Itís That Time AgainWritten By: GARRY BARTECKI
Article Date: 11-01-2006
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
Seems like we just finished up 2005's year end, and here we go again.
By now, you should have your year-end game plan pretty much formalized if you hope to have a smooth problem-free closing. You should have your engagement letter from your auditor, know who will be on the assignment, have your "PBC" (Prepared by client) list, and have the work scheduled noted and distributed to all concerned. In addition, you should have assigned internal responsibilities to meet the PBC requirements. Every attempt should be made to get your audit completed as soon as possible. In this industry, it is entirely possible to audit other then the year end balances because many of the material accounts will not change much over the last 30 to 60 days of the year.
To make this quick audit process work, you have to avoid surprises. Consequently, you need to find out where the bottlenecks are and take steps to resolve them.
Your auditor should be able to tell you where they had trouble. Ask them to explain in detail what the problems are and get the word back to your internal staff, so they have time to correct the files and workpapers.
Avoiding surprises also means not getting blindsided by your auditor. You should expect to be made aware of all new accounting requirements and tax issues well in advance of the year end, so you have time to make whatever changes are necessary. Remember, you can't probably make tax adjustments in December or January.
You need to be made aware of new tax changes as soon as they are available.
This column will normally contain accounting and tax alerts. We have a vested interest in staying ahead of the game and feel we have an obligation to keep AED members informed. Because we have this expertise, we hope members will contact us and funnel their accounting and tax questions through us. Doing so will save both time and money and insure you are following the latest industry standards.
What do you need to prepare for?
Probably the most complex issue will be the new Revenue Recognition Rules. Residual guarantees, buy-back provisions, RPO's, floor plan arrangements and other transaction provisions can easily transform a sale into a loan or deferred revenue.
You can bet your auditor will review your transactions this year to see if you have any of these. If you believe you do, now is the time to find out.
From a tax perspective, like-kind exchange (LKE) transactions are becoming more popular. LKE's unfortunately are very complex transactions that need constant review to insure compliance. It's easy to miss something that will reverse your LKE benefits. If you are doing LKE's, you may want to review your accounting and procedures with an LKE expert.
Be the end of the year you should have completed sending out confirmations and reconciling those confirmations; completed your physical inventories; completed most of your AR and bad debt reserve work; priced out new, used and parts inventory, as well as rental units; and reconciled the October floor plan balances.
Having a head start on the footnotes also saves tons of time in February or March. After the year end, it should be an easy task to just roll forward the October balance and verify material changes.
If all goes well, the audit should basically be completed by the end of January, or by February 15 at the latest.
If you have not heard from your auditor by the time you read this column, you have a problem that needs fixing.
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