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