosure of their financial
affairs. Users of personal financial statements rely on them in determining whether to grant
credit, in assessing the financial activities of individuals, in assessing the financial affairs of
public officials and candidates for public office, and for similar purposes. Personal financial
statements include the financial statements of an individual or a group of related individuals,
such as a husband and wife or a family.
Prior to 1982, the 1968 AICPA Industry Audit Guide, Audits of Personal Financial Statements,
supported historical cost as the primary basis of measurement for personal financial statements
and recommended the presentation of estimated current values as additional information. The
preface to that guide stated that “generally accepted accounting principles and auditing standards
developed for commercial enterprises are applicable in general to personal financial statements.”
However, the increasing use of personal financial statements and experience with the use of the
guide suggested the need to reassess those conclusions in light of the purposes for which
personal financial statements are prepared, the users to whom they are directed, and the ways in
which they are used. Statement of Position (SOP) 82-1, Accounting and Financial Reporting for Personal Financial Statements, is the result of that reassessment; it supersedes the accounting
provisions of the 1968 AICPA Industry Audit Guide, Audits of Personal Financial Statements.
Key Issues in Preparing Personal Financial Statements
A basis of accounting is a framework for determining what and how information is presented in
the financial statements and related notes. However, many issues have arisen in practice when
preparing personal financial statements. These issues are summarized as follows.
Ownership of Assets
Personal financial statements generally present the combined assets and liabilities of a husband
and wife. In these cases, it may be useful to disclose each individual’s interest in the net assets in
an additional statement or in a note to the financial statements.
When personal financial statements are prepared for only one of a group of joint owners, only
the individual’s share should be included as part of his or her assets. If an individual is a joint
owner of property, state law should be used to determine the individual’s interest in the property.
The individual’s interest in the property will determine what proportion of the value of the
property should be included in the individual’s personal financial statements. If ownership is
based on joint tenancy, however, it may be necessary to consult legal counsel to determine the
individual’s interest in the property. In addition, if the client has an interest in a separate business
(for example, is the owner of a closely held corporation), the property should be shown as a
separate asset and not presented with other investments.
Choosing the Basis of Accounting
SOP 82-1 states that personal financial statements should present assets at their estimated current
values and liabilities at their estimated current amounts and describes in detail the principles for
such presentations. SOP 82-1 also states that assets, liabilities, and changes in them should be
accounted for on the accrual basis.
The AICPA’s Personal Financial Statements Guide (Guide) states that the accountant may
compile, review, or audit personal financial statements that are prepared in conformity with a
comprehensive basis of accounting that presents assets and liabilities at values and amounts other
than estimated current values and amounts. The Guide states that other comprehensive bases of
accounting include, for example, historical cost, tax, and cash.
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