"Challenges in Accounting and Finance"
Challenges Facing Accounting and Finance Teams in 2010 While there have been signs of improvements, about the financial condition of counterparties’ many contend that for the remainder of balance sheets. These concerns have driven a 2010 the world’s financial system and the call for regulatory reforms, improved financial global economy will remain tangled up in the reporting transparency for investors, and uncertainty that most agreed was rampant in the creation of a system to reduce systemic 2009. During these times, economies have risk while requiring financial institutions to been rattled by severe volatility, significant maintain higher capital and liquidity levels. In deteriorations in equity values and difficult all, many would be supportive of reforms that credit markets. The optimists are hopeful that do not stifle innovation or entrepreneurship signs do point to improving financial conditions while making financial markets safer and more that will lead to better economic times as 2010 efficient. unfolds. However, the economy’s condition Accounting and finance organizations have not remains tenuous. Consumer spending is not gone unscathed during our economic crisis and strong, unemployment remains elevated and are presently faced with numerous challenges. credit for many businesses, especially smaller The economic environment, regulatory firms, remains tight. pressures and accounting changes continue to The troubles of the economy and the financial significantly impact the here and now for many system have in part stemmed from uncertainty organizations. Asset impairments, the need to Top Year End Reporting Challenges 7% 5% Resource constraints and shortened reporting deadlines 36% Forecasting business performance 25% Asset impairment Preparation of disclosures 27% Accounting and reporting for restructuring activities *Based upon SEG’s survey of accounting & finance professionals execute tasks with fewer staff resources, forced of reporting and accounting never seem to restructurings, and compliance with newly subside. While transparency for users of issued reporting and accounting changes are financial statements remains the stated all key challenges faced by accounting and objective of standard setters, the level of finance organizations. In fact, of the accounting complexity in accounting and reporting rules and finance personnel we surveyed, resource continues to increase. Some of the reporting constraints and shortened reporting deadlines and accounting changes facing organizations were seen as the greatest challenges identified today involve the codification of US GAAP, fair during the 2009 year-end close and financial value, consolidation, financial asset sales and reporting cycle. However, forecasting future transfers, multiple element revenue recognition, business performance and determining asset enhanced disclosures about compensation value and reporting asset impairments during and risk, and International Financial Reporting these challenging economic times were also Standards (IFRS). Specifically related to viewed as important challenges by our survey reporting issues for 2010, participants in our respondents. survey believe their organizations would be spending most of their time grappling with Reporting issues IFRS, multiple element revenue recognition As most accounting and finance personnel arrangements and the disclosures required by have come to realize, changes in the realm the SEC about compensation and risk. What financial reporting issue will your organization spend the most time on in 2010? ISSUE IFRS (Inernational Financial Reporting Standards) 32% Revenue Recognition 22% New SEC required proxy disclosures 20% XBRL 14% Consolidation of variable interest entities 12% IFRS effort As the United States (U.S.) continues to However, in light of the SEC’s reluctance to contemplate a future mandated conversion define a formal timetable for the adoption to IFRS, a majority of the world has already of IFRS by U.S. companies, the majority of made the decision to report financial the respondents to our survey indicated that performance to stakeholders and investors their organizations were going to wait before utilizing IFRS. The adoption of IFRS in the beginning any further significant IFRS transition U.S. will impact a company’s underlying efforts. In 2010, some survey respondents are systems, controls, processes, and contracts as planning to start training their staff on IFRS, well as other important fundamental business while others are planning to either develop strategies. Proactively setting out a plan and or start executing their formal transition plans communicating the anticipated impact of a to IFRS. future migration to IFRS will be paramount objectives for many U.S. companies in 2010. Estimated Amount of Time Spent by Organizations on IFRS in 2010 Monitor the actions of regulators, but wait on significant transition 49% Evaluate the impact that adopting IFRS may have 20% Seek out training opportunities, but wait on significant transition 13% Initiate executing plan by the end of the year 10% Develop a formal plan, begin implementing that plan 8% Final thoughts: About SolomonEdwardsGroup: For the remainder of 2010, accounting and SEG is a CFO services firm solving the finance organizations will focus much effort shifting needs of the CFO and the accounting around IFRS, ongoing challenges created by and finance profession. We deliver talent, the difficult economic environment, mount- perspective, and action in the critical areas of ing regulatory pressures and the complexity accounting operations, business performance, of new accounting and reporting changes. risk and regulations, and resource Practitioners will be challenged to stay abreast management. We specialize in providing our of these matters in their day to day roles clients with the talent and know-how to while navigating their organizations and their execute special projects in accounting and own professional development through these finance. SEG is proud of its track record in uncertain times. assisting clients with SEC, US GAAP and IFRS Compliance requirements. SEG can serve as About the survey: a technical advisor, mobilize and manage SEG surveyed more than 75 accounting and resources for compliance initiatives, provide finance professionals asking them three ques- professionals to augment client teams during tions. The first question asked which of five peak compliance periods, or recruit talent items was the greatest challenge facing their to fill permanent positions. SEG is not a organization for closing out their year-end registered public accounting firm. general ledger and financial reporting cycle. The second question asked participants to identify which of five new or emerging finan- For more information contact: cial reporting issues they foresaw their organi- zation devoting the most time to in 2010. The Brian Markley third question asked participants to estimate Partner the amount of effort their organization will 212-545-9500 firstname.lastname@example.org expend on IFRS in 2010. David Prinzivalli 212-545-9500 email@example.com