SME Feedback Does Not Reflect Accounting Standard Concerns

The SME feedback is said not to contain the housing association’s concern about the dangers of switching to international financial reporting standards.

Chairman of the Accounting Standards Board or ASB, Roger Marshall, is quick to defend that such inconsistency means that there is a need for further discussions. He further revealed his plans of meeting up with the housing association trade bodies after the consultation closes on April 30.

The affordable home providers’ concern is that transferring to IFRS means 100 million Euros in red tape. Furthermore, they told the Financial Times that it could also wipe 1 billion Euros off the current value of assets.

Other concerns include property revaluation. According to the proposed IFRS for SME, this revaluation is not allowed. This has caused fear among landlords that their equity might be slashed which would eventually lead to problems with existing banking covenants.

Another concern presented by housing associations and companies connected to construction is the capitalization of borrowing costs. Companies with properties that are being developed were able to roll the cost of borrowing into the project under the UK GAAP which has kept their balance sheets healthier.

Marshall says that the ASB is still listening to all concerns and is going to take all into consideration. He said that his being a former housing association treasurer makes him fit to deal with relevant issues. He further stated that the ASB will wait for all concerns, responses, and issues to come before it moves on to the next step.

News & Image Source: AccountancyAge.com »

Global Accounting Rules on Leasing and Insurance Delayed by FASB and IASB

The June target for reaching global accounting standards on leasing, revenue recognition, financial instruments, and insurance has been pushed back by US and international accounting groups.

FASB Chairman, Leslie Seidman, and IASB Chairman, David Tweedie, said that the The Financial Accounting Standards Board or FASB and the International Accounting Standards Board or IASB are still responding to issues regarding the proposal making them need a delay of “a few more months.” This statement was released on a podcast summarizing the meeting of the two groups.

Seidman added that June “was always intended to be a target, not a deadline, and we always said that achieving the target was subject to the nature and extent of the feedback that we got on each of the exposure documents”. She also added that, “at this point on each of the exposure documents we have received significant and very constructive feedback and we are in the process of working through those issues. The quality of the standards remains of the utmost importance.”

FASB, based in Norwalk, Connecticut, and IASB, based in London, are working together to reconcile each group’s global accounting standards to help investors and regulators to better compare the financial statements of companies all over the world.

PricewaterhouseCooper released the results of its survey that showed that more than half of its respondents expect at least a moderate impact from the leasing, revenue recognition, and financial instrument projects. The recent standard-setting pace is thought to be too fast by the 43 per cent of the 1,400 professional-respondents.

“In the next few days”, the FASB and the IASB expect to publish its convergence report that will give plans for the completion work on the projects.

News Source: Bloomberg »

Bookkeeper Fraud Not Interpreted Correctly

An organization of Australian bookkeepers believes that there is a need to look into a study that focuses on bookkeeper fraud in the correct light.

This followed after forensic accounting firm Warfield and Associates released a study conducted between 2005-2011 on 65 fraud convictions among bookkeepers employed at small and medium-sized businesses in Australia. In these cases, the total amount of money lost by companies due to theft was $31 million.

It was noted by Brett Warfield that though most bookkeepers are honest with their work, those who committed mistakes had enormous negative impacts on the employers. Aside from losing millions in investments, the companies had to lay off staff and had to sell off assets.

In effect, the members of the Association of Accounting Technicians are reacting for the reason that this research may imply a high motivation of bookkeepers to commit fraud.

According to Robert Hutt of AAT Australia, “Sixty five cases of fraud over a six-year period compared to the millions of accounts prepared over that time is a very small proportion of the work completed by all bookkeepers in Australia.”

He added that there are 16,000 BAS agents registered with the Tax Practitioners Board (TPB). The number of bookkeepers who have committed fraud is very little. He continued by saying that the TPB and the AAT Australia have worked very closely to raise the standards of bookkeepers and that bookkeepers keep a higher standard today than they did before.

He concluded it by saying that “the best defence against fraud of any kind is ensuring your business has appropriate procedures in place and that there are checks and balances in relation to financial issues.”

News Source: The Sidney Morning Herald »

New EFTPOS Charges Seen to Hurt Small Businesses

Brett Carey, a newsagent of Deception Bay, reacts to the set of changes made to the EFTPOS charges that is to be introduced in October. According to him, it is “yet another nail in the coffin” for small businesses. He also questioned about Coles and Woolworths being shareholders of EPAL.

He further stated that the new interchange fee model being introduced is going to cost him another $6500 per year.

According to Carey, “It’s harsh, that’s the same amount I would pay a young girl to work Thursday nights and Saturdays ... the charges will be at the expense of an employee.”

Alf Maccioni, CEO of the Australian Newsagents Federation, calls on the government and banks to reconsider and take a deeper look at the proposed changes on EFTPOS as this may hurt small businesses.

Maccioni added that the charges would cost customers and small businesses around $150 million per year.

EPAL Managing Director Bruce Mansfield responded that the new set of EFTPOS charges is not a tax, but is only a new model aimed at improving and maintaining the EFTPOS system. He adds that the new structure would make the EFTPOS network more secure, convenient, and accessible.

In answer to Carey’s concern on Coles and Woolworths, Mansfield says these were self-acquirers who processed their own transactions and dealt directly with cardholders’ banks. He also offered talks with Mr. Carey.

News Source: Redcliffe and Bayside Herald »

Changes To Accounting For Employee Benefits Proposed

It cannot be denied that the area where companies spend most on is its employee benefits. Among these benefits is the pension plan. In the Philippines, this particular benefit exposes the company to both actuarial and investment risks. An example of an actuarial risk is when the benefits of an employee are seen to be greater than expected by the time the employee retires. An example of an investment risk is when a company funds a pension plan. And when the fund does not perform well, the company is still obliged to pay the said plan.

Accounting for defined benefit plans such as the pension plans is complex and entails costs for companies. That is why these companies hire the services of an actuary.

Based on rules, actuarial gains or losses or changes to pension obligation can be accounted for in three ways namely: charge the entire change to profit or loss, charge the entire charge to other comprehensive forms, and charge a portion of the change to profit or loss using the “corridor system”.

It was proposed on April 29 last year by the International Accounting Standards Board (IASB) the changes to the accounting of employee benefits. These include removal of the “corridor mechanism” in accounting for long-term employee benefits, new rules to distinguish long-term and short-term benefits, and additional disclosure requirements.

Among these changes, the removal of the “corridor mechanism” is the most significant. Without it, the changes in fund values will be recognized over the average remaining service lives of the employees.

Also, all changes that occur in the value of long-term employee benefit plans will already be recognized as they happen in profit and loss and in comprehensive income.

The difference between long-term and short-term benefits is based on the time the employee is expected to receive the benefit. Therefore, under the current rule, if an employee is able to use a benefit at any time, the obligation is considered a short term benefit for the employee. But under the proposal, this benefit will be considered a long-term liability.

Additional disclosure requirements have also been proposed. These include characteristics of the employee benefit plan and the risks that may arise from the said benefit plan which may include sensitivity analyses and multi –employer plans.

The IASB is expected to publish the final amendments to this proposal by the end of March 2011.

News Source: BWorldOnline.com »

SME Businesses Still Trust Accountants For Advice

SME’s still prefer going to their accountants for advice rather than their bank, lawyer, business coach, or financial partner. This is according to MSI Global Alliance’s March 2011 survey of Australian small business owners. The advice taken predominately relates to business strategy and personal tax structures.

According to Charles Hornor, MSI Global Alliance spokesman, the result of the survey does not come as a surprise. What seems surprising for him is that accountants are also rated highly as a source of retirement advice. It is not an uncommon accounting practice for clients to be referred to their related financial advisers.

Accountants scored 37 per cent in the survey while banks only gained 10 per cent as a trusted source of retirement advice. Hornor says that banks should do better in order to gain better trust of clients.

But Nicholas Hossack, acting CEO of the Australian Bankers' Association, is quick to reply that banks are doing the best they can to cope with the competition. He added that “small businesses are important customers for banks and there is a lot of competition to win their business. Many banks have undertaken extensive advertising campaigns aimed at the small business sector and a number of banks have announced significant expansions in the hiring of business bankers. Compared to the height of the financial crisis, small businesses are now increasing their appetite for taking on new debt and banks are supplying the finance.”

According to ABA’s figures, banks reported strong lending records of $22.1 billion and $20.6 billion, respectively, in the June 2010 and September 2010 quarters.

It has been noted that during the financial crisis, banks charged higher interest rates to small business owners than to households.

“Banks must lend prudently. They must do this to comply with prudential and responsible lending regulations, as well as meeting commercial objectives for their shareholders. Capital required by the Australian Prudential Regulation Authority to be held by banks for small business loans is generally three times higher than for home loans, and can be seven times higher for some products,” Hossack said.

This may be true. But the fact remains that it is not an easy thing for small business owners.

News Source: SMH.com.au »

Accounting Software Helps Prevent Tax Errors

Every business can bring about happiness, contentment, and income for its owner. When it is managed effectively, the returns can be very rewarding. These benefits do not only go to the owners. In addition the businesses provide income to the government in the form of taxes and to employees in the form of wages.

Businesses pay their taxes annually. This task is taken care of by the bookkeeper and the accountant. These two employees make sure that the taxes remitted by the company are accurate and remitted on time. If not, the company acquires losses from miscalculations or they get penalized by the government for incorrect or late reporting.

These circumstances should be avoided by companies. This can be achieved by using up to date accounting software. According to Karla Dennis, accountancy expert and author, in her article submitted to the Entrepreneur Magazine, many business owners and accountants are committing avoidable mistakes in bookkeeping. She sees that the reason for such mistakes is that people usually rely on their memories in making calculations of expenses.

"When tax season arrives, you might find yourself estimating your expenses only to arrive at a number that is either far above or below the reality," she added.

Her suggestion to business owners is to use an accounting software package that is suited to the nature of their business. The software must meet the requirements and needs of a particular company. Another thing that one can do is to hire the most effective, experienced and efficient accountant and bookkeeper. This is because they are the ones who are going to best operate the accounting software and overall process.

Investing in accounting software is a necessary part of running a business. Since starting the business already requires a significant amount of time and money, the additional cost is relatively small to ensure accurate accounting and informed decision making.

News Source: CodeStone.net »