Dealer Insights - November/December 2013 - Dealer Digest

Boomers regain top spot as new car buyers 

The oldest baby boomers — those 55 to 64 — have replaced younger consumers (35 to 44) as the U.S. demographic group most likely to buy a new vehicle, according to a study by the University of Michigan's Transportation Research Institute.

The reason behind the surprising statistic, according to the study's author, is that many boomers are continuing to work and, because they grew up in an era where a car was a psychological extension of oneself, buying a new one remains important. But Gen Yers and other younger drivers are more likely to view cars merely as a mode of transportation.

New financial reporting option for non-GAAP dealerships 

A new financial reporting option could ease the process for privately held, owner-managed dealerships not required to follow Generally Accepting Accounting Principles (GAAP). The American Institute of Certified Public Accountants (AICPA) recently released the Financial Reporting Framework for Small- and Medium-Sized Entities (SME framework).

The framework is modeled after a set of private company principles developed by the Canadian Institute of Chartered Accountants (which has since merged with another group to create CPA Canada). Its purpose is to help these businesses clearly and concisely report what they own, what they owe and their cash flow.

Calling the new option a real "game-changer," Bob Durak, the AICPA's Director of Private Company Financial Reporting, told the trade press, "Millions of small businesses across the country will have another set of standards to choose from. . . . It's cost-effective, and a simplified approach — it's really a response to market demand."

According to the AICPA, the SME framework is a streamlined alternative to GAAP that focuses on the SME's performance and its assets, liabilities and cash flows. The new framework is expected to be relevant to lenders and other SME constituents, because it will report a business's profitability, cash available and assets to cover expenses.

The accounting principles in the framework reportedly are suitable to SMEs. For example, it:

  • Uses historical cost as its measurement basis, allowing SMEs to avoid complicated fair value measurements,
  • Reduces book-to-tax differences,
  • Doesn't require complicated accounting for derivatives, hedging activities or stock compensation, and
  • Targets its disclosure requirements to provide users of financial statements with the relevant information they need while recognizing that users can obtain additional information from management if they desire.

For more information on the SME framework, and to discuss whether the option is appropriate for your dealership, contact your CPA. Also, contact your manufacturer and lender to verify that this accounting method is acceptable to them.

Dealer Insights - November/December 2013


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