Complying With National and International Accounting Standards

Thankfully, international regulations are not that different and getting to know how to properly adapt to them could save you a major headache.

One set of accounting standards, two sets of accounting standards…

Even if there’s a great chance that you have never even heard about accounting standards, they are the primary reason why businesses have to provide consistent and reliable financial statements in order to keep their activities transparent and easily compared to one another. Simply put, by looking into reports anyone should be able to see at a glance whether a business fulfills its obligations and is profitable enough to stay afloat.

This works well, but only if the business operates at a local level. The moment it goes international its financial reports may be automatically rejected by other states simply for the reason that they are not being prepared to comply with the accounting laws of the new operating location. The more countries a company conducts business activities with the more its financial reports have to be tailored to match different accounting standards.

This is a huge burden for anyone, which is why the introduction of International Financial Reporting Standards (IFRS) has been such a blessing. Thanks to the IFRS, any financial report prepared in the participating 110 countries are guaranteed to be made in accordance with the same accounting rules. It’s too bad that the U.S. doesn’t fully recognize IFRS, then, and instead implements the Generally Accepted Accounting Principles (GAAP) that, interestingly, is only obligatory in 17 states.

Differences between U.S. and international standards

Although IFRS and GAAP have some similarities, their methodology assessing the accounting process is completely different. While the IFRS is based on principles, meaning that similar tax-related situations can be interpreted differently, GAAP is more rule-based, which leaves little to no room for exceptions and different interpretations.

However, that’s not the only thing IFRS and GAAP do differently, as clearly shown in this following chart:

Complying with different standards in online accounting software

It’s a widely known fact that online accounting solutions have many features that make a business’s life easier, and one such feature is the automated generation of business reports. This is convenient enough, but most accounting programs also provide the option to generate these financial statements multiple times based on different criteria and then include or exclude certain details in those copies to meet certain other accounting rules.

And if that’s not enough, there are accounting programs like FreshBooks and Sage Business Cloud Accounting that are capable of managing multiple companies under the same account. This means that not only are the books of each of your businesses handled separately – which prevents any confusion – but thanks to the fully customizable reports it will be certain that your financial statements are in compliance with different accounting standards throughout the world.