Anderson ZurMuehlen Blog

When it Comes to Revenue, Nonprofits Need to Think Like Auditors

Auditors examining a not-for-profit’s financial statements spend considerable time on the revenue figures. They look at the accounting methods used to record revenues and perform a detailed income analysis. You can use the same techniques to increase your understanding of your organization’s revenue profile.

In particular, consider:

Individual contributions. Compare the donation dollars raised to past years to pinpoint trends. For example, have individual contributions been increasing over the past five years? What campaigns have you implemented during that period? You might go beyond the totals and determine if the number of major donors has grown.

Also estimate what portion of contributions is restricted. If a large percentage of donations are tied up in restricted funds, you might want to re-evaluate your gift acceptance policy or fundraising materials.

Grants. Grants can vary dramatically in size and purpose ― from covering operational costs, to launching a program, to funding client services. Pay attention to trends here, too. Did one funder supply 50% of total revenue in 2015, 75% in 2016, and 80% last year? A growing reliance on a single funding source is a red flag to auditors and it should be to you, too. In this case, if funding stopped, your organization might be forced to close its doors.

Fees for services. Fees from clients, joint venture partners or other third parties can be similar to fees for-profit organizations earn. They’re generally considered exchange transactions because the client receives a product or service of value in exchange for its payment. Sometimes fees are charged on a sliding scale based on income or ability to pay. In other cases, fees are subject to legal limitations set by government agencies. You’ll need to assess whether these services are paying for themselves.

Membership dues. If your nonprofit is a membership organization and charges dues, determine whether membership has grown or declined in recent years. How does this compare with your peers? Do you suspect that dues income will decline? You might consider dropping dues altogether and restructuring. If so, examine other income sources for growth potential.
Once you’ve gained a deeper understanding of your revenue picture, you can apply that knowledge to various aspects of managing your organization. This includes setting annual goals and preparing your budget. Contact us for help interpreting and applying revenue data.

© 2018

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What Can You Deduct When Volunteering?

Because donations to charity of cash or property generally are tax deductible (if you itemize), it only seems logical that the donation of something even more valuable to you — your time — would also be deductible. Unfortunately, that’s not the case.

Donations of time or services aren’t deductible. It doesn’t matter if it’s simple administrative work, such as checking in attendees at a fundraising event, or if it’s work requiring significant experience and expertise that would be much more costly to the charity if it had to pay for it, such as skilled carpentry or legal counsel.

However, you potentially can deduct out-of-pocket costs associated with your volunteer work.

The basic rules

As with any charitable donation, for you to be able to deduct your volunteer expenses, the first requirement is that the organization be a qualified charity. You can use the IRS’s “Tax Exempt Organization Search” tool (formerly “Select Check”) at http://bit.ly/2KXWl5b to find out.

Assuming the charity is qualified, you may be able to deduct out-of-pocket costs that are:

  • Unreimbursed,
  • Directly connected with the services you’re providing,
  • Incurred only because of your charitable work, and
  • Not “personal, living or family” expenses.

Supplies, uniforms and transportation 

A wide variety of expenses can qualify for the deduction. For example, supplies you use in the activity may be deductible. And the cost of a uniform you must wear during the activity may also be deductible (if it’s required and not something you’d wear when not volunteering).

Transportation costs to and from the volunteer activity generally are deductible, either the actual cost or 14 cents per charitable mile driven. But you have to be the volunteer. If, say, you drive your elderly mother to the nature center where she’s volunteering, you can’t deduct the cost.

You also can’t deduct transportation costs you’d be incurring even if you weren’t volunteering. For example, if you take a commuter train downtown to work, then walk to a nearby volunteer event after work and take the train back home afterwards, you won’t be able to deduct your train fares. But if you take a cab from work to the volunteer event, then you potentially can deduct the cab fare for that leg of your transportation.

Volunteer travel

Transportation costs may also be deductible for out-of-town travel associated with volunteering. This can include air, rail and bus transportation; driving expenses; and taxi or other transportation costs between an airport or train station and wherever you’re staying. Lodging and meal costs also might be deductible.

The key to deductibility is that there is no significant element of personal pleasure, recreation or vacation in the travel. That said, according to the IRS, the deduction for travel expenses won’t be denied simply because you enjoy providing services to the charitable organization. But you must be volunteering in a genuine and substantial sense throughout the trip. If only a small portion of your trip involves volunteer work, your travel expenses generally won’t be deductible.

Keep careful records

The IRS may challenge charitable deductions for out-of-pocket costs, so it’s important to keep careful records. If you have questions about what volunteer expenses are and aren’t deductible, please contact us.

© 2018

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Home Green Home: Save Tax by Saving Energy

“Going green” at home — whether it’s your principal residence or a second home — can reduce your tax bill in addition to your energy bill, all while helping the environment, too. The catch is that, to reap all three benefits, you need to buy and install certain types of renewable energy equipment in the home.

Invest in green and save green

For 2018 and 2019, you may be eligible for a tax credit of 30% of expenditures (including costs for site preparation, assembly, installation, piping, and wiring) for installing the following types of renewable energy equipment:

  • Qualified solar electricity generating equipment and solar water heating equipment,
  • Qualified wind energy equipment,
  • Qualified geothermal heat pump equipment, and
  • Qualified fuel cell electricity generating equipment (limited to $500 for each half kilowatt of fuel cell capacity).

Because these items can be expensive, the credits can be substantial. To qualify, the equipment must be installed at your U.S. residence, including a vacation home — except for fuel cell equipment, which must be installed at your principal residence. You can’t claim credits for equipment installed at a property that’s used exclusively as a rental.

To qualify for the credit for solar water heating equipment, at least 50% of the energy used to heat water for the property must be generated by the solar equipment. And no credit is allowed for solar water heating equipment unless it’s certified for performance by the nonprofit Solar Rating & Certification Corporation or a comparable entity endorsed by the state in which your residence is located. (Keep this certification with your tax records.)

The credit rate for these expenditures is scheduled to drop to 26% in 2020 and then to 22% in 2021. After that, the credits are scheduled to expire.

Document and explore

As with all tax breaks, documentation is key when claiming credits for green investments in your home. Keep proof of how much you spend on qualifying equipment, including any extra amounts for site preparation, assembly and installation. Also keep a record of when the installation is completed, because you can claim the credit only for the year when that occurs.

Be sure to look beyond the federal tax credits and explore other ways to save by going green. Your green home investments might also be eligible for state and local tax benefits, subsidized state and local financing deals, and utility company rebates.

 

©2018

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The Pass-Through Provisions of the TCJA: The Details

The Tax Cuts and Jobs Act (TCJA) has been touted for cutting the corporate tax rate, but the law also contains some valuable goodies for smaller businesses that operate as pass-through entities, including partnerships, limited liability companies, S corporations and sole proprietorships. These businesses stand to see their tax liabilities fall significantly, but determining just how much they will benefit can be complicated.

Pass-through tax cuts

The owners and shareholders of pass-through entities pay taxes on their net income at individual ordinary income tax rates, which had reached as high as 39.6% under prior law. The TCJA reduced individual tax rates, though, with the highest rate now at 37%. It also raised the thresholds for individual tax brackets, and the top rate doesn’t take effect until taxable income exceeds $500,000 for single filers and $600,000 for married couples filing jointly.

Moreover, the TCJA added a generous new business deduction for pass-through businesses that will slash taxable income. The qualified business income (QBI) deduction generally allows taxpayers to deduct 20% of QBI received. QBI is the net amount of income, gains, deductions and losses, exclusive of reasonable compensation, certain investment items and payments to partners for services rendered. The calculation is performed for each qualified business and aggregated. (If the net amount is below zero, it’s treated as a loss for the following year, thereby reducing that year’s QBI deduction.)

Once taxable income — not QBI — exceeds $157,500 for single filers or $315,000 for married couples filing jointly, a wage limit begins to phase in, under which taxpayers can deduct only the lesser of 20% of QBI or 50% of their allocable share of W-2 wages paid by the business. The wage limit is intended to deter high-income taxpayers from converting wages or other compensation for personal services to QBI that qualifies for the deduction.

Alternatively, taxpayers can deduct the lesser of 20% of QBI or 25% of wages plus 2.5% of their allocable share of the unadjusted basis of qualified business property (QBP) — essentially, the purchase price of tangible depreciable property held at the end of the tax year. This option makes it easier for capital-intensive firms with relatively low wages (for example, real estate, construction or manufacturing businesses) to take advantage of the deduction.

The wage limit phases in completely when taxable income exceeds $207,500 for single filers and $415,000 for joint filers. When it applies but isn’t yet fully phased in, the gross (without any wage limit) deduction is reduced by the same ratio of the difference between the amount of the gross deduction and the fully wage-limited deduction as the ratio of 1) the amount by which the taxable income exceeds the threshold to 2) $50,000 for single filers or $100,000 for married couples filing jointly.

The amount of the deduction may not exceed 20% of the taxable income less any net capital gains. So, for example, if the QBI for a married couple is $400,000 and their taxable income is $300,000, the deduction is limited to 20% of $300,000, or $60,000.

The QBI deduction is further limited for specified service trades or businesses (SSTBs). SSTBs include businesses involving law, financial, health care, brokerage and consulting services firms, as well as any business where the principal asset is the reputation or skill of one or more of its employees. The QBI deduction for SSTBs begins to phase out at $157,500 in taxable income for single filers and $315,000 for joint filers, phasing out completely at $207,500 and $415,000, respectively (the same thresholds by which the wage limit phases in).

The QBI deduction applies to taxable income and doesn’t come into play when computing adjusted gross income (AGI). It’s available to both itemizing and nonitemizing taxpayers.

Examples for non-SSTBs

The amount of the deduction for “qualified trades or businesses” depends largely on taxpayers’ taxable income — that is, their AGI less itemized deductions (excluding the QBI deduction). It’s most easily calculated when taxable income is under $157,500 for single filers and $315,000 for married joint filers so the wage limit doesn’t apply. For example, joint filers Bob and Mary have taxable income of $150,000, including $75,000 in QBI. They can deduct 20% of $75,000, or $15,000, from their taxable income.

Computing the deduction also is fairly straightforward when taxable income exceeds $207,500 for single filers or $415,000 for married joint filers. Let’s assume Bob and Mary have taxable income of $575,000, including $75,000 of Mary’s QBI. She pays $20,000 in wages and has $90,000 of QBP. The first option for the wage limit calculation in this situation is $10,000 (50% of $20,000), and the second option is $7,250 (25% of $20,000 + 2.5% of $90,000) — making the wage limit, and the deduction, $10,000.

What if Bob and Mary’s taxable income falls into the range between $315,000 and $415,000, where the wage limit is phasing in, with everything else remaining the same? If their taxable income is, say, $400,000, their deduction is partially capped by the wage limit. As in the immediately preceding example, the full wage limit is $10,000, but, with taxable income of $400,000, only 85% of the full limit applies:

($400,000 taxable income – $315,000 threshold)/$100,000 = 85%

To calculate the amount of their deduction, the couple must deduct 85% of the difference between the gross deduction of $15,000 and the $10,000 deduction if the full wage limit applied:

($15,000 – $10,000) × 85% = $4,250

That amount is deducted from the gross deduction for a final deduction of $10,750 ($15,000 – $4,250).

Example for SSTBs

When taxable income doesn’t exceed $157,500 for single filers or $315,000 for married couples filing jointly, SSTBs are treated in the same manner as qualified businesses (see first example above) when it comes to the QBI deduction. And, if the taxable income equals or exceeds $207,500 for single filers or $415,000 for married joint filers, SSTB owners receive no QBI deduction.

It’s when taxable income falls between those thresholds that things get trickier because the QBI, W-2 wages and QBP all gradually phase out on a prorated basis over this income range. The percentage that a taxpayer can take into account is 100% less the percentage equal to the ratio of 1) the amount by which taxable income exceeds the threshold amount to 2) $50,000 for single filers or $100,000 for joint filers:

1- (taxable income – applicable threshold)/$50,000 or $100,000 = applicable percentage

For example, let’s say Bob and Mary have joint taxable income of $400,000, and Mary has an SSTB with $75,000 in QBI. She pays $20,000 in wages and owns $90,000 in QBP. Only 15% of the QBI, or $11,250, qualifies for the deduction:

1- ($400,000 – $315,000)/$100,000 = 15% × $75,000 = $11,250

The gross deduction is 20% of $11,250, or $2,250. But, because only 15% of the QBI qualifies for the deduction, the couple can take account of only 15% of wages ($3,000) and QBP ($13,500) when calculating the wage limit. Fifty percent of wages for purposes of the limit, therefore, is $1,500, and 25% of wages plus 2.5% of QBP is $1,087.50 — setting the full wage limit at the greater amount of $1,500.

As for a non-SSTB, though, the wage limit phases in gradually over this income range. In this case, 85% of the limit applies:

($400,000 – $315,000)/$100,000 = 85%

The couple must reduce their QBI deduction by 85% of the difference between the gross deduction amount and the deduction amount if the full wage limit applied:

($2,250 – $1,500) × 85% = $637.50

As a result, their allowable deduction is $1,612.50 ($2,250 – $637.50).

What’s next?

It’s still early in the life cycle of the TCJA, and extensive regulations are expected in the near future. Among other things, the Treasury Department must draft regulations addressing the allocation of items and wages, along with reporting requirements, and the application of the QBI deduction to tiered entities. We’ll keep you abreast of important developments.

 

©2018

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Could a Long Term Deal Ease Your Succession Planning Woes?

Some business owners — particularly those who founded their companies — may find it hard to give up control to a successor. Maybe you just can’t identify the right person internally to fill your shoes. While retirement isn’t in your immediate future, you know you must eventually step down.

One potential solution is to find an outside buyer for your company and undertake a long-term deal to gradually cede control to them. Going this route can enable a transition to proceed at a more manageable pace.

Time and capital

For privately held businesses, long-term deals typically begin with the business owner selling a minority stake to a potential buyer. This initiates a tryout period to assess the two companies’ compatibility. The parties may sign an agreement in which the minority stakeholder has the option to offer a takeover bid after a specified period.

Beyond clearing a path for your succession plan, the deal also may provide needed capital. You can use the cash infusion from selling a minority stake to fund improvements such as:

• Hiring additional staff,
• Paying down debt,
• Conducting research and development, or
• Expanding your facilities.

Any or all of these things can help grow your company’s market share and improve profitability. In turn, you’ll feel more comfortable in retirement knowing your business is doing well and in good hands.

Benefits for the buyer

You may be wondering what’s in it for the buyer. A minority-stake purchase requires less cash than a full acquisition, helping buyers avoid finding outside deal financing. It’s also less risky than a full purchase. Buyers can, for example, push for the company to achieve certain performance objectives before committing to buying it.

Integration may also be easier because buyers have time to coordinate with sellers to implement changes — an advantage when their IT, accounting or other major systems are dissimilar. In addition, in a typical M&A transaction, decisions must be made quickly. But under a long-term deal, the parties can debate and negotiate options, which may improve the arrangement for everyone.

What’s right for you

There are, of course, a wide variety of other strategies for creating and executing a succession plan. But if you’re leaning toward finding a buyer and are in no rush to complete a sale, a long-term deal might be for you. Our firm can provide further information.

©2018

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2018 Q3 Tax Calendar: Key Deadlines for Businesses and Other Employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

July 31 

• Report income tax withholding and FICA taxes for second quarter 2018 (Form 941), and pay any tax due. (See the exception below, under “August 10.”)

• File a 2017 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.

August 10 

• Report income tax withholding and FICA taxes for second quarter 2018 (Form 941), if you deposited on time and in full all of the associated taxes due.

September 17 

• If a calendar-year C corporation, pay the third installment of 2018 estimated income taxes.

• If a calendar-year S corporation or partnership that filed an automatic six-month extension:

• File a 2017 income tax return (Form 1120S, Form 1065 or Form 1065-B) and pay any tax, interest and penalties due.

• Make contributions for 2017 to certain employer-sponsored retirement plans.

© 2018

Factor in State and Local Taxes When Deciding Where to Live in Retirement

Many Americans relocate to another state when they retire. If you’re thinking about such a move, state and local taxes should factor into your decision.  

Income, property and sales tax

Choosing a state that has no personal income tax may appear to be the best option. But that might not be the case once you consider property taxes and sales taxes.

For example, suppose you’ve narrowed your decision down to two states: State 1 has no individual income tax, and State 2 has a flat 5% individual income tax rate. At first glance, State 1 might appear to be much less expensive from a tax perspective. What happens when you factor in other state and local taxes?

Let’s say the property tax rate in your preferred locality in State 1 is 5%, while it’s only 1% in your preferred locality in State 2. That difference could potentially cancel out any savings in state income taxes in State 1, depending on your annual income and the assessed value of the home.

Also keep in mind that home values can vary dramatically from location to location. So if home values are higher in State 1, there’s an even greater chance that State 1’s overall tax cost could be higher than State 2’s, despite State 1’s lack of income tax.

The potential impact of sales tax can be harder to estimate, but it’s a good idea at minimum to look at the applicable rates in the various retirement locations you’re considering.

More to think about

If states you’re considering have an income tax, also look at what types of income they tax. Some states, for example, don’t tax wages but do tax interest and dividends. Others offer tax breaks for retirement plan and Social Security income.

In the past, the federal income tax deduction for state and local property and income or sales tax could help make up some of the difference between higher- and lower-tax states. But with the Tax Cuts and Jobs Act (TCJA) limiting that deduction to $10,000 ($5,000 for married couples filing separately), this will be less help — at least through 2025, after which the limit is scheduled to expire.

There’s also estate tax to consider. Not all states have estate tax, but it can be expensive in states that do. While under the TJCA the federal estate tax exemption has more than doubled from the 2017 level to $11.18 million for 2018, states aren’t necessarily keeping pace with the federal exemption. So state estate tax could be levied after a much lower exemption.

Choose wisely

As you can see, it’s important to factor in state and local taxes as you decide where to live in retirement. You might ultimately decide on a state with higher taxes if other factors are more important to you. But at least you will have made an informed decision and avoid unpleasant tax surprises. Contact us to learn more.

© 2018

 

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It’s Time for a Mid-Year Checkup!

Time flies when you’re busy running a business. But it’s important to occasionally pause and assess interim performance — otherwise you’re likely to be surprised by the year-end results. When reviewing midyear financial reports, however, recognize their potential shortcomings. These reports might not be as reliable as year-end financials, unless a CPA prepares them or performs agreed-upon procedures on specific accounts.

Diagnostic benefits

Monthly, quarterly and midyear financial reports can provide insight into trends and possible weaknesses. Interim reporting can be especially helpful for businesses that were struggling at the end of 2017.

For example, you might compare year-to-date revenue for 2018 against 1) the same time period for 2017, or 2) your annual budget for 2018. If your business isn’t growing or achieving its goals, find out why. Perhaps you need to provide additional sales incentives, implement a new ad campaign or alter your pricing.

You can also review your gross margin [(revenue – cost of sales) ÷ revenue]. If your margin is slipping compared to 2017 or industry benchmarks, find out what’s going wrong — and take corrective actions.

Don’t forget the balance sheet. Reviewing major categories of assets and liabilities can help detect working capital problems before they spiral out of control. For instance, a buildup of accounts receivable may signal collection problems. Or, if your company is drawing heavily on its line of credit, operations might not be generating sufficient cash flow.

Potential shortcomings

When interim financials seem out of whack, don’t panic. Some anomalies may not be caused by problems in your daily business operations. Instead, they might be caused by informal accounting practices that are common midyear (but are corrected by your CPA at year end).

For example, some controllers might liberally interpret period “cutoffs” or use subjective estimates for certain account balances and expenses. In addition, interim financial statements typically exclude costly year-end expenses, such as profit sharing and shareholder bonuses. Interim financial statements, therefore, generally paint a rosier picture of a company’s performance than its year-end report potentially may.

Furthermore, many companies perform time-consuming physical inventory counts exclusively at year end. Therefore, the inventory amount shown on the interim balance sheet might be based solely on computer inventory schedules or, in some instances, the controller’s estimate using historic gross margins. Similarly, accounts receivable may be overstated, because overworked controllers may lack time or personnel to adequately evaluate whether the interim balance contains any bad debts.

Proceed with caution

Contact us for help interpreting your midyear results, as well as detecting and correcting potential problems. Unlike year-end financials, interim reports are seldom subject to external audit or rigorous internal accounting scrutiny. We can remedy any shortcomings by performing additional testing procedures on your interim financials — or preparing audited or reviewed midyear statements that conform to U.S. Generally Accepted Accounting Principles.

© 2018

 

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IRS Issues Guidance to Ease Transition to FASB’s New Revenue Recognition Rule

In 2014, a new accounting standard on how to recognize revenue from contracts was issued by the Financial Accounting Standards Board (FASB). Now the IRS is allowing a new automatic change in accounting method for businesses to use to conform with the new financial accounting standard. This will allow for more book-tax conformity and facilitate accounting method change requests associated with adopting the new standard.

New accounting rules

Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, goes into effect in 2018 for public companies and 2019 for private ones. The new revenue recognition standard requires entities following U.S. Generally Accepted Accounting Principles (GAAP) to recognize contract revenue for promised goods and services to customers based on the following five steps:

1. Identify the contracts with a customer.

2. Identify the performance obligations in the contract.

3. Determine the transaction price.

4. Allocate the transaction price to the performance obligations.

5. Recognize revenue as the entity satisfies a performance obligation.

The new revenue recognition standard is a significant change from current accounting practices, particularly for technology firms, construction contractors and service providers with warranty and repair service contracts. However, the recognition rules for tax purposes remain unchanged.

Under the tax rules, businesses that follow the accrual method of accounting accrue income when the right to receive income is fixed and the amount can be determined with reasonable accuracy. This is known as the “all events” test.

IRS change of accounting method

Your business can apply for a change in accounting method by filing IRS Form 3115 and submitting detailed information about the change. To alleviate the administrative burden, the IRS created a list of “automatic” method changes whereby a business is deemed to have the consent of the IRS to change its accounting method if it’s within the scope of a revenue procedure and any related guidance for the specific method change.

When a business changes its accounting method for tax purposes, adjustments are generally required to be made to prevent items from being duplicated or omitted. Sometimes, the IRS allows a “cutoff” method instead, where only the items arising on or after the beginning of the year of change are accounted for under the new accounting method.

Syncing GAAP revenue and taxable income

Most entities would prefer to use the same method of recognizing revenue under GAAP as they do for reporting taxable income to the IRS. The new IRS guidance provides procedures to obtain automatic IRS consent to change to an otherwise permissible accounting method under ASU 2014-07, if such method change is otherwise permissible for federal income tax purposes and is made for the tax year in which a business adopts the new accounting standard.

Specifically, Revenue Procedure 2018-29 applies small business exception rules to more businesses and gives taxpayers the option of implementing the accounting method change either with an adjustment or on a cutoff basis. If needed, the IRS may issue additional guidance as the IRS and businesses obtain more experience with the interaction of the new standard with federal income tax accounting methods.

We can help

The new IRS guidance simplifies the procedures needed to align your taxable income with the amount of revenue reported on your financial statements. Contact us for answers to your questions about how to implement the changes.

© 2018

 

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What’s All the Buzz About XBRL?

The Securities and Exchange Commission (SEC) requires public companies to provide their financial statements in the eXtensible Business Reporting Language (XBRL) format as an exhibit to their regulatory filings. But XBRL isn’t just for reporting to the SEC. There are many compelling reasons for public companies to expand their use of XBRL data — and for private companies and financial statement users to jump on the XBRL bandwagon, too.

Many uses

Introduced in 1999, XBRL is based on a complex technical infrastructure. It provides a universal standards-based method to prepare, publish, exchange and analyze financial data across disparate accounting and operating systems.

Using a tagging system, computers filter XBRL data “intelligently,” automating many aspects of report preparation, data collection and due diligence. Companies can apply XBRL to various types of business data, such as internal and external financial reports, tax returns and loan applications.

Potential upsides

This machine-readable reporting format makes financial statements more useful to researchers, regulators and investors. It has the potential to increase the speed, accuracy and usability of financial disclosure — and eventually reduce costs.

Companies that report financial data using XBRL can share it directly with their auditors and lenders. This significantly reduces the need to manually re-enter data into spreadsheets and other analytic software programs and repackage it into new formats. Automation, in turn, cuts data processing costs and minimizes human error.

Another upside is that XBRL permits automatic validation of financial data by highlighting inconsistencies, deviations from industry norms and even transaction patterns characteristic of fraudulent behavior. And it provides a global framework for exchanging financial information that transcends current language and reporting standards barriers. XBRL doesn’t replace current operating or accounting systems but, instead, piggybacks onto existing systems.

Further, XBRL speeds up the financial reporting process, facilitating real-time disclosures and continuous auditing, and eases the burden of Sarbanes-Oxley compliance for public companies. For companies making acquisitions, XBRL can link formerly incongruent systems, eliminating costly conversions to a common operating system.

Put XBRL to work for you

Companies that choose to adopt XBRL can convert data to this format in two ways. They can either 1) purchase off-the-shelf software and categorize line items themselves, or 2) outsource their XBRL projects. Once the company incurs initial setup costs, ongoing costs generally are minimal.

XBRL may ultimately reduce compliance costs through greater efficiency. Contact us for more information on switching over to this user-friendly reporting format.

© 2018

 

 

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