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Assessing Accounting For entities preparing GAAP compliant financial statements, adoption of Revenue Recognition Standard (ASC 606) and Lease AccountingStandard (ASC 842) is now mandatory. Changing how revenue is reported impacts EBITDA and also balance sheet items such as deferred revenue and deferred expenses.
ASC 842 is a new accountingstandard set forth by the FinancialAccountingStandards Board (FASB). These impacts will include major changes to accounting practices and financialreporting, as well as increased scrutiny of contracts, service agreements, and all leases starting now and moving forward.
FP&A vs financial controlling Working closely with accounting function, financial controllers ensure compliance of reported results with accountingstandards, legislation and regulations, develop and document policies and procedures of the internal control in the organization, participate in financialreporting, budgeting and forecasting.
As a result, the organization might not adhere to Generally Accepted Accounting Principles (GAAP), which can trip them up come tax time or during an audit. Governance issues, tight regulations, and high public accountabilitystandards mean strong accounting practices are more important than ever.
Increased Accuracy : By automating calculations and providing advanced reporting tools, it improves the accuracy and reliability of revenue recognition. Enhanced Compliance : Facilitates adherence to accountingstandards and regulations, reducing the risk of non-compliance and associated penalties.
The financial implication of these decision is critical and the CFO is the executive helping the CEO navigate these decisions. Historically, the CFO role was focused on backward looking information: ensuring on-time and accurate financialreporting. Pre Series B, it’s a part-time role to simply track past financial numbers.
FP&A is a process used by organizations to develop and manage their financialplans and make informed decisions based on financial analysis. It involves forecasting, budgeting, analyzing, and reportingfinancial information to support strategicplanning and operational decision-making.
We expect the same will happen locally, there are a lot of listed companies in South Africa getting loans and credit from the PIC and soon the PIC will also start requiring these types of reports.
The conversation about the underinvestment in intangible assets in South Africa, and the challenges of accounting for these assets (due to subjective accounting treatments), directly impacts how CFOs approach financialreporting. Why is this important for CFOs? IFRS, US GAAP).
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