Anti Money Laundering Efforts of Tax Authorities Worldwide
October 31, 2011 | Author admin
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. Methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount of money laundered, either worldwide or within their national economy.
Regardless of the difficulty in measurement, the amount of money laundered each year is in the billions of US dollars and poses a significant policy concern for governments. As a result, governments and international bodies have undertaken efforts to deter prevent and apprehend money launderers. Financial institutions have likewise undertaken efforts to prevent and detect transactions involving dirty money, both as a result of government requirements and to avoid the reputational risk involved.
Money laundering often occurs in three steps: first, cash is introduced into the financial system by some means called -placement, the second involves carrying out complex financial transactions in order to camouflage the illegal source – layering, and the final step entails acquiring wealth generated from the transactions of the illicit funds – integration. Some of these steps may be omitted, depending on the circumstances; for example, non-cash proceeds that are already in the financial system would have no need for placement.
Anti-money laundering (AML) is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent detect and report money laundering activities. An effective AML program requires a jurisdiction to have criminalized money laundering, given the relevant regulators and police the powers and tools to investigate; be able to share information with other countries as appropriate; and require financial institutions to identify their customers, establish risk-based controls, keep records, and report suspicious activities.
Leaders throughout the international community recognize that anti-money laundering (AML) and counter-terrorist financing (CFT) measures are powerful tools that are effective in the fight against corruption.
The fight against money laundering has been an essential part of the overall struggle to combat the activities of organized crime, and more recently the financing of terrorist activity. It became apparent over the years that banks and other financial institutions have been an important source of information about money laundering and other financial crimes investigated by law enforcement. Concurrently, governments around the world began to recognize the corrosive dangers that unchecked financial crimes posed to their economic and political systems.
FATF
One of the first organized efforts on a world level to address the problem of money laundering is the Financial Action Task Force on Money Laundering (FATF). The FATF was set up by the Group of Seven industrialized countries at its Economic Summit in Paris in July 1989. It is an inter-governmental body whose purpose is the development and promotion of policies, to combat money laundering and terrorist financing, both at national and international levels. Anti-money laundering guidelines came into prominence globally as a result of the formation of the Financial Action Task force (FATF) and the promulgation of an international framework of anti-money laundering standards. These standards began to have more relevance in 2000 and 2001 after FATF began a process to publicly identify countries that were deficient in their anti-money laundering laws and international cooperation, a process colloquially known as name and shame.
It also monitors its members’ progress in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of suitable measures worldwide. It also collaborates with other international bodies involved in combating money laundering and the financing of terrorism.
The FATF membership is currently made up of 31 countries and territories and 2 regional organisations. The FATF does not have a tightly defined constitution or an unlimited life span. The Task Force reviews its mission every five years and it will only continue to exist and to perform its function until the member governments agree that this is necessary.
In October 2001 the FATF expanded its mandate to deal with the issue of financing of terrorism, and took the important step of creating the Nine Special Recommendations on Terrorist Financing. These Recommendations contain a set of measures aimed at combating funding of terrorist acts and terrorist organizations, and are complementary to the Forty Recommendations.
These Recommendations set minimum standards for action for countries to implement the detail according to their particular circumstances and constitutional frameworks.
In 2003 FATF issued a revised version of the Recommendations. Major changes to the revised Recommendations include:
- Specifying a minimum list of designated categories of predicate crimes for money laundering;
- Extending several AML requirements to cover financing of terrorism, including suspicious transaction reporting (STR) requirements;
- Introducing risk-based application of customer due diligence (CDD),
- Imposing specific conditions and CDD for business and transactions where third parties are relied upon for completing CDD;
- Extending required AML/CFT measures,
- Including additional key institutional measures,
- Prohibiting shell banks; and
- Improving transparency of legal persons.
FATF’s three primary functions with regard to money laundering are:
- Monitoring members’ progress in implementing anti-money laundering measures.
- Reviewing and reporting on laundering trends, techniques and countermeasures.
- Promoting the adoption and implementation of FATF anti-money laundering standards globally.
Moneyval
Moneyval was formerly known as the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures. Today, it has 27 permanent members, 2 temporary members and 1 active observer. In addition, an important number of countries and organizations have regular observer status.
The aim of MONEYVAL is to ensure that states have effective systems in place to counter money laundering and terrorist financing and to comply with the relevant international standards in these fields.
Moneyval mutually evaluates States against all relevant international standards in the legal, financial and law enforcement sectors.
As of June 2006, Moneyval has become an Associate Member to FATF. This status provides an opportunity for more countries within Moneyval to attend and actively participate in FATF meetings as part of the Council of Europe/Moneyval delegation.
Egmont Group
Separate legislations created specialized governmental agencies as countries around the world developed systems to deal with the problem of money laundering. These entities are now commonly referred to as “Financial Intelligence Units” or “FIUs”.
Recognizing the benefits of a FIU network, in 1995, a group of FIUs at the Egmont Arenberg Palace in Brussels decided to establish an informal group for the stimulation of international co-operation. Now known as the Egmont Group, these FIUs meet regularly to find ways to cooperate in the areas of information exchange, training and sharing of expertise.
There are currently 101 countries with recognized operational FIU units, with others in various stages of development. Countries must go through a formal procedure established by the Egmont Group in order to be recognized as meeting the Egmont Definition of an FIU. The Group as a whole meets once a year. There is no permanent secretariat, and administrative functions are shared on a rotating basis.
Although initially the focus of the Egmont FIU was essentially on money laundering, FIUs also play an important role in the international effort to combat the financing of terrorism.
Egmont approved the following definition of an FIU in 1996, consequently amended in 2004 to reflect the FIU’s role in combating terrorism financing:
A central, national agency responsible for receiving, analyzing and disseminating to the competent authorities, disclosures of financial information: concerning suspected proceeds of crime and potential financing of terrorism, or required by national legislation or regulation, in order to combat money laundering and terrorism financing.
According to the Statement of Purpose of the Egmont Group, the Financial Intelligence Units participating in the Egmont Group resolve to encourage co-operation among and between them in the interest of combating money laundering and terrorism financing.
IFRS for SME
October 29, 2011 | Author admin
IFRS for SME is a solution in response to international demand from both developed and emerging economies for a rigorous and common set of accounting standards for smaller and medium-sized businesses that is much simpler than full IFRSs.
IFRS for SMEs will:
- Provide improved comparability for users of accounts
- Enhance the overall confidence in the accounts of SMEs
- Reduce significant costs involved of maintaining standards on a national basis.
An SME financial statement does not require complete IFRS and as IFRS was designed to meet the needs of equity investors in companies in public capital markets, they cover a wide range of issues, contain a sizeable amount of implementation guidance and include disclosures appropriate for public companies.
Financial statements of SME does not need the above, but, require a more focused on assessment of short-term cash flows, liquidity and solvency. The objectives of developing IFRS for SME were to meet user needs while balancing costs and benefits from a preparer perspective.
The IFRS for SMEs is derived from full IFRSs with appropriate modifications based on the needs of users of SME financial statements and cost-benefit considerations.
Most of the principles in full IFRS for identifying and measuring assets, liabilities, income and expenses have been simplified, topics not relevant to SMEs have been omitted, and the number of required disclosures has been significantly reduced. To further reduce the reporting burden for SMEs revisions to the IFRS will be limited to once every three years.
The IFRS for SMEs will also provide a platform for growing businesses that are preparing to enter public capital markets, where application of full IFRSs is required.
The IFRS for SMEs is separate from full IFRSs and is therefore available for any jurisdiction to adopt whether or not it has adopted the full IFRSs. It is also for each jurisdiction to determine which entities should use the standard. It is effective immediately on issue.
The publication of IFRS for SMEs is a major breakthrough for companies throughout the world. For the first time, SMEs will have a common high quality and internationally respected set of accounting requirements. The benefits will be felt in both developed and emerging economies.
UAE Financial Trends and Economic Scenario
October 25, 2011 | Author admin
The economic recovery in the United Arab Emirates is gaining strength, supported by a favorable global environment but subject to increased regional uncertainty.
Growth reflects stronger tourism, logistics, and trade in the emirate of Dubai; and large public investment spending in the emirate of Abu Dhabi, including through Government- Related Entities.
Higher oil prices are also contributing to a marked improvement in the fiscal and external positions of the country. Inflation rate at consumer level is expected to remain moderate at 4.5 percent in the country despite a rise in food prices internationally. Property rents continue to decline. Besides, the UAE’s unemployment rate is at low level of 4.2 percent.
However, it must be noted that risks to the country’s economic recovery remain, including from possible economic spillovers of regional events. In particular, the current re- pricing of geopolitical risk in the region could lead to more challenging market conditions, which may put pressure on the entities that need to roll over external borrowing.
Forecasts indicate the UAE real GDP will grow by five per cent this year and a similar rate in 2012, considering the expected growth of six per cent in emerging economies, this rate of growth in the UAE is good. The UAE and Saudi Arabia will be among the countries leading growth in MENA.
Besides high oil prices, growth in the UAE would be fueled by a surge in the tourism sector, citing a 70-80 per cent jump in hotel occupancy in the first few months of 2011. Trade would be another strong growth sector and the current political unrest in MENA would give a strong push to Dubai as a key commercial centre in the world.
A sharp increase in the UAE’s trade sector this year and next year can be expected and the other sectors that will contribute to growth are telecommunications and transport besides in addition to infrastructure and financial services sectors.
The UAE’s GDP, the second largest in the Arab region after the Saudi economy, expanded by around 3.2 per cent in 2010 after shrinking in 2009. Real GDP recorded one of its highest growth rates of 7.4 per cent in 2008.
Strong oil prices will ally with an upsurge in tourism, trade and communications to lift the UAE’s economy by nearly five per cent in 2011, sharply higher than the growth rate in 2010.GDP growth will remain at a high level in 2012 and the level is considered as one of the best growth rates in the Middle East and North Africa.
Indian Economic Scenario and Projections
September 25, 2011 | Author admin
India’s overall growth of gross domestic product (GDP) at factor cost at constant prices, as per advance estimates was 8.5 per cent in 2010-11, representing an increase from the revised growth of 8 per cent during 2009-10, according to the monthly economic report released for the month of July 2011 by the Ministry of Finance. The index of industrial production (IIP) rose to 8.8 per cent in June 2011, year-on-year, on back of manufacturing and within that, the capital goods sub-segment. During April-June 2011-12, the IIP growth was registered at 6.8 per cent as compared to 9.6 per cent during 2010-11.
India has entered the club of top 20 exporters of goods and reclaimed its position among top 10 services exporters in 2010. India’s goods exports rose by 31 per cent in 2010, helping it to improve its world ranking moving up two places to 20 from 22 in 2009.
India’s FDI gathered momentum with the inflows growing by 310 per cent in June 2011 to touch US$ 5.65 billion. It is the highest monthly inflow during the last 11 years. The total FDI stood at US$ 16.83 billion during January-June 2011, nearly 57 per cent higher than the US$ 10.74 billion received during the same period last year.
The eight core infrastructure industries grew by 5.2 per cent in June 2011 as compared to the growth of 4.4 per cent in June 2010. In addition, exports in terms of US dollar, increased by 46.4 per cent during June 2011. On the back of such facts, India’s GDP is projected to continue to grow at a brisk pace of 8.8 per cent in 2011-12.
India has been ranked at the second place in global foreign direct investments (FDI) in 2010 and is expected to remain among the top five attractive destinations for international investors during 2010-12,
Non-resident Indian (NRI) inflows in the first quarter of 2011-12 has witnessed a rise of 38 per cent as compared to the same period in 2010-11. NRIs invested US$ 1.54 billion in various NRI deposit schemes during April-June 2011.
India’s foreign exchange (Forex) reserves have increased by US$ 1.6 billion to register US$ 318 billion during the week ended August 19, 2011, according to data released by the Reserve Bank of India (RBI). The increase in Forex is largely attributed due to valuation changes.
The Government has approved fund raising worth Rs 60,950 crore (US$ 13.24 billion) by companies through external commercial borrowings (ECB) or foreign currency convertible bonds (FCCB) for infrastructure projects in the financial years 2009-2011.
India’s merchandise exports have registered an increase of nearly 82 per cent during July 2011 from a year ago to touch US$ 29.3 billion, according to a release by the Ministry of Commerce and Industry. Exports during April-July 2011 reached US$ 108.3 billion, up 54 per cent over the same period a year ago.
The Indian automobile industry, the seventh largest in the world, has currently estimated to have a turnover of US$ 73 billion, accounting for 6 per cent of its GDP, and is expected to record a turnover of US$ 145 billion by 2016. India’s automobile industry is expected to grow by 11 to 13 per cent in the fiscal year ending March 2012, according to Pawan Goenka, President, SIAM. The Indian automakers sold 143,370 cars in June 2011, added SIAM.
Demand for two-wheelers has increased by 16 per cent in June 2011 to over 880,000 units, as compared to 761,000 units in June 2010, according to data released by six of the eight domestic two-wheelers manufacturers.
The growth of Indian agriculture and allied sector was a top agenda in Budget 2011-12 presented by Mr Pranab Mukherjee, the Union Finance Minister. He has estimated that the agriculture and allied sector would grow by 6 per cent in 2011-12.
Software as a Service (SaaS) is estimated to grow by 20.7 per cent in 2011 amounting close to Rs 538 crore (US$ 116.85 million) as compared to 2010 where it was close to Rs 445 crore (US$ 966.60 million), according to IT advisory firm Gartner Inc.Approximately 75 per cent of SaaS delivery can be regarded as cloud services as per Gartner, which is on its way to exceed 90 per cent by 2015. Customer relationship management (CRM) is the largest market for SaaS, which is expected to reach Rs168.83 crore (US$ 36.67 million) in 2011 to represent 32 per cent of the total CRM market.
Growth Potential Story
India’s consumption growth story is expected to maintain its course of about 14 per cent growth over the next three years driven by three factors-inclusiveness, mix changes and specific consumption categories, as per senior analysts Vijay Chugh, Ashvin Shetty and Shariq Merchant in the report ‘The Indian Consumer: a robust operator in an uncertain world’.
India will emerge as the second largest steel producer by 2013 with an installed capacity of 120 million tonnes (MT), riding on high levels of growth, construction, housing, real estate, automobiles and agriculture, according to Mr Beni Prasad Verma, Steel Minister. The demand for steel in the country is growing at an average of 10 per cent, which may even exceed to 12 per cent in the near future.
Indian Millionaires
The number of millionaire households in India will grow from 2,86,000 to 6,94,000 between 2011-2020, at a growth rate of 143 per cent, as per a study by the Deloitte Center for Financial Services. Among emerging markets, India is likely to have the highest per capita wealth among millionaires with US$ 4.25 million — placing it ahead of the US. In comparison to other BRIC (Brazil, Russia, India and China) nations, India is likely to experience the largest growth at 405 per cent in total wealth held by the millionaires.
Changes in International Accounting Standards
September 24, 2011 | Author admin
The International Accounting Standards Board decided not to extend the relief from restatement of comparative figures currently provided by IFRS 9, which allows an entity not to restate comparative figures if it decides to adopt the standard before 2012.The International Accounting Standards Board has proposed in its Exposure Draft Mandatory Effective Date of IFRS 9 to move the mandatory effective date of IFRS Financial Instruments to annual periods beginning on or after 1 January 2015.
Earlier application would continue to be permitted. The ED does not address other specific transition issues for IFRS 9, including the prohibition against applying IFRS 9 to items that have already been de-recognized at the date of initial application, which the IASB had indicated it may reconsider. The ED does not discuss how the effective date of IFRS 9 should relate to the effective dates of other projects but confirms the importance of the timing of the insurance project (IFRS 4 Phase II) when setting an effective date.
The ED poses questions for public comment on the proposed date of 1 January 2015 and the IASB’s tentative decision not to change the current requirement in IFRS 9 on comparative figures. The comment period of the exposure draft closes on 21 October 2011.
The IASB has published an ED proposing to defer the mandatory effective date of IFRS 9 to annual periods beginning on or after 1January 2015, with earlier application permitted. The comment period of the ED closes on 21 October 2011. The IASB recently extended its time line for IFRS 4 Phase II and has not yet set a publication date for the insurance standard.
The IASB recently extended its IFRS 4 Phase II timetable and now plans to make a decision on whether to re-expose or move to a review draft of the standard by the end of 2011, or during the course of 2012. It will set a publication date for a final IFRS 4 Phase II standard in due course. The deliberations on the insurance project are ongoing and the IASB has not yet made a decision on the effective date for the future IFRS 4 Phase II standard.
Extension of relief from the requirement to restate comparative figures until the mandatory effective date of IFRS A single effective date for all the phases of IFRS 9, as well as the revised IFRSs on insurance contracts, revenue recognition, and leasing. Many insurers asked the IASB to delay IFRS 9 to achieve alignment with IFRS 4 Phase II.
First of all, the delay of the IFRS 9 effective date gives insurers more time to prepare for IFRS 9. Additionally, allowing insurers sufficient time to make the necessary system changes and to prepare adequately for transition. Considering that the IASB does not expect to issue an IFRS 4 Phase II standard in 2011, it would be impossible to fully align both standards for adoption under the effective date currently in IFRS 9 (1 January 2013)
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Commodity Prices
September 23, 2011 | Author admin
Silver has taken over gold as the most rare precious metal, read on and discover why we should buy silver in this current uncertain economy.
Silver mining demand aren’t enough to meet the current demands. Silver is often a by-product of mining copper, lead, zinc and gold. Getting silver is a bonus for mining companies.
Worldwide economic growth mainly in China & India, results in more goods being produced. Silver is the indispensable metal in most electronic goods as it is the most electrically conductive, thermally conductive and reflective.
The declining Dollar With confidence dwindling in fiat currencies such as US dollars and Euros, people and investors are turning to real money which have withstood centuries, such as gold and silver.
A further intriguing fact related to this topic is the rising tide in investing demand – Gold and silver, are also known as commodities. Recently, there have been an increase in commodities demand. Gold is peaking now, and silver, the more neglected real money with gold, will gain investor‘s demand as people realise the gold prices are too high.
Gold/Silver Price Ratio – Gold and silver price ratio have always been 1:16. The current ratio is 1:69. Apparently, there is potential for silver prices to move closer to that of gold’s as silver is becoming more rare compared to gold in the current era.
Gold Trend
Demand for gold has bounced back after the downgrade in Italy’s long-term credit rating by the Standard and Poor’s to A from A-plus, indicating a weak economic scenario in the Euro region. Any indication for further monetary stimulus would be seen as bullish for the Precious Metals.
Silver Updates
Silver also closed in the green as prices took support from rising gold prices but sharp gains were capped as being an industrial metal it also took cues from movement in the base metals pack. Investment demand for the white metal saw redemption in holdings yesterday by 34.83 tonnes from the iShares Silver trust.
Copper Updates
The International Copper Study Group said the world copper market was in deficit by 130,000 tons during the first six months of the year. Supply fell short of demand by 286,000 tons during the same period in 2010. Copper prices came under pressure on Tuesday declined by more than 1 percent on the LME as macroeconomic concerns dominated market sentiments. Prices on the LME touched a 9 – ½ month low as poor global economic prospects led to worries over future demand for the metal.
Current Financial Turmoil in Global Context
September 22, 2011 | Author admin
Signs of Recovery
The world is near the bottom of a global recession that is causing widespread business contraction, increases in unemployment, and shrinking government revenues. Although recent data indicate the large industrialized economies may have reached bottom and are beginning to recover, for the most part, unemployment is still rising. Numerous small banks and households still face huge problems in restoring their balance sheets, and unemployment has combined with sub-prime loans to keep home foreclosures at a high rate. Nearly all industrialized countries and many emerging and developing nations have announced economic stimulus and/or financial sector rescue packages. Several countries have resorted to borrowing from the International Monetary Fund as a last resort.
The Weakness of Financial Systems Worldwide
The crisis has exposed fundamental weaknesses in financial systems worldwide, demonstrated how interconnected and interdependent economies are today, and has posed vexing policy dilemmas. The process for coping with the crisis by countries across the globe has been manifest in three basic phases.
The first has been intervention to contain the contagion and restore confidence in the system. This has required extraordinary measures both in scope, cost, and extent o government reach.
The second has been coping with the secondary effects of the crisis, particularly the global recession and flight of capital from countries in emerging markets and elsewhere that have been affected by the crisis.
The third phase of this process is to make changes in the financial system to reduce risk and prevent future crises. In order to give these proposals political backing, world leaders have called for international meetings to address changes in policy, regulations, oversight, and enforcement.
U S Crisis Trickles Down to all Nations
According to the Economist Intelligence Unit, the aggressive measures that governments have taken to counter the financial crisis have not only helped to prevent a more severe downturn but are now setting the stage for a recovery, albeit a weak one. However, the world economy could weaken again once the stimulus wears off, mainly because government debt has increased dramatically in many countries—eliciting rising concerns about the solvency of the state. This has made current levels of stimulus through government spending not quiet sustainable.
The global financial crisis has brought home an important point: the United States is still a major center of the financial world. Regional financial crises (such as the Asian financial crisis, Japan’s banking crisis, or the Latin American debt crisis) can occur without seriously infecting the rest of the global financial system. But when the U.S. financial system stumbles, it may bring major parts of the rest of the world down with it.6 The reason is that the United States is the main guarantor of the international financial system, the provider of dollars widely used as currency reserves and as an international medium of exchange, and a contributor to much of the financial capital that sloshes around the world seeking higher yields. The rest of the world may not appreciate it, but a financial crisis in the United States often takes on a global hue.
India and IFRS
September 21, 2011 | Author admin
Countries around the world have accepted the importance of converging accounting standards and are well on their way towards implementing them. Most countries have adopted IFRS standards and are in various stages of adoption at the end of this financial year.
The Implications of IFRS Convergence for Indian Companies
Investments in India are valued at lower of the cost of fair trade value under Indian accounting standard – one of the divergences from IFRS. After implementing IFRS, only fair value will be calculated. The differences of our Indian accounting Standard with IFRS are minor with respect to IAS – 2 inventories, IAS – 7 cash flow statements, IAS – 20 accounting for government grants and disclosure of government assistance, AS – 33 earnings per share, AS 36 impairment of assets, AS – 38 intangible assets etc, therefore the transition to IFRS for Indian companies is certainly easier.
Benefits of IFRS for Indian Companies
Ease of Investments
Overseas investors will choose economies with IFRS compliant financial statements.
Higher Confidence Levels
Organizations will operate with the confidence of having a common accounting system perceived as stable and transparent.
Risk Evaluation
IFRS will eliminate barriers to cross border listings and will be beneficial for investors who ascribe a risk premium if the underlying financial information is not prepared in accordance with international standards.
Mergers & Acquisitions Made Easier
Trans border acquisitions and mergers will be easier for both parties in as far as redrawing of documents is concerned.
Companies have adopted IFRS from FY10 to make available comparative figures in the annual report. Successful transition requires a planned procedure well in advance. Several large listed companies have moved to the new standards and those in transition are actively incorporating the changes, in the beginning of the new financial year.
An Introduction to IFRS
August 5, 2011 | Author admin
International Financial Reporting Standards (IFRS) is a unified reporting standard adopted by most countries today. In the past, every country had their own set of accounting and reporting standards based on factors such as individual legal systems, political systems, capital markets, etc. and this led to differences in how transactions get reported from one country to the next.
Back in 1973, accountancy bodies in 10 countries together formed The International Accounting Standards Committee. The committee proposed development of one set of international reporting standards. By 2000, over 100 countries were in agreement and 41 international accounting standards were in place. However, many countries continued to use their own reporting standards.
Since 2000, this is quickly changing. The International Accounting Standards Board replaced the IASC and continues issuing international accounting standards. Today, over 100 countries have adopted the use of IFRS. Japan and the United States are the last two large countries to officially adopt the now globally accepted IFRS standard. However, both will adopt the use of IFRS in the next several years.
The world is so much smaller thanks to the use of technology. Global business is now the norm rather than the exception. Investments are now aimed at the global marketplace, and to succeed companies need to understand the financial reporting standards of the companies they will work with. IFRS helps streamline accounting procedures internationally.
IFRS offers several advantages that will create a unique opportunity for privately held companies struggling with the issue of growth, increasing production costs, and a shrinking marketplace.. It has been well-documented that China and India will have a strong sustainable economic growth that will provide an opportunity for privately-held companies to access additional customers.
Changes and developments are evolving around IFRS constantly. Kothari Auditors & Accountants are committed to develop the expertise to assist our current and future clients in this area.
By adopting IFRS, privately-held companies will be received well in the global marketplace and perceived as an international player. This will afford them an opportunity for growth that, for the most part, has only been afforded to U.S. publically-held companies with an abundance of financial resources to gain access to international customers, suppliers and world capital markets, reducing some of the risks and barriers of setting up international joint venture supply arrangements and importing/exporting.
The aim of this article is to keep you informed of recent developments with IFRS. We would very much appreciate hearing comments or questions you may have on how we can enhance it or questions or concerns on IFRS.
Financial System Review
August 4, 2011 | Author admin
Financial systems are a vital component in the delivery of an organizations programs and services. When managed effectively, financial systems improve service quality, enhance productivity and reduce costs.
A financial system is a system used to exercise financial management, control and accountability of an organizations funds or assets. Included are systems used to record, verify, report, generate and/or execute financial transactions, and those used for the management and control of assets, liabilities and assets.
Systems must be put in place to determine methodology to be used in the development of financial systems. The methodology used must be consistent with the company’s information technology.
Organizations must ensure that financial systems have comprehensive controls to prevent and reduce the risk of loss, error, misuse or fraud to an acceptable level. A risk and controls review must be performed and documented for a new financial system, and whenever there are significant modifications to an existing financial system. Qualified, independent and objective parties must carry out the review.
The scope of a risk and controls review depends on the nature and complexity of the financial system. A comprehensive review includes project management, systems development, general controls and application-based controls. Companies that require a financial system to interface with other systems must establish proper and integrated processes to secure financial information.
Financial systems in the corporate world represent the business study department of a company. Large organizations use financial systems to review financial performance. Sometimes, corporate financial system is a conduit to accounting and management. Financial systems goes a step beyond preparing financial information it measures performance and projects forecasts. Various financial activities come under the corporate financial system. Capital structure, profitability measurements, budgets, sales forecasts, cash flow management and financing decisions are just some of them.
The essential purpose of financial systems is to measure the profit generating capability of the company and recommend best finance options for further growth and profitability.
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