Why is reliable financial report important?
Statistics show that one of the top 5 reasons for bankruptcy is the absence of reliable accounting. It is obviously not possible to run a business successfully without accurate and timely financial information. Accounting is one of the most important tools to make well-informed business decisions.
So, if your company or – even worse – its external controller finds that accounting has not been done properly and that you cannot rely on the financial information currently available, you will need to initiate accounting recovery.
When is accounting recovery required in practice?
- A bank asks for financial reports upon loan application, but accounting was not kept properly.
- Financial reports are requested for due diligence of business sale-purchase, but accounting was not done properly.
- Accounting was done mainly for tax purposes and as a result financial reports do not reflect actual financial performance. This happens often in Russia.
- Accounting data were destroyed (database crashed, fire or by other occasion).
What is the procedure for accounting recovery?
Each case is very specific, so we will outline a main approach:
1. Accounting recovery starts with an inventory of assets and liabilities:
- Inventory of material assets is conducted with a physical count
- Inventory of intangible assets includes checking documents confirming ownership rights
- In some cases, an independent appraiser is engaged to estimate asset value
- Receivables and payables are recovered by contacting customers and suppliers and getting a balance confirmation in written form
- The balance of bank accounts is confirmed by banks. If requested, banks can also provide some information about bank account transactions to help recovering payments from counterparties, employees and state authorities
- Intra-group accounts are verified by contacting shareholders and other companies from the same group
- Tax recovery should start with requesting from tax authorities duplicates of tax reports and verifying tax account balances
As soon as the inventory is completed, all collected evidence should be documented and recorded in the accounting system.
2. The share capital value is recognized as indicated in the State Register.
3. The total difference between assets and liabilities, and identified equity are recorded in financial statements as retained earnings and financial result, respectively.
How can Accountor help?
We have been providing accounting services to international companies since 1992, and over the years we have completed hundreds of accounting recovery projects. Our outsourcing services are provided by highly professional HRA, accounting, IT, and tax experts who work in close collaboration with our experienced lawyers.
If you would like to find out more about our services, please feel free to contact us by phone: +7 495 788 00 05, by email: firstname.lastname@example.org or filling the contact form below. We will get back to you as soon as possible.