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Accounting For Slow Accounting

Preeti Pateria's Profile

In a case where lots of entries are falling in GL and currently take 2-3 months to identify if these are to be expensed off or to be capitalized- in that situation, should some sort of accrual be made for expenses that did not hit the p&l or depreciation?

Answers

(Agent, JKS Solutions, Inc.) |

I'm having a difficulty with your question due to perhaps English as a second language, but I will take a chance and try to answer your question.

1. If your accounting is lagging behind the timing of when the expenses occur, the answer is - yes, you will need to assess the need for an accrual, where you expect the amounts to be a material impact to your financial statements.

2. Regarding the question of estimated depreciation on accrued capitalized amounts, the answer is the same - yes, where the depreciation generated on the accrued assets would be material to your financial statements.

You may want to consider bringing in some temporary help to reduce the backlog.

Preeti Pateria
Title: AVP
Company: EXL
(AVP, EXL) |

Thanks Valerie. That answers my question.

Are there any GAAP pronouncement/view on this...particularly US GAAP? Currently this is a process design issue and we are planning to revamp the process but since that would take time I was wanting to ensure we are fine in terms of any accruals from audit point of view.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

One simple question......

If you have not recorded the transaction therefore have not decided (or don't know) to either expense or capitalize ...how are you even going to reasonably estimate the accrual for depreciation?

For situations like this, I usually recommend setting up a date where going forward, you are capturing the transaction when it happens or immediately after it happens. This way, there is a reference date where you know you are caught up and just worry about the 2-3 month delayed transactions. Else, It will be a never ending catch-up to something that is also running....so to speak. How you do it depends on the circumstances.

Do you need to accrue? Yes you do, but NOT for the sake of accruing since you do not have any reasonable basis or estimate! (unless you have already made a separate worksheet and determined expensed and capitalized from the unrecorded transactions)

My personal opinion is that it is ludicrous to be concerned about accruals (no matter what GAAP says) when you have 2-3 months of unrecorded transactions.

Preeti Pateria
Title: AVP
Company: EXL
(AVP, EXL) |

Thanks Emerson. That's convincing!

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