All multinational companies, including German companies operating in the Russian Federation, have to deal with the challenge of preparing corporate reporting.
The main objective of the consolidated financial statements is to eliminate differences in RAS standards (generally accepted local accounting principles) and in the common accounting policies for the entire transnational concern.
Reasons for differences in financial statements:
- different reporting periods (start, duration, closing date);
- different accounting policy;
- different currency zones;
- different approaches to the valuation of assets and debts;
- different requirements for the structure of regulated reporting in the Russian Federation and corporate reporting of the concern.
The solution to these problems is a complex and time-consuming process that includes the following:
- comparison of reporting indicators
- transformation of accounting reporting
- exclusion of business transactions that are not important to the corporate accounting purposes.
Lets consider in steps an example of reporting transformation for German companies working according to HGB standards:
- Decoding of the local reporting indicator (“HB I” in accordance with the German Commercial Code (HGB)), with the exception of the turnover of certain accounts in the local accounting system or business transactions.
- Translation of such postings to the accounts of the uniform chart of accounts of the group, taking into account the specifics of the comparison and accounting differences mentioned above.
- Consolidation of turnover on accounts in HGB accounts in corporate reporting lines (“HB II” in accordance with the HGB lexicon) in accordance with the accounting principles of the group.
Difficulties of inconsistency between the local laws, regulations and accounting practices and transactions of the German company according to HGB standards:
- the absence of a total expenditure method in the analysis of profitability of profits and losses due to a fixed uncompromising cost assignment according to the type of costs complicates the calculation of the financial result, if this method is applicable to the group;
- the presence of asset/liability accounts in the chart of accounts, which allows making debit and credit balances on the same account after the end of the month, determines the risk of translating the balance of the account;
- a predefined RAS chart of accounts, into which you cannot add new financial accounts by analogy with corporate standards;
- the presence of a number of corrective entries and additions that increase the turnover of individual accounts and which should not be taken into account in corporate accounting (for example, the redistribution of costs between the same accounts during the closing of the month);
- admissibility of changes in previous periods;
- the absence in the local accounting of such a term as a “cost center”.
Obviously, all of the above tasks are extremely difficult to solve in order to accurately and timely create reports according to the HGB or IFRS standards, when the process of transferring postings and transforming statements is partially automated, for example, by means of Excel, and is performed almost manually by an accounting specialist. That is why companies face the priority task of timely and high-quality automation of this business process, taking into account the requirements of the group. Compliance with the standards of a group of companies, as a rule, is mandatory for any international company.
SETTING UP THE INTERNATIONAL 1С: ERP 2 MODULE
In the CIS, 1C software is one of the most popular IT products for accounting and financial accounting.
This brand has been developing since the 1990s and continues to provide the market with a number of interesting solutions for automating enterprises of all sizes and industries. The 1C product line has comprehensive solutions for managing medium and large enterprises. These IT solutions include, but are not limited to, 1C: ERP “Production management 2” (1C: ERP 2).
In addition to the standard modules of operational and management accounting, ERP 2 also has a subsystem of international accounting, which takes into account business transactions in both accounting (local GAAP) and corporate (HGB, IFRS, US GAAP, etc.) accounting. The subsystem allows implementing a number of automation options, each of which has its own advantages:
- Complete independence of international accounting from the local accounting, when one of the accounting types can also be disabled on request, or
- Translation of local accounting transactions into international accounting accounts in accordance with certain transformation and display rules;
- Flexible settings for accounting policies, approaches, currency zones, periods;
- A privately owned, completely independent chart of accounts, which can be configured as accurately as possible according to the sample corporate chart of accounts. This chart of accounts can be supplemented and expanded as necessary without interfering with the system program code;
- The ability to create your own copies of the group reports (including HB II sets) and automatically fill them with data reflecting any period of time;
- Possibility to distribute costs among cost centers;
- the ability to reflect business transactions in accordance with specific rules, taking into account various depreciation rates, cost allocation methods, and types of reserves;
- Customizable data export to external databases.
When speaking specifically about German, Austrian or Swiss companies, we are often given a special task as part of the setting up of the international 1C: ERP 2 module: the task of generating an income statement using the “cost-based” method (also called “the nature of expense” method), instead of the typical, most often used method in Russian accounting, “the cost of sales” method. To meet these requirements, we are creating a new type of corporate reporting – P & L, where the relevant indicators are taken from the corporate model. For each indicator (report line), we determine the data source using a special selection.
If you want to know the details of how to automate this accounting section, just ask our specialists!
We have solved numerous design tasks in the field of accounting, auditing, development and customization of software for automation and consolidation of corporate reporting.
Therefore, we are confident that the functionality of 1C: ERP-2 and similar products 1C is perfect for automation projects of international accounting, and it becomes easier every time.
Automation implementation results in the following:
- the work of specialists in international accounting and controlling becomes easier
- business processes become more transparent
- financial forecasts become more precise.
