SSARS 23 Changes Preparation and Compilation Standards

SSARS 23 amends SSARS 21 to encompass prospective information

The Accounting and Review Services Committee (ARSC) issued SSARS 23 in October 2016. Parts of the standard (e.g., that applying to supplementary information language in compilation and review reports) were effective immediately, while other parts (mainly regarding preparation and compilation of prospective information) are required as of May 1, 2017. This post tells you how SSARS 23 affects Preparation (AR-C 70) and Compilation (AR-C 80) engagements.

SSARS 23 changes preparation and compilation standards

You’ll recall that ARSC issued SSARS 21 back in October 2014. It was effective for years ending December 31, 2015. A clarified version of the compilation and review standards is included in SSARS 21. SSARS 21 also provides new guidance for the preparation of financial statements. The Standard did not address prospective financial statements. Why? The AICPA was working on clarifying the Attestation Standards (SSAE 18), the place where compiled prospective financial statement guidance was (previously) housed. With the issuance of SSARS 23, the AICPA moved this guidance from the Attestation Standards to SSARS.

The primary impact of SSARS 23 is to provide standards for the preparation and compilation of prospective financial information.

How Preparation of Financial Statements (AR-C 70) Changed

The Preparation Standard (AR-C 70) now includes guidance regarding prospective financial information. Since significant assumptions are essential to understanding prospective information, SSARS 23 requires their inclusion. The accountant should not prepare prospective financial information without including the disclosure of the summary of significant assumptions. Also, a financial projection should not be created unless it includes:

  • an identification of the hypothetical assumptions, or 
  • a description of the limitations on the usefulness of the presentation

SSARS 23 deletes the word “accordingly” from the AR-C 70 disclaimer; the change is shown below:

How Compilation Engagements (AR-C 80) Changed

AR-C 80, Compilation Engagements, now applies to compilations of prospective financial information (new with SSARS 23), pro forma financial information (see SSARS 22), and other historical information (as provided for in SSARS 21). 

SSARS 23 also clarifies that accountants must disclose known departures from the applicable financial reporting framework in the accountant’s compilation report. Prior to SSARS 23, accountants could disclose such departures in the notes without doing so in the compilation report.

Prospective Financial Information Guidance

Both AR-C 70 and AR-C 80 were amended to clarify that the AICPA Guide Prospective Financial Information provides comprehensive guidance regarding prospective financial information, including suitable criteria for the preparation and presentation of such information.

Clarification Projects Complete

The AICPA has clarified the audit standards (AU-C), the attestation standards (AT-C), and the SSARS (AR-C).

Short SSARS 23 Video

If you desire additional information about SSARS 23, check out my video:

SSARS 21 Book

If you need SSARS 21 guidance, see my book on Amazon.

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2 thoughts on “SSARS 23 Changes Preparation and Compilation Standards

    • Chuck, sorry but I haven’t taken any write up or compilation CPE in while. I teach compilation and review classes to my firm and get credit that way. Sorry but I don’t offer any online CPE classes.