Business owners will find out at some time in the business history, (usually early on!) that they require financial information to satisfy essentially two bodies – shareholders/management, and, secondly, lenders!

There are essentially 3 types of financial statements:

Audited
Review Engagement
Internal

Audited Statements – Companies who require audited financial statements. Why does a company require an audited financial statement? Business owners quickly realize this type of statement comes with a very significantly higher cost. So why the need? The best way to describe the need is that there is an important interest in the company, and that interest comes from an owner /shareholder, or lender. The audited statements report to those two parties and validate that the auditor, an independent third party, is saying that the financial represent the true picture of the company, and if there are any serious inadequacies then those are pointed out.Any ‘ inadequacies’ relate to GAAP, which, stands for Generally Accepted Accounting Principles ‘. Let’s use a quick example. There are primarily two methods that corporations use to count and record inventory. If the company was using an alternative method, the auditor would point out that the GAAP is in effect being broken. That’s a quick simple example. We are most familiar with public companies requiring audited financial statements. That is because a public company has usually thousands of investors. They, 99% of the time, don’t get to meet management or see the company. They rely on the audited financial statement to reinforce the credibility of the financials. Audited statements are costly and time consuming to prepare, and require significant company and auditor inter-action. However the importance of the audited statement can’t be over emphasized.

Review Engagement Statements – This type of financials statement ranks 2nd in the hierarchy of financial statements. (Audited is # 1!). Review Engagement Statements are prepared by a 3rd party accountant; however they come with only 3 basic elements to them.

1. The accountant should have a ‘ reasonable knowledge of the company’
2. His questions, comparisons, and discussions should provide an inference that the financial statements seem reasonable
3. The statements should be presented in a manner acceptable to GAAP ( even though individual accounts aren’t checked )

Internal Financial Statements – These are exactly what are inferred. They are financial statements prepared internally for management, or for monthly reporting to their bank. We can essentially say that management or the third party accountant simply collects information, summarizes it, and notes that information is somewhat restrictive in nature as it lacks the additional due diligence in Notice To Reader and Audited statements.

In summary, there are 3 times of financial statements. They are given various weight and significance based on who prepared them, and how, and under what standards of accounting competency. A start up firm might start its history with internal statements, as the company grows it would be required by lenders and other stakeholders to prepare Notice to Reader Statements. As the company grew very large, and went public perhaps the need to prepare Audited Financials would be a necessity.

Business owners and financial managers should continually be determining if the type of statement they currently prepare satisfies current needs, and management should also be looking at the next evolution in the company’s financial reporting needs.

Stan Prokop is the founder of 7 Park Avenue Financial.
See http://www.7parkavenuefinancial.com The company originates business financing for Canadian companies and is a specialist in working capital and asset based financing of all types. For more information or contact details please see: http://www.7parkavenuefinancial.com/Home_page.html

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Personal Computer have changed the people life. And every person have a PC in their home in a normal family. And my opinion every one need a PC. But due the the huge amount of use of the energy due to the Computer in huge sector, the energy consumed is growing day by day. And there must be some solution to this problem. If the huge computer can be made to work in low power available then we can managed the energy saving and bring a revolution in the world.

After some research we found that Low Power PC has been introduced by some people around the world and has been a great success. It has a saying that its energy costs reduced 60% of the current energy consumption. So a Low Power PC can be a great revolution for the people and countries.

Its not just about the power consumption, but they are also the cheapest found on market. If people are really concious about the energy and the money then, I suggest people surely should get a one. I have order a piece for myself, as every good things should be started from ownself.

Save energy, Save world – Go green.

What is management accounting?

According to the Chartered Institute of management accountants (CIMA), Management Accounting is “the process of recognition, measurement, gathering, study, research, analysis and communication of information used by management to plan, assess and control within a body and to assure appropriate use of and accountability for its Resources. Management accounting also comprises the preparation of financial reports for non management groups such as shareholder’s, creditor’s, regulatory agencies and tax authorities” (CIMA Official Terminology) The American Institute of Certified Public Accountants(AICPA) states that management accounting as practice extends to the following three areas:

- Strategic Management-advancing the role of the management accountant as a strategic partner in the organization.
- Performance Management-developing the practice of business decision-making and managing the performance of the organization.
- Risk Management-contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization.

The Role of Management Accounting

Management accountants have a double reporting relationship. As a strategic partner and provider of decision based financial and operational information, management accountants are responsible for managing the business team and at the same time having to report relationships and responsibilities to the corporation’s finance organization.

Breaking down of cost or outflow into functions and processes to smooth the progress of cost control at each prepared level in the business environment, also to suggest alternatives to improve the productivity of the business to accumulate the maximum profit/success of the business.

The management accountants must develop a standard for all working areas and to evaluate the actual standards within the business sector, ensuring the best operation of available resources in the business sector and to Identify areas of wastages, leakages, inefficiencies and invisible losses that the business has dealt within the last view years.

The accountant must deploy informatic tools for a well-organized management information system to keep the business up to date with the latest whereabouts in the business sector, contributing to a Total Quality Management (TQM) assisting in decision-making process at all levels of management of the specific enterprise.

What management accountants Do?

Also known as corporate accountants, management accountants work within one specific company. They perform a series of tasks to ensure their company’s financial security, handling essentially all financial matters and thus helping to drive the business’s overall management and strategy skills to the best they can.

A management accountant’s responsibilities can be a variety of things, depending on the company you work for, the management accountant’s level of experience, the time of year and the type of industry the management accountant is at, you could find yourself doing anything from budgeting, handling taxes, managing assets to help determine compensation, the benefits packages and aiding in strategic planning.

The aims of management accounting

1. Formulating strategies to reach their goals as fast as possible but thorough.
2. Planning and constructing business activities to keep the business up and running for it to make a profit.
3. Helps in making the financial decisions of the firm, by using strategies to reach their aim.
4. Optimal use of Resources (making use of all resources that one can find like the internet, books and own knowledge)
5. Supporting financial reports. preparation (you can also give your meaning about the subject that is discussed by giving your view point).
6. Safeguarding asset.

Surround sound receivers

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If corporations want to stay successful, they need to find new ways of expanding their market. Lots of big corporations have already globalized, and many more will follow. If these companies are globalizing, it would make sense to have globalized accounting systems.

Currently, companies in the US use generally accepted accounting principles (GAAP) to report their financial statements; while the rest of the world use international financial reporting standards (IFRS). The U.S. Securities and Exchange Commission plans to switch from GAAP to IFRS in the near future.

While the transfer from GAAP to IFRS will take some time, the SEC is optimistic that most of the major US companies will follow IFRS by 2014. The European Union, which is made up of twenty seven countries in Europe, has already moved to IFRS from 2002 to 2005 with a fairly steady and smooth transition. US companies can learn from the problems their EU competitor’s had to deal with when they made their transition, to make their change even easier. There is also a difference between adopting IFRS and converging to IFRS. Adopting IFRS means that companies are required to use IFRS to file their financial reports, while converging IFRS means that the International Accounting Standards Board (IASB) would work with Financial Accounting Standards Board (FASB) to create a set of compatible accounting standards over a period of time.

This switch is important because consistency and comparability are some of the qualitative characteristics of accounting information. It’s easier to compare different companies from around the world if everyone decided to use the same reporting standards. Benchmarking with global competitions is an important part in making the business grow. Investors also benefit from this, since they are able to compare apples to apples on financial statements.

With this big change in reporting standards, there are some criticisms. One of the biggest concerns about the IFRS is that there are very little to no enforcement. While GAAP is enforced by the US SEC, there is no international securities and exchange commission to watch over IFRS. People argue that the new standards are weak without administration to control it. Another criticism is that many companies that proclaim they follow IFRS are not totally compliance with IFRS. Some countries modify their standards from the IFRS to accommodate their interests, companies who are using IFRS range from thirteen to one hundred percent compliance to IFRS. Some companies state that the cost of switching from GAAP to IFRS doesn’t outweigh the benefits of IFRS. The costs come down to retraining accountants as well as investors to get comfortable with IFRS. The change will also affect college level courses, if there isn’t enough time to reform the curriculum, there may be a shortage in accountants that are failure with IFRS. They see no reason to switch because many still see GAAP as the golden standard in accounting reporting.

No matter what people think, it seems like the US SEC has made up their mind to make the IFRS mandatory for big, global companies. It is clear that many of the disadvantages of IFRS are just short term, for example the costs of transition; while the advantages are long term. Whether they are able to accomplish it in the current deadline of 2014 is another thing.

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