OCBOA Explained: What Is “Other Comprehensive Basis of Accounting”?

When we think of accounting in the U.S., the GAAP accrual basis framework usually comes to mind. It’s the standard for most businesses, nonprofits, and public companies. But GAAP isn’t the only game in town — there are alternative frameworks that fall under what’s called OCBOA, or Other Comprehensive Basis of Accounting.

OCBOA is considered a special-purpose framework and can be helpful for entities that don’t need the complexity of full GAAP reporting. Let’s break it down.

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What Counts as OCBOA?

Presentations under OCBOA include:

1. Cash basis or modified cash basis of accounting

2. Tax basis of accounting

3. Price-level adjusted financial statements

4. Regulatory basis of accounting

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Financial Statements Required

Under OCBOA, the required set of financial statements typically includes:

• A balance sheet

• An income statement

• An explanation of changes in equity

💡 Note: a statement of cash flows is not required (cash is already the foundation of these frameworks).

One key difference: because the term income statement implies accrual accounting, OCBOA reports must state the framework in their title. Example: “Income Statement (Tax Basis)”.

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Disclosure Requirements

Even with a simpler framework, disclosures still matter. OCBOA requires:

• A summary of significant accounting policies

• Other disclosures similar to GAAP, such as related-party transactions, subsequent events, and uncertainties

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Types of OCBOA Frameworks

1. Cash Basis

• How it works: Cash in = revenue, cash out = expenses. Simple.

• Best for: Estates, trusts, civic ventures, political campaigns.

• Statements:

  • Statement of cash and equity (like a stripped-down balance sheet: only cash as an asset, equity equals cash, no liabilities).

  • Statement of cash receipts and disbursements (like an income statement).

2. Modified Cash Basis

• A hybrid between cash and accrual.

• Includes some accrual concepts like:

  • Capitalizing and depreciating assets

  • Recording liabilities (short- and long-term)

  • Accruing income taxes

  • Capitalizing inventory

  • Reporting investments at fair value, including unrealized gains/losses

• Statements:

  • Statement of cash and equity

  • Statement of assets and liabilities (modified cash basis)

  • Statement of revenues, expenses, and retained earnings (modified cash basis)

3. Income Tax Basis

• Built on IRS rules used for tax returns.

• Well-suited for more complex operations.

• The tricky part: handling revenues/expenses not recognized for tax purposes. Options include:

  • Reporting them as separate line items

  • Reconciling them with net income

  • Disclosing them in the footnotes

• Statements:

  • Balance Sheet (tax basis)

  • Income Statement (tax basis)

  • Additional footnotes depending on the entity’s tax return complexity

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Why OCBOA Matters

For some organizations, GAAP is unnecessarily complex — especially when the main stakeholders (like donors, regulators, or boards) only need straightforward reporting. OCBOA offers flexibility, simplicity, and reduced reporting costs, while still requiring consistency and transparency.

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✨ Takeaway: OCBOA frameworks may not get as much attention as GAAP, but they provide practical, efficient alternatives for entities that don’t need the full weight of accrual accounting. The key is ensuring disclosures and titles clearly identify the framework in use.