CPA Accountant

What is IFRS?

International Financial Reporting Standards (IFRS) is a set of accounting standards, developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.

 

Worldwide Adoption of IFRS  

From the past few years many changes have been seen by many in finance and accounting sectors. Today it is observed that many major economies in the world are under way to adopt IFRS. Nearly 100 countries have adapted their local accounting standards to conform to IFRS.

 It is under practice that many nations developed their own local Generally Accepted Accounting Principles (GAAP). The advent of IFRS has brought with it the choice of adopting a globally accepted set of standards instead of using local GAAP.

 

 But why is IFRS so important and why is convergence of accounting standards so advantageous or even necessary?

 International Financial Reporting Standards remove some of the subjectivity from financial reporting and provide a consistent basis for recognition, measurement, presentation and disclosure of transactions and events in financial statements. In recent Past, there have been cases where companies reporting under IFRS in Europe record a loss but when these same companies re-state their accounts according to US GAAP they record a profit!

 Financial statements are prepared based on a number of accounting principles and assumptions. Accountants use their judgment to apply these principles and produce financial statements for use by management, shareholders, analysts, finance providers, governmental agencies, the general public and other stakeholders.

 

Why is the World looking at IFRS?

 Convergence of accounting standards will have the effect of attracting investment through greater transparency and a lower cost of capital for potential investors. In recent times Companies are finding it increasingly difficult to raise money and get them listed on stock exchanges as they were not following the standard in accordance with IFRS. Differences in accounting practice make it difficult for investors, whether individual or institutional, to compare the financial results of different companies and make investment decisions.

 

 To Whom It Benefits

 Multinational companies will find it easier to comply with reporting requirements of overseas stock exchanges since they would no longer have to re-state their accounts.

Governments will be in a better position to assess the tax liabilities of multinational companies receiving income from overseas as well as for foreign multinationals setting up shop in their own country.

 In 2005 the European Union formally adopted IFRS as the single accounting standard throughout their member countries. Australia, Russia, China, South Africa and the GCC nations have already converged or are in the process of converging with IFRS. Canada has committed to adopting IFRS by 2011. Japan, India, Brazil and Mexico are also pursuing convergence or adoption of IFRS.

 In 2007 the US Securities & Exchange Commission made the landmark decision to allow non-US companies to file their financial statements based on IFRS without reconciling back to US GAAP. This is widely regarded as the most significant step by the SEC towards full adoption of IFRS in the not too distant future. This change by the SEC is an effort to reduce the barriers to capital flows between countries using IFRS and US GAAP.

 The IASC expects that by 2011 more than 150 countries will have adopted IFRS including the US which is expected to at least have converged with IFRS to a great extent either by changing US GAAP or adopting IFRS outright.

 

 Who gets affected by the change?

 A country’s intention to adopt IFRS or converge with IFRS is highly admirable and to be applauded. However, the accounting profession, governments, regulators, national accounting standard setters, and other constituents must continue to work together to eliminate differences between national and international standards. The principal actions needed to support convergence are outlined below.

 v The Accounting Profession needs to assist governments and standard setters in formulating and  enacting convergence plans, provide IFRS training and education and support the preparation of national  language translations of IFRS.  

 v Governments must establish formal convergence plans that include target dates for implementation and address impediments to convergence, for example the link between financial accounting and lax legislation.

 v Regulators should set up efficient and effective enforcement mechanisms to increase the consistency and quality of application of IFRS as well as support the International Financial Reporting Interpretations Committee (IFRIC) and the IASB as the sole clearing house for interpretation of IFRS.

 v National Standard Setters must decide on a strategy and timetable for achieving convergence and develop an active standard setting agenda aimed at eliminating existing differences with IFRS.

 v The IASB is required to address concerns about the complexity and operational practicality of IFRS, prioritize the SME project as an agenda item and oversee and authorize translations of IFRS in various languages.

 v The Preparers of financial statements must actively participate in the standard setting process, in particular to identify practical application concerns, as well as providing IFRS training for staff and managers, including those in non-financial roles.

 v Universities need to include IFRS in the core accounting curriculum.

 v Analysts and Investors are required to promote convergence of national accounting standards with IFRS. They should also actively participate in the IASB’s standard setting process, in particular to identify users’ needs, and educate their staff regarding the IFRS reporting model.

 

SEC offers roadmap to global accounting standards

 The Securities and Exchange Commission has proposed roadmap that could lead to the use of international financial reporting standards (IFRS) by U.S. issuers beginning in 2014. Currently US Companies are using US Gaap. In 2011 SEC would make a final decision whether to adopt IFRS.

“An international language of disclosure and transparency is a goal worth pursuing on behalf of investors who seek comparable financial information to make well-informed investment decisions,” said SEC Chairman Christopher Cox. “The increasing worldwide acceptance of financial reporting using IFRS, and U.S. investors’ increasing ownership of securities issued by foreign companies that report financial information using IFRS, have led the SEC to propose this cautious and careful plan. Clearly setting out the SEC’s direction well in advance, as well as the conditions that must be met, will help fulfill our mission of protecting investors and facilitating capital formation.”

My Opinion

 The transition from GAAP to IFRS is not only inevitable, but a positive development that would help make capital markets more competitive. Transitioning to IFRS would allow companies to compete for capital in other countries, while reducing cost and complexity for companies operating internationally; we also think that embracing a single set of global accounting standards would contribute to a higher degree of investor understanding and confidence. Also IFRS is very important for US Investors as they own 2/3 rd of securities issued by foreign companies. Because of IFRS there will be greater comparability and greater confidence in the transparency of financial reporting for the US investors  

 

ICS can help you and your business. ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at 203 437 4083, e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com

Disclaimer:  ICS does not offer legal services or legal advice, but only generic information on legal subjects. ICS is not an attorney or law firm and not a substitute for an attorney or law firm

 

Accounts and the recruitment of accounts has always been a headache for entrepreneurs who don’t know how to manage them. Small scale business units have faced major problems because of the wrong calculation of profits and stock-in-trade in their balance sheets and profit and loss statements. The question then arises is how can this problem be solved. One solution is hiring an accountant preferably a CPA to handle accounting worries. But then this becomes very expensive and in present day market condition where due to recession and competition, there is a lot of cost cutting, the salary and perks paid to an accountant turns out to be highly expensive. Where cost cutting is the motto of the day one simply can not afford to hire a CPA anymore. What the recent trend has changed into, is taking the help of New York accounting firm to manage all the accounting worries.

It is mandatory to keep the books of accounts updated on a daily basis for which one has to take professional help if one doesn’t know how to prepare accounts. Accounts are the face of the business. They are used by not only the shareholders but also the creditors, debtors, government and prospective buyers. Thus it’s very important to have just and regular accounts maintenance.

New York accounting firm charges a very nominal rate for its services and offers all the help one needs to tally the balance sheets and income statements. The fees aren’t that high due to various reasons like outsourcing and managing work of a lot of other businesses. It’s not that far and has professionals with a lot of work experience manage your accounts. Another advantage is that this will give a business the third person perspective and one can make decisions without emotional attachment. The New York accounting firm has a lot of professionals working so if there is any doubt then they will all help in solving that. Plus they also manage work for firms in the same industry and peer groups so one has a fair amount of idea what practices they are using and can compare their standards to the business.

When one hires a CPA then there is only one person to do all the work and this often gets boring and complicated for one person to handle reducing the productivity levels and making the work place monotonous. When a business takes help from New York accounting firm they don’t have to worry about the space the professional would occupy since they have their own office. This is particularly helpful for small businesses where there is a lot of shortage on work areas.

New York accounting firm not only helps in the preparation of accounts but also advices the business to take new steps and what projects to venture in the future according to the market scenarios and the firms solvency. The firm’s net worth is also calculated by accounting firms so that if the business gets a buyer with a 25-40% profit they can consider sale. An accounting firm also saves firms from the constant threat of acquisitions by peer companies by using certain accounting policies.

Looking for a Bookkeeping / Accounting / CPA firm – which works for your best interest?

Hiring the right Bookkeeping firm is an important aspect of your business. What do we look for in the firm we select to serve our business? Is it their business knowledge, skill sets, their approach & attitude, their passion towards work, customer service, price or a mixture of everything?  You ask me, I’d say everything!

A lot of things from these mentioned points can be found out only by talking with them or by passage of time. However you can make an initial decision to go with them based on some skills and knowledge related questions.

Why does it become so important to test a firm for their knowledge / skills before we outsource our accounting work to them – Well it’s because the costs you pay every time you move your accounting firm can be huge. Also untimely and inaccurate reports can put you under heavy penalties from taxing authorities.

We have used various questions below which will help you when interviewing your bookkeeping / accounting compliance firm in your initial conversation with them. With these questions you can test their knowledge in QuickBooks, Excel and General Accounting / Bookkeeping concepts.

QuickBooks: 

Are you Quick book certified?

Having a QuickBooks ProAdvisor License or a QuickBooks Certified User really differentiates a person / entity with other service providers. After achieving the ProAdvisor or Certified User status these QuickBooks professional gain required knowledge and skills needed to assist you with your Bookkeeping assignment.

Can you show us the process of invoicing and collecting from a customer in QuickBooks?

A QuickBooks Certified user or a QuickBooks ProAdvisor will mention creating an invoice, receiving payment and making a deposit, QuickBooks aging reports and QuickBooks pre-written collection letters.

Can you show us how to use QuickBooks to track or manage employee’s time?

QuickBooks has some neat time tracking features. An experienced QuickBooks have had the opportunity to use them, and if someone can explain you the details of the feature instantly then it is great sign of their knowledge.

We are maintaining our bookkeeping in Peachtree Accounting, can the data be transferred to QuickBooks?

An experience QuickBooks user will instantly say that it can be done. QuickBooks has a conversion feature wherein a data can be converted from Peachtree Accounting or many other similar accounting system in QuickBooks.

General accounting knowledge: 

What is the difference between capital expenditure and regular business expense?

An Accountant should be able to explain you a difference between an asset and an expense. Any expenditure that is associated with that asset usually qualifies as a Capital Expenditure.

Explain the differences between purchasing a computer and a travel expense, with respect to profitability, cash flow and general accounting?

An experienced bookkeeper will understand depreciation and easily talk about this.

Excel:

Scenario: you have a spreadsheet with information on 500 products.  You have a column which says the total available quantity. You want product line arranged in ascending order of quantity.

An experience Excel user will immediately tell you that this can be done by sorting.

General Business Knowledge:

You have a friend who is considering purchasing a company and she asks you to look at the numbers and let her know what you think.  What do you do?

There is no definite answer to this question. However an experience Accountant will talk to you about terms like due diligence, profitability of the firm compared to industry standards, cash flow analysis, balance sheet analysis, etc.

ICS Accounting Team is a group of professionals who are QuickBooks ProAdvisor and Certified Users. ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at 203 437 4083, e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com