Accounting and Financial Outsourcing

Article Dean Dorton

Time is running out! The deadlines for private companies to comply with new FASB accounting and reporting standards is less than a year away.

For the first time in several decades, the organizations that establish accounting and reporting standards for public and private companies – the Financial Accounting Standards Board (FASB) in the USA and the International Accounting Standards Board (IASB) – have announced new guidance for contract revenue recognition – ASC 606 and IFRS 15.

To comply, affected companies will need to review contracts and possibly restate timing of their revenue. It may be necessary to modify computer systems and change procedures in areas such as sales, accounting, financial reporting and internal audit.

What is ASC 606 and IFRS 15?

The Accounting Standards Codification (ASC) 606 issued by FASB and the International Financial Reporting Standards (IFRS) 15 issued by IASB are both titled Revenue from Contracts with Customers and reflect the organizations’ agreement on best practices for contract revenue recognition across industries.

What is changing?

The new standards define Contracts with Customers as transferring goods, services or non-financial assets unless the contracts are already covered by other standards such as leases or insurance contracts. The change establishes a 5-step process for revenue recognition:

  1. Identify contracts signed with customers.
  2. Identify timing of separate performance obligations in each of those contracts.
  3. Determine the transaction price for the contract.
  4. Allocate the transaction price to each of the performance obligations.
  5. Plan for and recognize revenue as performance obligations are satisfied.

A major implication of the new process is that instead of recognizing revenue when the cash is received, companies will recognize revenue when performance obligations – formerly referred to as deliverables – are met.

Who is affected and how?

Companies who frequently change the terms of a customer contract will be most affected. Each time a customer contract changes, the new standards require companies to reassess the performance obligations and if necessary, reallocate revenue across the contract and defer expense recognition to align with the contract’s new delivery schedule.

So, it should be obvious that companies relying on Excel spreadsheets to prepare financial statements will see their workload significantly increased with the change. Additionally, accountants will have to keep two sets of books for a number of years to show and compare revenue recognition under old and new regulations.  

Take a look at this video for details on how easy Intacct makes ASC 606 and IFRS 15 compliance

Article Dean Dorton

Small businesses face particular difficulties in creating effective internal controls that will minimize the possibility of fraud – and maximize the chance of detecting fraud before serious damage is done.

Small businesses – defined as having fewer than 100 employees – were the most victimized of any size business, according the 2014 report of the Association of Certified Fraud Examiners. Nearly 29 percent of all reported fraud cases in its study were small businesses, followed by businesses with between 1,000 and 10,000 employees at 28 percent.

The average loss was also high for small businesses – a median $154,000 per case, second only to the largest businesses of more than 10,000 employees, which had a median loss of $160,000 per case.

Internal control measures taken by large organizations don’t always work for small businesses. However, small business owners who are diligent can protect themselves from becoming the victims of theft.

One of the hallmarks of an effective internal control system is the segregation of duties within a company’s accounting or bookkeeping department. But for many small businesses, the bookkeeper is the accounting department. In many cases, it is simply not possible to split the various accounting functions among different people.

Thus, the kind of internal control structures recommended to thwart fraudulent schemes are simply not feasible or cost-effective for many small businesses.

Moreover, while many small business owners have a long relationship with their outside accountants, they may not realize that their accountant can assist them with more than just their taxes.

The small business owner may be unaware of the many simple and feasible steps that can be taken to minimize the opportunities for employee fraud.

In very small businesses, where there is no accounting function beyond a lone bookkeeper, the business owner must become the first line of defense, no matter how much trust he or she may have in the bookkeeper.

This requires that the business owners sign checks themselves or authorize payments by other methods. An easy deterrent is to have the business owner receive the bank statement directly, unopened, and review the cancelled checks and activity.

Where electronic access to the business’s bank accounts is available (and such access should be tightly restricted within the company), the owner should access the account online a few times each month to see whether there have been unusual or unexplained expenditures.

The owner should also be sure to require invoices or other back-up to support any payments for which approval is requested – and to be diligent about reviewing the backup and asking questions. The business owner truly is his or her own first line of defense when it comes to fraud prevention.

If the business is large enough to have more than one person involved in bookkeeping and accounting, then the various functions within the group should be rotated from time to time. This will serve notice on employees that any fraudulent conduct may soon be detected by a different set of eyes looking at the company’s checkbook or other accounting records.

It is also important to assure that bookkeepers take vacations and that another employee or the owner assumes responsibility for the bookkeeping tasks. This also serves as a deterrent to fraud and helps increase the chances that any theft will be detected before too much time passes.

The relationship between the business owner and his or her accountant can also be a key element in preventing and detecting fraud.

It is important for the business owner to understand precisely what services the accountant is providing and can provide. The owner should meet periodically with the accountant to discuss any changes in services that might be advisable because of changes in the nature or size of the business.

Many levels of financial statement services are not expressly designed to detect fraud so, in far too many cases, the accountant-client relationship is not documented by an up-to-date engagement letter that specifies both the extent and the limitations of the services provided by the accountant. This creates a great deal of room for misunderstanding, which can be detrimental to both parties.

An engagement letter – regardless of the extent of the accountant’s services – helps avoid dangerous misunderstandings by specifying the nature and limitations of the accountant’s services.

Keeping the letter current also enables the business owner to determine whether the cost of additional services may help minimize the danger and cost of potential employee fraud. While even a financial statement audit may not always detect a collusive scheme, accountants can help the business owner design and implement policies and procedures that will minimize the chances that a fraudulent scheme will go undetected.

Article Dean Dorton

Rarely do you find an accounting system these days that does not integrate data from or to some other system. Most companies have, for example, a CRM (Customer Relationship Management) that synchronizes customers, contacts, orders, items and more with their accounting system. Some companies have an operational management system for manufacturing, project management, services billing or a myriad of other processes that must integrate to an accounting system. Data synchronization is vital to today’s organization as it eliminates the “silo” effect of have different data in different systems.

When considering data integration for Dynamics GP, there are many tools to choose from. Two of the more popular tools are the Integration Manager tool from Microsoft and SmartConnect from eOne Solutions.  But how do these two choices compare? The reasons to recommend SmartConnect over Integration Manager are numerous. From a TRUE Excel integration, to more integration points, to automated integrations with logging and error reporting, SmartConnect flies head and shoulders above Integration Manager.

Why is an Excel integration important? Imagine pushing data from WITHIN Excel instead of having to save it as a CSV file, close the file, change programs and the integrate the data! Yes, you can integrate data into Dynamics GP directly from Excel by clicking one button with SmartConnect using the Excel add-in!  No saving! No changing programs! Just push the data!

Integration Manager limits your data integration points – even when you include its eConnect capabilities. SmartConnect, however, gives you access to nearly ever object in Dynamics GP. In fact, SmartConnect exposes integration capabilities that no other tools do. Take, for example, the idea of integrating customers. Other tools will let you create a customer, but no other tool lets you creat customer class IDs if they do not already exist. Why is the important? Who wants to have their customer integration fail because the class ID does not exist and they have to manually create it?!?

And, let’s not forget those automated integration possibilities!  Synchronizing your Salesforce and Dynamics GP data by pushing buttons would be a nightmare! Automated data synchronizations via APIs and other methods are the only way to integrate in 2016 and beyond. An automated integration allows for power not only with APIs though. Consider being able to save CSV files in a directory of your choosing and having SmartConnect push the data into Dynamics GP or CRM or other apps! No effort on your part, just save the file!

SmartConnect is far superior to Integration Manager, and a number of other tools, for many reasons. Automation, pure Excel capabilities, and a deeper integration are just a few reasons. Stop wasting your time with Integration Manager and step up to SmartConnect to power your integrations to the next level and gain more time to make better decisions, not just push buttons! Contact us for details!

Article Dean Dorton

Join us along with your Dynamics GP peers, and the Microsoft Dynamics GP Product team, at GPUG Amplify taking place May 23-25 at the Anaheim Marriot located in Anaheim, CA. Save money by registering today! Early bird discounts are available, but hurry – savings end March 25.

Here’s how Amplify hosted by GPUG is different than other GPUG events (link to PDF of graphical breakdown). Here’s what you need to know about Amplify hosted by GPUG:

  • Discover the latest solution innovations and new product updates
  • Connect with Microsoft to learn about product roadmaps and the future direction of the Dynamics GP product.
  • Dive into the features and functionality of Dynamics GP 2016, the latest release, with sessions led by the Microsoft Dynamics GP Product team.
  • Pre-conference Academy instructor-led training
  • Dynamics GP certification exams will be available

At Massey Consulting, it’s our goal to help you become more successful, both individually and as an organization. This is why we are encouraging you to take advantage of resources and tap into the breadth of knowledge being shared by Dynamics GP Experts and the Microsoft team at Amplify hosted by GPUG. Register today!

Article Dean Dorton

On February 25, 2016, the Financial Accounting Standards Board (FASB) issued its new lease accounting guidance in Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842).

The ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases, unless the lease is a short term lease.

Short term leases
A short term lease is defined in the ASU as “a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise”.  The lease term is defined as the noncancellable period for which a lessee has the right to use an underlying asset, together with all of the following:

  • Periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option.
  • Periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.
  • Periods covered by an option to extend (or not to terminate) the lease in which exercise of the option is controlled by the lessor.

For short term leases, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.

Leases not considered short term
For all other leases, the lessee will be required to recognize the following at the commencement date of the lease:

  • A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and
  • A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease.  Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. Reasonably certain is a high threshold. In addition, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments.

Consistent with current Generally Accepted Accounting Principles (GAAP), the recognition, measurement, and presentation in the statements of income and cash flows will depend on the lease’s classification as a finance or operating lease.

  • For finance leases, a lessee is required to:
    • Recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of income.
    • Classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the lease liability and variable lease payments within operating activities in the statement of cash flows
  • For operating leases, a lessee is required to:
    • Recognize a single lease cost in the statement of income (which will include both the amortization of the right-of-use asset and the “interest” element associated with the lease liability), calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis.
    • Classify all cash payments within operating activities in the statement of cash flows.

The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.

Lessor accounting
Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

Sale and leaseback transactions
The new lease guidance also simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing.

Effective dates
Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Nonpublic business entities should apply the amendments for fiscal years beginning after December 15, 2019 (i.e., year ending December 31, 2020 for a calendar year entity), and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all public business entities and all nonpublic business entities upon issuance.

Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach.

If you have any questions regarding this new standard or would like assistance in implementing the new standard, please contact your Dean Dorton advisor, or:

David Richard, Director of Assurance Services: drichard@deandortonstg.wpenginepowered.com
Simon Keemer, Director of Assurance Services: skeemer@deandortonstg.wpenginepowered.com


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Article Dean Dorton

Microsoft Dynamics GP 2016 is set to release in the Summer of 2016 and the feature releases and updates make it more powerful and user-friendly than ever!  We have gathered seven of the most intriguing features here for your review.

First, the official Dynamics GP Roadmap to show where it started and where the product is headed…

And now, for the new features and updates…

  1. The Web Client is now cross-platform compatible!  Gone is Silverlight and introduced is HTML5!!
  2. Project Accounting fields are now available in Purchase Requisition.
  3. Workflow approval conditions can be more tightly monitored and changed.
  4. Credit cards can now be used to pay bills during regular check runs.
  5. Management Reporter Viewer now supports HTTPS for greater security.
  6. “All In One” Document Viewers for inventory and sales.
  7. Power BI Charts can be used on GP Home Pages and Role Centers!

Have questions about any of these features? Once 2016  hits the streets, we will recap each of the seven features above in separate blog articles. Stay Tuned!!

Want to know more about the Microsoft Dynamics GP?  Contact us here!