What Technical Accounting Really Means for Small and Midsize Businesses — And Why It Matters
There’s a quiet shift that happens as small and midsize businesses grow: their financial reporting needs start to evolve. Suddenly, internal spreadsheets aren’t enough. Bankers want reviewed financials. Investors ask questions about GAAP compliance. Auditors appear on the scene.
And that’s when technical accounting enters the picture.
Many early-career professionals — and even experienced operators outside of audit — think of technical accounting as something reserved for larger companies or public filers. But the truth is, technical accounting applies to companies of all sizes. If your client or employer is pursuing a financial statement audit, expanding through acquisitions, or issuing equity-based compensation, you’re already playing in this arena.
The only question is whether your team knows how to recognize these issues — and what to do next.
What Is Technical Accounting, Really?
At its core, technical accounting is the interpretation and application of complex or judgment-heavy accounting standards to a company’s unique facts and circumstances. It’s about digging into the how and why behind the numbers — not just plugging in journal entries.
It’s most commonly needed when a business is producing financial statements in accordance with U.S. GAAP, particularly in preparation for an external audit. That could be because the company is raising capital, issuing stock options, preparing for M&A, or simply reaching the size and complexity that demands more sophisticated reporting.
Technical accounting sits at the intersection of business growth and compliance. As a company matures, the accounting gets harder — not because the books are wrong, but because judgment is now required. And that’s where things get interesting.
The “Big 7” Standards That Come Up Most Often
I regularly support small and mid-market clients as they prepare for audits or address one-off accounting events, and these are the seven most common technical areas I see, along with the types of questions I’m trying to answer and the deliverables I typically prepare:
ASC 606 – Revenue Recognition
Key question: When do we recognize revenue, and how?
Deliverables: Customer contract review, revenue waterfall schedules, technical accounting memo.
ASC 842 – Leases
Key question: What qualifies as a lease, and how should it be measured and recorded?
Deliverables: Lease identification, right-of-use asset/liability schedules, journal entries, memo documenting key assumptions.
ASC 718 – Stock Compensation
Key question: How do we value and expense equity-based compensation like stock options or RSUs?
Deliverables: Valuation support (e.g., 409A), expense amortization schedules, grant documentation, memo support.
ASC 740 – Income Taxes
Key question: How do we account for taxes on an accrual basis, and what do we do with uncertain tax positions or deferreds?
Deliverables: Deferred tax asset/liability schedules, valuation allowance analysis, tax footnote disclosures, and memos.
ASC 326 – Credit Losses (CECL)
Key question: What is our expected credit loss on financial assets like receivables?
Deliverables: Loss-rate or aging-based models, assumptions documentation, CECL methodology memo.
ASC 810 – Consolidation
Key question: Do we need to consolidate this entity? Are we the primary beneficiary of a VIE?
Deliverables: Org chart and ownership analysis, consolidation entries, VIE assessment memo.
ASC 805 – Business Combinations
Key question: Did we acquire a business or just a group of assets, and how should we account for the transaction?
Deliverables: Purchase price allocation model, intangible asset identification, goodwill calculation, acquisition memo.
What Technical Accounting Looks Like in Practice
In practice, technical accounting support usually involves a few key deliverables:
Technical Memos — These summarize the issue, relevant guidance, management’s position, and supporting rationale. Memos don’t need to be 30 pages — a well-written 5-page memo can be just as effective, especially for a smaller client.
Schedules and Support Models — Whether it’s lease amortization, revenue waterfalls, or stock option vesting, these models translate technical rules into numbers that auditors and stakeholders can understand.
Audit Support and Communication — We often interface directly with auditors to walk through accounting positions and answer technical questions on behalf of the client.
Disclosures and Financial Statement Prep — Technical issues often flow through to footnotes and MD&A, where they must be clearly explained.
Not every team member needs to be fluent in these standards. But knowing how to spot when technical accounting is needed — and when to ask for help — is an essential skill in today’s finance world.
What Many People Get Wrong About Technical Accounting
Here are a few things I wish more professionals understood — especially those new to private-company advisory:
The same rules apply to small and large companies. A $20 million company needs to apply ASC 606 just like a $2 billion one. What changes is how much support is needed — not the underlying principles.
You don’t need a 50-page memo every time. The level of documentation should match the size, risk, and complexity of the issue. The goal is to provide clear, auditable support — not to bury your client or auditor in paper.
Private company elections can simplify things — if you know about them. Standards like ASC 842 and 805 have relief options for private companies, but you need to understand them in order to apply them appropriately.
Audit readiness is a team sport. Even if you’re not the one writing the memo, your ability to anticipate technical issues and communicate them early will set you apart as a trusted advisor.
Final Thoughts
Technical accounting may feel like a niche area, but it’s becoming more mainstream by the day — especially in the growing businesses we serve.
If you're an early-career accountant or finance professional, don’t ignore this stuff just because it feels dense. You don’t need to be an expert in all of it. But knowing when to raise your hand, when to escalate, and what kind of support may be needed will make you invaluable to your clients, your team, and your career.
Stay sharp. Stay curious. And when in doubt — go read the codification (or come find someone who already has).