(a) CERTIFICATION OF PERIODIC FINANCIAL REPORTS- Each periodic report containing financial statements filed by an issuer with the Securities Exchange Commission pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.

Failure of corporate officers to certify financial reports If the company does not apply one or the other standard correctly, its management is criminally liable.

However, this freedom disipates when a company registers with the SEC (US GAAP) or EU member state regulator (IFRS). Instead, it is designed to address the needs of companies that must, for whatever reason, apply US GAAP or IFRS guidance in full. This site is not meant to address the needs of these companies. Obviously, an accountant working at such a company can stop reading (assuming he or she has gotten this far) and visit some other site. (even if some tax CPAs make it out to be some kind of dark art). Some Americans even have trouble finding a country like the Czech Republic on a map.Īnother reason, unless they cross the IRS's threshold for accrual accounting, preparing a tax return is pretty much: receipts - disbursements = taxable income One reason, most companies in the US have no divisions in other countries. In the United States, the question of which approach is better rarely comes up. Shelf-space height, proximity to other merchandise or any of a myriad of data points useful to management in evaluating how a particular merchandise item contributes to the company's bottom line. The advantage of approach B is that it makes the job of managing a company easier.įor example, there is no requirement in any accounting standard that companies break sales down, for example, by product type, store location, in-store location, 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.

Set up gaap standard accounts