Without a common COA, consolidating these divisions is daunting (if possible at all). This is especially important for a company that must submit that report to a regulator like the US SEC.Ī common account structure is also important for a company with operating in multiple jurisdictions. The advantage of approach A is that it makes creating the financial report relatively straight forward. Instead, management designs the COA around its own needs using managerial accounting principles. The more closely it adheres to that guidance, the less likely mistakes in applying that guidance will be made.Īpproach B does not require an accounting standard be selected at all. Once that standard has been selected, the COA is designed around that standard's recognition guidance. Instead of having to decide which standard will work best, they either apply the national GAAP or go to prison.Ī more detailed discussion of national GAAP is available in the release notes. In this respect, the management of a company operating in a country that prescribes a national GAAP has it easy. In the end, managment can decide what works best for them and their company. Then again, no ever said creating a COA for usable with two different reporting standards and two (generally incompatible) XBRL taxonomies was going to be a stroll in the park. Once the company becomes complicated (listed on an exchange with an IFRS and/or US GAAP reporting obligation), it can take months.Įven the standard COAs downloadable here were not easy.įor example, the universal COA (and all of its versions) took almost a year and over 1400 man hours. Once the company becomes more complicated (multiple divisions, multiple tax jurisdictions), it can take weeks. Then again, maybe we are just being cynical. We suppose this may also be the reason why this tax CPA makes this suggestion. The problem is the "Just be sure to make it easy for them by incorporating any special accounts they need into your remodeled chart accounts." is the hard part and, unless done very well, often leads to a tax CPA's services being more costly than they would otherwise have been. Just be sure to make it easy for them by incorporating any special accounts they need into your remodeled chart accounts." Sure, it is true that "tax and audit CPAs have the custom reporting software to easily convert your management-oriented chart of accounts into their format. And no, management cannot simply ignore tax reporting like the site we are criticizing suggests.
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