Goodwill impairment: Is your company at risk?

Goodwill impairment is often a negative indicator. It potentially signals that a business combination failed to meet management’s expectations due to internal or external factors. In recent years, uncertain markets, lingering inflation and high interest rates have caused goodwill impairments to spike. Evaluating impairment trends In 2022, 400 U.S. public companies reported $136.2 billion of […]

How do auditors verify account balances and transactions?

Audit season is just around the corner for calendar-year entities. Understanding the types of source documents your audit team might request can minimize disruptions during audit fieldwork and maximize your audit’s effectiveness. Here are some common sources of “substantive evidence” that auditors gather to help them form an opinion regarding your financial statements. Original source […]

Chart a course for success with a detailed chart of accounts

A chart of accounts is the foundation of accurate financial reporting, so it needs to be set up correctly. A disorganized chart or one that lumps transactions into broad, undefined “buckets” of data can make it difficult for management to evaluate financial performance and identify unmet customer needs — or open the door to accounting […]

Get a handle on how accounting and tax profitability metrics differ

The pretax (accounting) profit that’s reported on your company’s income statement is an important metric. Lenders, investors and other stakeholders rely on pretax profits to evaluate a company’s financial performance. However, business owners also need to keep their eyes on taxable income to optimize tax outcomes and manage cash flow effectively. Here’s an overview of […]

Beyond the numbers: 5 red flags that may indicate financial distress

Financial statements help managers, lenders and investors evaluate a company’s financial performance. But they tell only part of the story — and they might not reveal financial distress until it’s too late, especially for companies that issue only annual reports. So it’s critical to watch for these five common warning signs indicating a company may […]

How to report contingent liabilities in your company’s financial statements

It’s critical for business owners and managers to understand how to present contingent liabilities accurately in the financial statements. Under U.S. Generally Accepted Accounting Principles (GAAP), some contingent losses may be reported on the balance sheet and income statement, while others are only disclosed in the footnotes. Here’s an overview of the rules for properly […]

5 reasons to outsource your bookkeeping

Running a closely held business is challenging. Owners usually prioritize core business operations — such as managing employees, serving customers and bringing in new sales — over tedious bookkeeping tasks. Plus, the accounting rules can be overwhelming. However, access to timely, accurate financial data is critical to your business’s success. Could outsourcing bookkeeping tasks to […]

How do external auditors evaluate audit risks?

As calendar-year entities wrap up financial reporting for the year, their external auditors work behind the scenes to prepare for audit season. Here’s what you can do to help facilitate the audit planning process. The audit risk assessment During fieldwork, auditors can’t test every transaction, recalculate every estimate or examine every external document. Instead, they […]

The evolution of financial reporting

In recent years, the accounting rules have undergone significant changes, including updated standards for reporting revenue, leases and credit losses. While business owners and managers often express frustration over the complexity of these rules, they’re more than an exercise in compliance. They help promote investor confidence and efficient capital markets. Here’s an overview of why […]

Eyes on the income statement

When reviewing their income statements, business owners tend to focus on profits (or losses). But focusing solely on the bottom line can lead to mismanagement and missed opportunities. Instead, you should analyze this financial report from top to bottom for deeper insights. Think like an auditor Review your company’s income statement with an auditor’s mindset. […]