Changing Your Accounting Standards to Improve Your Business

Change is in the air and one of the biggest changes on the horizon seems to be the imminent update from GAAP (generally accepted accounting principles) currently used throughout the U.S. to International Financial Reporting Standards. Forward- thinking business owners and managers have already anticipated the changes ahead and are making adjustments to their accounting standards now in order to avoid mass chaos and utter confusion when the time comes. They are also focusing on hiring quality accounting and finance staff to manage these tasks.

With accounting disasters like Enron and WorldCom in our not-so-distant past, it makes sense that the time has come for the current accounting standards to change. However, the changes ahead are big changes that some businesses are reluctant to embrace. What possible benefits are in these changes for businesses that will make it worth a complete overhaul of current accounting and bookkeeping systems? How will it improve your business?

Uniformity in Accounting Principles

The new standard, known as the Financial Accounting Standards Board (FASB), offers a global standard that is uniform from one nation to the next. This also works from one business to the next and levels the playing field, to some degree, in that companies with more clever tactics for working around the GAAP aren’t getting an unfair advantage by using creative accounting to look more stable on paper than they actually happen to be. Your business will be judged by potential investors based on apples to apples comparisons of your business with other businesses in your industry.

Private Rather than Government Affiliation

The great thing about FASB is that it’s not an entity of the U.S. government. The U.S. government is overburdened with oversight commitments at the moment. FASB actually lifts some of the burden off the shoulders of the government by allowing the private sector to make the accounting rules. More importantly, with political stalemates becoming particularly problematic, it allows for the possibility of getting something accomplished because it is a non-political entity.

Clarity in Financial Reporting between Nations

When there is an international standard for accounting, there is greater clarity for conducting business on a global scale. No one country has an unfair advantage due to accounting practices that aren’t necessarily transparent. Every player at the table has an understanding of what the number represent rather than having an inflated sense of a business’ value because the numbers appear to be better than they are in reality.

There are a few potential drawbacks for adopting new accounting standards. The first major hurdle businesses will need to overcome is the transition process itself. For some businesses, this is going to be a costly and extremely time-consuming process. That’s why it’s better to act now and make the transition ahead of the curve so that you’re up, running, and ready to go when the change becomes necessary.

Get a jump start on your accounting updates by bringing on knowledgeable and reliable accounting and finance staff this year. Change is inevitable, so be sure to have the employees on board who can manage these updates. Venteon gives you access to leading accounting and finance staff to meet your business needs.

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