| An open letter to international finance and | | | | adoption of International Financial Reporting |
| accounting managers | | | | Standards (IFRS) and International Accounting |
| Over the past few decades, the accelerating | | | | Standards (IAS, those standards issued by the |
| trend towards globalization has inevitably | | | | forerunner to the IASB). In 2002 IASB and FASB |
| generated extra work and stomach acid for the | | | | announced that convergence in methods was a |
| financial controllers, chief accountants and CFOs of | | | | priority for both, and beginning in 2005 publicly |
| companies that have been acquired by foreign | | | | traded companies in EU member countries started |
| multinationals. | | | | reporting in IFRS. One day, finance and accounting |
| Whereas in the good old days these multinationals | | | | managers around the world will be looking at the |
| frequently used to make due with a minimum of | | | | same things the same way. |
| local reporting and some adjusting entries at a | | | | However, there is still the question of language. |
| very broad level, the global trend towards | | | | Financial translators generally have years of |
| improving visibility and reliability in consolidated | | | | experience in the business world prior to taking up |
| financial reporting for listed companies is increasing | | | | translation. Unfortunately, even the best of them |
| the levels of detail and accuracy required. | | | | haven't worked at every company in every |
| Now, finance and accounting personnel, in addition | | | | industry. What's more, they are restricted by the |
| to producing their normal financial statements and | | | | fact that terms vary greatly, even within the |
| reports (perceived as both time consuming and | | | | same language, country or industry. And there is |
| pertinent) for the people to whom they report | | | | just no convenient way of translating something |
| directly and who decide on their bonuses, are | | | | that simply doesn't exist yet in another country's |
| required to produce reports (viewed as time | | | | economic reality (any Americans out there ever |
| consuming and a nuisance) for the 'home office'. | | | | have a 'postal checking account'? Or preference |
| This home office is often quite distant, in another | | | | shares issued to the government upon |
| time zone, and populated by people who speak a | | | | nationalization?). Financial translation is an art, not a |
| foreign language or the local language with thick | | | | science. |
| accents and who have very little impact on local | | | | Financial translation is an iterative process. At the |
| managers' individual compensation (a consideration | | | | best-managed translation companies, primary |
| not to be underestimated in the real world). In | | | | translators discuss terms with the secondary |
| addition, one of the home offices' primary | | | | translators who proof-read them, to make sure |
| concerns always seems to be discovering where | | | | that they are either accurate or at least coherent |
| you've tucked away your 'cushion' to smooth out | | | | (when the corresponding accounting notion just |
| earnings when you need to. None of these | | | | doesn't exist in the target language). The |
| conditions are predisposed to fostering a kindly | | | | translator frequently works closely with the |
| spirit of Intercompany cooperation. | | | | financial staff at the company requesting the |
| These reports to the home office frequently | | | | translation to ensure that they've understood that |
| require that consolidating entries be made to | | | | company's specific internal jargon and |
| present local accounts in a manner compliant with | | | | nomenclature. Translators take pride in the |
| foreign accounting principles. These consolidating | | | | product they deliver, and every time they send |
| entries are frequently not fully comprehended by | | | | off their translations, they hope that they will |
| personnel on either side of the border (regardless | | | | make life easier for the people receiving them |
| of their individual expertise), as accounting | | | | (often their compatriots, as one generally |
| principles differ greatly by country: goodwill may | | | | translates into one's native language). Especially as |
| or may not be amortizable; economic lives differ; | | | | the subjects are often - let's admit it - quite |
| reserve and write-off policies vary greatly by | | | | complicated and dry. |
| country (not to mention that some reserves are | | | | So, how do you get the most out of your |
| called 'provisions' by some and by others | | | | financial translation and make your 'home office' |
| 'reserves', and what the heck are 'regulated' or | | | | reporting package meaningful and pertinent, since |
| 'legal reserves' anyway?); some countries appear | | | | (1) you're not allowed to just throw it away, (2) |
| to use the "extraordinary items" line for the most | | | | understanding it fully enables you to provide |
| ordinary events; financial assets are classified | | | | meaningful, accurate and useful data and (3) if |
| differently - every local manager has his own list | | | | you don't, then some day the auditors will |
| of pet peeves. | | | | discover that it's been done wrong for years, and |
| To complicate matters, the reporting software is | | | | someone will be held accountable for the very |
| often presented along with an accounting manual | | | | messy adjusting entries that will be required in |
| which looks to harried local managers trying to | | | | consolidation? If parts of the accounting manual |
| comprehend foreign accounting principles as | | | | you are provided don't make sense to you, don't |
| pertinent as the familiar instructions: "Welcome to | | | | simply take a best guess and stick it on the shelf. |
| Chinese Restaurant. Please try Your Nice Chinese | | | | Get together with the financial controller from the |
| Food With Chopsticks, the traditional and typical if | | | | home office, and verify how you've mapped your |
| Chinese glorious history and culture." | | | | local accounts to the Group accounts. Discuss the |
| The temptation to simply map accounts to | | | | notions or terms you're having trouble with. Tell |
| whatever line seems plausible, without truly | | | | him/her what the term already used internally at |
| understanding whether the mapping is correct or | | | | your company is (and have the controller provide |
| not, is great. Unfortunately, it only means | | | | feedback to the translator, modifying the |
| performing extra work without providing actual | | | | document for once and for all to everyone's |
| accurate, useful information to the people to | | | | benefit). |
| whom the reports are sent. | | | | It doesn't take long, and not only will the time |
| Financial reporters of the world: do not despair, | | | | you've spent enable you to improve your |
| help is on the way! | | | | communications with your foreign counterparts, |
| The International Accounting Standards Board | | | | but you'll be able to "own" the data you're sending |
| (IASB) is working with national accounting | | | | out with as much pride and competence as you |
| regulatory bodies to achieve the convergence of | | | | do the local data. |
| accounting standards worldwide, through the | | | | |