The normal close process is rarely simple to manage because data is dispersed across numerous systems and formats, hours are spent looking for missing data, and human entry of spreadsheet formulas into the accounting system is required. Closing the books is more difficult for companies that have numerous subsidiaries or autonomous business units, particularly if they have operations in several different countries.
To enter new markets or diversify their sources of income, corporations frequently purchase other firms as they grow and develop, which only serves to increase the complexity. An organization may end up utilizing many ERP and accounting systems concurrently as a result of this development. These systems hardly ever interact with one another, even if they may each serve a specific purpose when used alone.
Another challenge to creating consolidated financial reports is the absence of a shared chart of accounts. This means that accounting should check each transaction from each subsidiary before it is reported to the general ledger to make sure the right account codes are being utilized. However, given the limited resources available and the need to finish the volumes as soon as possible, this might not actually occur. Smaller transactions are frequently overlooked whereas major transactions will certainly be examined.
Corporate Expectations, Regional Results
While following local and federal laws is necessary for subsidiaries operating in many countries, it is desirable for them to also follow corporate accounting standards and utilize the same chart of accounts for consistency and simpler consolidation. A crucial first step in attaining this objective is to replace the disparate collection of multiple ERP and accounting software with a single solution.
Netsuite designed software to fulfill the particular requirements of multi-entity accounting. The software includes:
- Automatic currency conversion utilizing current exchange rates and simultaneous reporting of transactions in the local currency and the base currency of the parent company
- A common general ledger with standardized accounts and the option to design unique accounts at the regional, national, or subsidiary levels
- Ability to apply different accounting treatments to a single transaction and support multiple accounting standards and tax regulations
- No need to manually categorize or alter individual transactions; seamless consolidation
- Authorized users’ real-time access to subsidiary financial data at the transactional level
Accounting and finance professionals can construct numerous sets of books with distinct rules using the NetSuite multi-book accounting software to meet a range of financial, tax, and managerial objectives. An American-based company with a European subsidiary, for instance, would have to adhere to generally accepted accounting principles (GAAP) when including those same transactions in corporate financial reports but would have to apply IFRS accounting rules to business transactions in France and Germany. The business can set up an IFRS-specific accounting book with rules that automatically post transactions happening through the European subsidiary to both it and the main accounting book that adheres to U.S. GAAP using NetSuite’s multi-book accounting.
Separate books with different revenue recognition schedules can be developed because revenue management rules change according to various standards. Revenue may be recorded in different amounts or at different periods based on the needs where the rules differ. Additionally feasible are fixed asset depreciation as well as expense amortization plans, as well as book-specific GL accounts. For example, a company having subsidiaries in various jurisdictions in the United States can keep distinct records to reflect variations in corporation taxes or depreciation.
According to specified criteria that specify which units are used for reporting purposes in each nation or territory and for each subsidiary, NetSuite’s multi-book accounting also automatically converts currencies. The closure procedure does not require manual currency conversions because each transaction is posted in various currencies concurrently using the most recent exchange rates. Additionally, because this occurs in real-time, the GL impact may be seen instantly in a variety of currencies.
Businesses with several subsidiaries or international operations benefit from NetSuite multi-book. By removing human adjustments and laborious consolidation procedures, real-time consolidation, automatic currency translation, and the ability to apply different accounting standards, tax laws, and revenue and expense schedules expedite the closing process. The outcomes are quicker and more accurate reporting,
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