International accounting follows strict reporting methods and standards, but it often varies between regions. An increasing number of companies run global operations making international accounting compliance extremely important.
Many businesses do not have the know-how or resources to meet increasingly difficult international accounting demands. Fortunately, solutions exist.
Here are a few of the international accounting obstacles your business may face and how you can overcome them.
Varied Accounting Methods
Unfortunately, there isn’t one universal accounting method used around the globe. International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) are the two major accounting methods, but how they’re used may vary and in some cases, neither applies.
Accounting methods are important as they are intended to standardize the way businesses describe their financial performance. Consistent language, practices, and financial statements offer more transparency, comprehension, and comparability. This allows investors and businesses to make educated decisions when they review financial data.
However, differences exist between these methods, and these differences are relevant to stakeholders. Comparing IFRS to GAAP is sometimes like comparing apples to oranges. This can lead to misinterpreted financial information, especially between disparate regions.
Global & Regional Complexity
In the past few decades, there has been a push towards the International Financial Reporting Standards. Proponents believe a single set of robust international standards would eliminate confusion and ensure transparency and fairness.
The American Institute of CPAs reports approximately 120 nations and reporting jurisdictions permit or require IFRS for domestic listed companies, while only about 90 have fully conformed. These include all EU countries and many within Asia and Central and South America.
Many nations have also committed to convergence towards IFRS and are improving their existing standards to reduce differences between methods. However, how a jurisdiction implements (or will implement) IFRS standards can vary and many differences still exist.
As an example, the European parliament mandated IFRS in 2005 for companies listed on EU stock exchanges. However, it is optional for unlisted companies and for companies only holding debt securities.
In 2015, the United Kingdom started to update their old reporting method to a single financial reporting standard. This standard includes IFRS and the ‘Financial Reporting Standard for Smaller Entities’. Plus, this process is still in transition.
Additionally, there is a huge variance between whether a particular type and size of the company or a particular industry must use IFRS within a region and how they must prepare their financial statements.
The United States is the only country that uses GAAP exclusively. While differences between GAAP and IFRS are being reduced, they are still very different in many ways.
GAAP & IFRS Will Continue to Coexist
Currently, domestic public companies must use U.S. GAAP. Despite the push for a convergence of international accounting standards, the Securities and Exchange Commission (SEC), the International Accounting Standards Board (IASB), and several major accounting firms criticized and sometimes openly oppose the plan.
As a result, it appears U.S. GAAP and IFRS will continue to coexist for the foreseeable future. U.S. companies operating abroad must adhere to regional standards and each country decides whether they’ll mandate IFRS for financial statements. Many countries are also either in transition or undecided, but none of them use GAAP.
Meeting Compliance
Complying within your own jurisdiction is already complicated and time-consuming, but when you add additional regions, the task can seem impossible. Fortunately, that’s not the case.
Blueback Global has a dedicated team of qualified in-country experts to manage compliance and regulatory changes within each country. They understand the intricacies of international accounting within your target region, which are often very exacting.
We begin with a thorough understanding of your business including what drives revenue and costs. Once we’ve completed a comprehensive assessment, we’ll tailor a chart of accounts for your foreign region that reflects your parent company to ensure a seamless consolidation process.
We’ll also offer you viable ERP and accounting system options based on your business activities and current accounting and inventory management policies. We offer online cloud solutions with convenient access from anywhere around the world or traditional monthly financial reporting with set deadlines.
Regardless of which services you choose, our team of specialists simplifies international accounting setup.
Minimize Ongoing International Accounting Costs
Calculating payroll for each pay period, tracking benefit and tax deductions and remitting them to authorities, setting up new hires, terminating employees, producing and submitting reports, and figuring out how to get payment to workers are just a few of the challenges a company faces abroad. Businesses also need to constantly monitor regulatory changes to remain in compliance. Obviously, all this can be a hefty financial and time burden on any company, but especially when all of this differs from what you use at home.
While big businesses often maintain extensive payroll departments, small- and medium-sized businesses usually have few payroll resources. They may have one or two workers and an internal or outside accountant. Learning new laws and requirements takes time. No company can afford non-compliance errors while in-house payroll people grapple with new processes, forms, and deadlines in a new country.
Consequently, handling international payroll in-house often overtaxes already heavily burdened employees or the company must hire additional workers. As a result, it often makes more financial sense to outsource.
Blueback Global’s in-country representatives already have the expertise you need. They monitor regulatory changes on your behalf, understand accounting compliance requirements, and follow accounting best practices within each region. A finely tuned accounting system and in-country accounting proficiency help minimize the risk of regulatory fines, enforcement, and unnecessary expenses.
Let Blueback Global help you establish a well-integrated, automated accounting system and cut through the complications of international expansion. There’s no need to struggle with complex international accounting requirements when your business should be focusing on core competencies and growth.
Contact us for a free consultation.