Archive for Accounting
November 19, 2008 at 3:55 am · Filed under Accounting
Just four days after releasing a formal “roadmap” proposal to move U.S. companies to international accounting rules, U.S. regulators are facing a slew of complaints about the millions of dollars it would cost companies to make the switch.
A top U.S. securities regulator said on Tuesday, that the proposed transition toward international accounting rules in the United States should not reduce the amount of information available to investors, even if it requires companies to keep dual sets of books for years at their own expense.
“We would not want to reduce the amount of information that is available to U.S. investors,” John White, the director of the division of Corporation Finance for the U.S. Securities and Exchange Commission said on Tuesday in response to concerns from corporate finance executives about the cost of switching to International Financial Reporting Standards (IFRS).
“Today the U.S. investor gets three years of information,” White continued, saying that if companies transition by 2014, as proposed, they would likely have to report results in IFRS for the two previous years.
White’s comments at a Financial Executives International conference in New York stood in stark contrast to concerns expressed by executives at the conference on Tuesday.
“I don’t think this is a particularly good time, given the economy to begin this massive … move to IFRS,” Talia Griep, vice president and controller at manufacturer Honeywell International Inc said on Monday. “It’s just a tall order to ask for any group of executives.”
To make the switch, Griep estimated her company would have to begin running parallel sets of accounting books, in U.S. Generally Accepted Accounting Principles and IFRS by January, 2012 — a move that would require more training, technology and other costs for her accounting staff.
On Tuesday, the SEC’s White acknowledged many companies would prefer to run two sets of books “rather … than go back and reconstruct,” their financials.
On Friday, the SEC released its formal proposal for a “roadmap” that would have U.S. companies filing financial results under IFRS by 2014. The release is open for public comment until February 19.
Under the proposed roadmap, in industries where a significant majority of companies use IFRS, some U.S. companies would have the option to file financial results under international rules as soon as 2010.
According to the proposal, the SEC estimated that 34 out of 74 industry groups, or a minimum of 110 U.S. companies, would be eligible to file financial results under IFRS by 2010, according to the proposal. The SEC estimated the total cost of transitioning to IFRS for those 110 companies would be $3.5 billion, or about $31.8 million on average.
While the SEC said it would be unlikely that all 110 eligible companies would elect to file results in IFRS, General Motors Corp controller Nick Cyrus, said at the conference, that the cost would be prohibitive, especially since international and U.S. accounting rules have not fully converged
“There’s no first-mover advantage here … resources are scarce,” Cyprus said. “I think there needs to be a lot more convergence between U.S. GAAP and IFRS before I lead,” the effort to switch accounting rules.
To account for pension costs or intangible assets, like research and development, some companies may even have to look back as far as 10 or 15 years, Arnie Hanish, executive director of finance and chief accounting officer at Eli Lilly and Co & Co said at the conference.
Despite the cost, White said the SEC is eager to have some U.S. companies file in IFRS.
http://www.reuters.com/article/politicsNews/idUSTRE4AI12K20081119
November 17, 2008 at 5:51 am · Filed under Accounting
THE SECURITIES and Exchange Commission (SEC) has relaxed accounting rules to give corporations more leeway amid a global economic crisis.
The SEC en banc on Friday issued a memorandum circular amending Philippine Accounting Standard 39: Financial Instruments Recognition and Measurement and Philippine Financial Reporting Standard 7: Financial Instruments Disclosures.
The regulator’s move — permitting firms to reclassify their equity and debt investments out of the trading category to the loan or until maturity categories — follows a similar directive issued by the central bank last month.
The change provides companies relief from the mark-to-market accounting rule, said to be responsible for adding to the global financial turmoil as it trapped distressed financial institutions in a capital raising spiral.
With the plunge in value of financial instruments, banks had to raise additional capital as provision for possible losses. In order to do this banks sold assets, further driving down prices.
“The problem with the mark-to market rule is that firms would be incurring paper losses daily [due to market volatility] even though their intention is to hold assets such as bonds until maturity and not to actively trade these instruments,” SEC Secretary Gerard M. Lukban said in a telephone interview.
“They are incurring losses that are not reflective of their financial standing,” he added.
Market analyst Joseph Y. Roxas, president of Eagle Equities, Inc., agreed. “This will effectively limit losses of firms,” he said in a phone interview.
The mark-to-market rule, he added, only works when markets are rational, which is not the case right now.
“You always assume that assets are priced correctly but the market is too volatile right now. Today you are way up, tomorrow you are way down then the next day you’re up again,” Mr. Roxas said.
Accord Capital Equities Corp. Analyst Claire S. Quiray also said the new regulation would be good for companies. But she warned that firms applying the change could end up not benefiting in case the market rebounds, a possibility given positive sentiment caused by the US election results and company window-dressing.
Financial and holding firms that have large bond holdings, said Mr. Roxas, would be the main beneficiaries of the SEC action.
Mr. Lukban said the corporate watchdog had consulted industry groups and accountants before issuing the memorandum.
The Commission set a November 30 as the deadline for reclassifications. Listed firms that would like to recategorize their assets must reflect such changes in their third quarter report. Firms that have already submitted their third quarter financial statements may file an amended report.
Companies may revert to July 1, 2008 fair values for reclassifications done before November 15. After the latter date, prevailing fair values will be used. Firms must disclose the fair values of assets that will be reclassified and provide the reason for doing so.
Companies must also include gains or losses that will be realized due to the recategorization, and also the gains or losses that would have resulted had the assets not been reclassified.
A firm wishing to avail of the reclassification option must submit a resolution from its audit committee as certified by the corporate secretary and other pertinent documents.
Pre-need companies will be allowed to reclassify assets to “held for maturity” from “held for trading” or “available for sale” only if they show that their liquid assets will be sufficient to service maturing/availing plans within the term of the instruments proposed to be reclassified.
Mutual fund or investment companies are not allowed to reclassify because of the redeemable feature and the prescribed daily computation of the net asset value of their shares.
http://www.bworldonline.com/BW111708/content.php?id=003
November 14, 2008 at 1:25 am · Filed under Accounting
Retailers work on a common objective — grab maximum share of a customer’s disposable income.
Novel ways of drawing customers are fast emerging. Over and above the availability of merchandise or price point, retailers are trying hard to develop customer loyalty, a concept still in a nascent stage in India. While price point is surely one way to attract customers, it is not easily distinguishable from one retailer to another.
Therefore, retailers are introducing loyalty programmes to lure customers and create loyalty.
Such is the power and success of loyalty programmes that in a fairly short span, the concept has spread across retailers selling medicines, fruits and vegetables, groceries, apparel, etc.
Loyalty programmes are structured marketing efforts that reward, and therefore encourage, loyal buying behaviour in the form of a loyalty card, rewards card, points card, advantage card, or club card that identifies the card holder as a member in a loyalty programme.
By presenting the card, the cardholder is typically entitled to either a discount on the current purchase, or an allotment of points that can be used for future purchases.
Accounting Standard 9 (AS-9) on Revenue Recognition issued by the Institute of Chartered Accountants of India (ICAI) does not specifically deal with accounting of discounts offered on sales. It only states that these should be deducted from the total sales. The generally accepted fundamental accounting assumption on the accrual concept of accounting holds that all costs should be recognised as incurred.
The principle of prudence as per Accounting Standard 1 (AS-1) Disclosure of Accounting Policies requires that provision should be made for all known liabilities and losses on an estimated basis. Going by the concepts provided in AS-1, retailers would need to provide for the liability based upon estimates.
http://www.dnaindia.com/report.asp?newsid=1206255
November 13, 2008 at 12:17 am · Filed under Accounting
QuickBooks Accounting 2009 is the latest version of Intuit’s small business accounting application and, as noted in our First Look, a significant upgrade to a program that has remained relatively unchanged for almost a decade. Compared to those earlier versions, QuickBooks 2009 is a major improvement, but it’s an update that’s incomplete and which has several shortcomings that are likely to leave many users wondering what on earth Intuit is thinking. In the interest of brevity let’s clear the deck:
* Credit card processing
* Multi-user capabilities
* Cross platform data files
* Online bill pay
If you’re holding out hope that any of the above features are found in this release of QuickBooks, you will be disappointed: They’re not. I’ve already complained about this in a multiplicity of past QuickBooks reviews. These issues have been and still remain major flaws, and features you’ll find in some of QuickBooks’ most basic, and in some cases, less expensive competitors such as MYOB’s FirstEdge () and AccountEdge (), and even the Windows version of QuickBooks. Their absence from this version of QuickBooks for the Mac is dumbfounding.
QuickBooks 2009 is not a trivial update, there are several new or improved features, including better iCal () integration, better online banking support, and integration with XSilva’s LightSpeed point of sale system. Its newly redesigned interface is a significant change to the program, making it appear that, for the first time in recent memory, Intuit is taking the Mac business market seriously. But it’s also clear that the redesign is incomplete.
QuickBooks 2009’s new Home Page is similar to the same feature in the Windows version of the program and gives you quick access to the majority of QuickBooks’ most important tools. Each of the Home Page’s five tabbed sections is devoted to a specific area of your business and helps you to quickly get a grip on how your business is doing, from initial estimates and invoicing, to accounts receivable, and deposits. Some buttons on the home page display numbered badges to help you see what items need immediate attention. In most cases a mouse hover or a single click is all you need to dig into the details.
The inclusion of Centers is another feature that QuickBooks now shares with its Windows analog. Centers give you access to the details behind your business and they’re where you go to update or enter customer, vendor, company, and transaction information as well as where you’ll access all your business reports. It’s also in these centers that some inconsistencies begin to appear in the program.
For example, Centers are searchable and have a Spotlight-like text field where you can live-search your data. Using this tool you should be able to find a customer or vendor by typing into the search field any information you know about them, like their e-mail address or street name. Unfortunately, that’s not the case. You can only find the information you want by typing either the company or contact name, which limits this feature’s usefulness. Similar shortcomings apply to all the Centers: The Transaction Center can’t be searched across different types of transactions; Reports can’t be searched at all. Intuit says it’s aware of these shortcomings, and that these features are evolving and will be upgraded at some point in the future.
Vermeer or Veneer?
While QuickBooks 2009 has a beautiful, functional interface that simplifies your business accounting, I didn’t have to work with the program for too long to find that this new interface is at times a gateway to some very old tools. No place is this more evident than with QuickBooks’ reports.
http://www.macworld.com/article/136727/2008/11/qb2008.html?t=201
