Other Comprehensive Basis of Accounting (OCBOA)

What Is Other Comprehensive Basis of Accounting?

Other Comprehensive Basis of Accounting (OCBOA) incorporates financial statements prepared utilizing a system of accounting that varies from GAAP, the most common being tax-basis and cash-basis financial statements. Other Comprehensive Basis of Accounting (OCBOA) systems likewise incorporates a statutory basis of accounting, for example, that utilized by insurance companies to conform to the rules of a state insurance commission, as well as financial statements prepared utilizing defined criteria that are very much supported in famous writing.

Grasping OCBOA

Two major benefits of financial statements prepared under OCBOA are: they are more obvious than statements prepared under GAAP, which can be very complex, and they might cost essentially less to prepare than GAAP-based statements. A key difference between GAAP-basis financial statements and those prepared under OCBOA is that the last option doesn't need a statement of cash flows.

One analysis of OCBOA statements is that disclosures are not adequate. Subsequently, it is suggested that complete divulgences be made by a company that has adopted OCBOA, including the basis of accounting utilized, contingent liabilities, and risks and uncertainties.

Under the Statement on Auditing Standards (United States) No. 62, Special Reports, an OCBOA is any of:

A statutory basis of accounting (for instance, a basis of accounting insurance companies use under the rules of a state insurance commission).
Income-tax-basis financial statements.
Cash-basis and modified-cash-basis financial statements.
Financial statements prepared utilizing definitive criteria having substantial support in accounting writing that the preparer applies to all material things showing up in the statements, (for example, the price level basis of accounting).

Special Considerations

In circumstances where GAAP-basis statements aren't required in view of loan covenants, regulatory requirements, or comparable conditions, an OCBOA alternative might be the preferred arrangement.

OCBOA statements might be more valuable for certain elements in view of who the users are and what they are hoping to see. They might be required by a regulatory agency or might be tied to spending plans and management choices. Moreover, costs might be diminished since these reviews might require less complex procedures and required revelations.

Despite the fact that OCBOA statements stray from the undeniably more normal GAAP standards, they are not without their very own code. For example:

Professional standards actually apply to OCBOA statements.
OCBOA statements might be examined, arranged, or looked into.
A statement of cash flows isn't required in OCBOA statements.
The basis of accounting utilized must be unveiled, and all statements must be named in a way that is discernable from GAAP basis titles.
Exposures ought to be comparable to those of a GAAP basis statement and, likewise, ought to give either the pertinent revelations required by GAAP or data that conveys the substance of those required divulgences.
If changing an OCBOA basis, adjustments can't be so broad as to bring about a GAAP basis statement with flights really.

Features

OCBOA doesn't need a statement of cash flows, versus GAAP, and is perceived as having exposures that are inadequate.
Statements prepared under OCBOA are more straightforward to investigate than those made under GAAP; they additionally frequently cost less to prepare.
Generally accepted accounting principles (GAAP) is a method of making financial statements in light of principles issued by the Financial Accounting Standards Board (FASB); public U.S. companies must follow GAAP.
Other Comprehensive Basis of Accounting (OCBOA) is a non-GAAP accounting protocol used to create financial statements.
OCBAOA models incorporate the income tax basis of accounting, the cash basis of accounting, and the modified cash basis of accounting.