DEFINITION of 'Other Comprehensive Basis of Accounting - OCBOA'

Financial statements prepared using a system of accounting that differs from GAAP, the most common being tax-basis and cash-basis financial statements. Other Comprehensive Basis of Accounting (OCBOA) systems also include a statutory basis of accounting such as that used by insurance companies to comply with the rules of a state insurance commission, as well as financial statements prepared using defined criteria that are well-supported in popular literature.

BREAKING DOWN 'Other Comprehensive Basis of Accounting - OCBOA'

Two major advantages of financial statements prepared under OCBOA are: they are easier to understand than statements prepared under GAAP, which can be quite complex, and they may cost significantly less to prepare than GAAP-based statements. A key difference between GAAP-basis financial statements and those prepared under OCBOA is that the latter does not require a statement of cash flows.

One criticism of OCBOA statements is that disclosures are not adequate. As a result, it is recommended that comprehensive disclosures be made by a company that has adopted OCBOA, including the basis of accounting used, contingent liabilities and risks and uncertainties.

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