The SEC issued 246 accounting and auditing enforcement actions last quarter alone. Behind each enforcement action lies a technical accounting issue that could have been prevented. From revenue recognition errors costing millions in restatements to lease accounting missteps triggering audit deficiencies, technical accounting challenges pose real risks to organizations of every size.
Proper technical accounting resources prove invaluable when tackling complex accounting standards, implementing new requirements, or structuring significant transactions. According to recent studies, organizations with robust technical accounting support spend 40% less time resolving complex issues and face significantly lower audit and compliance costs.
In my own experience, I’ve found having a wealth of resources at your fingertips the most beneficial. However, most of my clients run lean accounting departments focused on day-to-day operations with little to no technical accounting capabilities and no bandwidth to complete complex technical accounting research and documentation. One such client had complex equity awards to founders and executives that were never analyzed properly by accounting management. Utilizing the GAAP codification, the big four auditor’s own stock compensation and equity guidance, I analyzed the agreements, guidance and clients accounting to create three years of stock compensation and equity adjustments to properly account for the awards.
Here are the key things you need to know about technical accounting resources:
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Key Takeaways
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Table of Contents
Common Technical Accounting Issues & Their Consequences
Technical accounting challenges can significantly impact financial reporting accuracy and business operations. Research from the American Institute of CPAs shows that 67% of companies face material accounting issues during complex transactions or implementations.
Complex Transaction Accounting
The increasing complexity of business transactions creates significant accounting challenges, particularly in areas like:
- Revenue recognition for multi-element arrangements
- Business combination accounting
- Complex financial instruments
- Lease accounting under ASC 842
- International operations and currency translation
While assisting a client with integrating NetSuite and Jira engineering project tracking to properly account for software engineering time between capitalized internal use software cost related to Software as a Service development, software integrated within equipment and maintenance cost, having access to the GAAP codification and software development implementation guided created the fundamental base for establishing and documenting the client’s GAAP policies. In addition, having access to a plain English guide with detailed decision trees provided an easy tool to teaching the engineers and accounting team the difference between and how to track time for the various types of software development costs.
Consequence: Improper accounting for complex transactions can lead to restatements, which according to Audit Analytics, cost companies an average of $1.5 million in direct expenses alone.
Our 8020 Consulting team replaced the client’s accounting management, who had been tasked with reporting complex business combinations and related debt transactions. As a result of agreement to finance the operations of the acquiree prior to consummating the acquisition, our client was supposed to account for the acquired company as a variable interest entity (VIE) for the six months prior to the acquisition. The Company did not follow the VIE and business combination rules under ASC 810 and ASC 805, which resulted in a restatement of the business combination and operations for the prior quarters and year-end. If the terms of the initial arrangement were properly analyzed and interpreted timely, the restatement would not have occurred.
Implementation of New Standards
The pace of accounting standard changes continues to accelerate, with the FASB issuing multiple significant updates annually. Organizations face several critical challenges when implementing new standards, each requiring careful attention and planning.
Resource allocation presents an immediate challenge as organizations must balance implementation efforts with ongoing accounting activities. Teams need to determine appropriate staffing levels while managing competing priorities and coordinating across functions. This often requires careful planning to ensure core accounting activities aren't disrupted during implementation.
Technical analysis forms the foundation of successful implementation. Teams must interpret complex requirements, apply principles to specific situations, and document key decisions. This process often involves evaluating multiple implementation approaches and making judgments about application to specific circumstances.
Process changes invariably accompany new standard implementations. Organizations must update systems and controls, modify workflows, and establish new procedures. This often requires significant coordination across departments and careful attention to maintaining effective internal controls throughout the transition.
Stakeholder communication becomes particularly important during implementation. Organizations must keep leadership informed of impacts, coordinate with auditors on approach, and ensure business partners understand changes to processes and requirements. Clear communication helps manage expectations and ensure smooth adoption of new requirements.
At a client with significant, complex convertible debt with attached warrants, the accounting team did not properly bifurcate and obtain fair values for the various elements of the agreement. While analyzing the debt in accordance with ASC 480 Distinguishing Liabilities from Equity, ASC 815 Derivatives and Hedging and ASU 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20), it was determined that prior accounting for the debt must be restated to properly bifurcate and fair value the debt and attached instruments. By early adopting ASU 2020-06, the Company determined it could simplify the accounting for its existing debt and equity instruments and create a framework for future debt instrument accounting.
Consequence: Failed or delayed standard implementations can result in qualified audit opinions and compliance issues. The SEC reports that implementation issues account for approximately 30% of comment letters to public companies, and remediation costs average $3.9 million per instance.
Resource Constraints
Many organizations lack the specialized expertise needed for complex technical accounting matters.
At a client that I consulted with for two years, I first assisted with their IPO and then helped to assist with transitioning to a public company filling the role of technical accounting and financial reporting expert. During that time, I assisted with implementing new stock-based compensation systems and accounting for complex awards, working with operations to determine how to proceed with new revenue opportunities within the constraints of ASC 606 revenue guidance, complex lease transactions and implementing accounting policies and procedures to comply with SOX. Providing these services required significant use of the GAAP codification, SEC guides and various accounting guides to create memos supporting the Company’s conclusions.
Consequence: According to surveys by Robert Half, companies without adequate technical accounting resources spend 40% more time resolving accounting issues and face higher audit costs.
What Are Technical Accounting Resources?
Technical accounting resources encompass specialized expertise, tools, and support systems designed to address complex accounting challenges. At their core, these resources consist of technical accounting specialists who bring deep expertise in GAAP/IFRS standards, industry-specific accounting requirements, and implementation methodologies. These experts often specialize in particular areas like revenue recognition, lease accounting, or business combinations, providing targeted support for complex transactions and implementations.
Research tools and databases form another crucial component of technical accounting resources. Organizations need access to comprehensive accounting standards databases, technical guides, and implementation materials to stay current with evolving requirements. These resources typically include real-time updates on standard changes, practical application guidance, and industry-specific examples that help teams navigate complex accounting scenarios.
Professional service providers play an essential role in supplementing internal capabilities. Accounting advisory firms, technical consultants, and industry specialists can provide valuable expertise during complex transactions, standard implementations, or periods of organizational change. These providers often bring broad experience across multiple industries and situations, helping organizations avoid common pitfalls and apply best practices.
Technology solutions have become increasingly important in technical accounting. Modern organizations rely on specialized software for technical research, policy management, and documentation. These tools help streamline processes, maintain consistency, and ensure proper documentation of technical accounting decisions.
Knowledge management systems tie these resources together by providing structured ways to capture and share technical accounting expertise. These systems typically encompass comprehensive documentation of accounting policies, implementation guides, process flowcharts, and training materials. Effective knowledge management ensures that technical accounting insights are preserved and can be consistently applied across the organization.
Benefits of Using Technical Accounting Resources
Enhanced Compliance and Risk Management
Technical accounting resources provide systematic approaches to maintaining compliance with evolving standards while managing risk effectively.
A US subsidiary for a large foreign corporation lacked the accounting expertise and bandwidth to manage their annual long term asset impairment analysis. For several years, I worked with the CFO, Controller and valuation team to provide the annual evaluation and memos for their Goodwill, Intangible and other long-lived asset under ASC 340 and 350. With minimal input from the CFO and Controller, I managed the entire impairment analysis process, allowing them to focus on the year-end close, audit and operations.
Outcome: Studies by the Big 4 accounting firms indicate that organizations using dedicated technical accounting resources experience 45% fewer control deficiencies and 60% faster resolution of complex accounting issues.
Knowledge Transfer and Team Development
Technical accounting resources can help build internal capabilities through structured knowledge transfer. This includes:
- Formal training programs on new accounting standards
- Documentation of technical accounting policies and procedures
- Real-time guidance on complex transactions
- Access to specialized research tools and databases
- Ongoing support for implementation challenges
Outcome: Companies investing in technical accounting resources see a 40% improvement in team capabilities within 12 months and report significantly higher retention rates among accounting staff.
Strategic Decision Support
Technical accounting expertise enables better-informed business decisions by providing:
- Transaction Analysis
- Early identification of accounting implications
- Assessment of alternative structures
- Impact analysis on financial statements
- Evaluation of disclosure requirements
- Comparison of accounting approaches
- Risk Assessment
- Identification of potential issues
- Evaluation of control implications
- Assessment of audit impacts
- Analysis of regulatory considerations
- Review of industry practices
- Implementation Planning
- Resource requirements assessment
- Timeline development
- Cost-benefit analysis
- Change management planning
- Stakeholder communication strategy
- Operational Impact
- System requirements analysis
- Process change evaluation
- Control modification needs
- Training requirements
- Documentation updates
While working as the technical accounting expert at a client, operations developed a new revenue model that operations believed could bring in additional profitability while vertically integrating into acquiring assets instead of working as a middle-man in transactions in which the Company received commissions. Operations believed they could enter into the new transactions without recognizing inventory, something the Company never had in the past. However, based on the model presented, I demonstrated how other public companies with similar transactions were required to recognize inventory and provided them with the necessary GAAP guidance. Instead, I also demonstrated how other public entities were structuring similar transactions differently without having to recognize associated inventory – providing them with an alternative option if they could structure their contracts correctly.
This strategic support helps organizations:
- Make informed decisions about complex transactions
- Avoid unexpected accounting consequences
- Optimize transaction structures
- Maintain reporting compliance
- Manage stakeholder expectations
Expert Tips for Improved Technical Accounting
Build a Strong Technical Foundation
A robust technical accounting foundation requires:
- Comprehensive technical accounting policies
- Clear documentation standards
- Regular training and updates
- Access to authoritative guidance
- Structured review processes
As a consultant who provides controllership, technical accounting and financial reporting leadership to my clients, I find that many private equity owned and pre-IPO companies lack the accounting resources to address the complex transactions entered into by these companies. Having a technical accountant on staff or a trusted consulting resource with access and knowledge of GAAP codification, SEC guidance and other GAAP guides is necessary in this ever-changing accounting environment. Accounting teams are stretched thin and cannot keep up with accounting guidance changes, so having a technical accounting resource available provides accounting leadership with security that financial statements and accounting policies will comply with GAAP and regulatory requirements.
Leverage Technology Effectively
Modern technical accounting requires appropriate technology support:
- Research databases and tools
- Policy management systems
- Workflow automation
- Documentation platforms
- Collaboration tools
Work with 8020 Consulting
Technical accounting challenges require specialized expertise and proven methodologies. Our team at 8020 Consulting can help strengthen your technical accounting capabilities and ensure you're prepared for complex accounting matters. Book a meeting with our consultants to discuss your technical accounting needs.
Additional Resources
Professional Organizations and Standards
- Financial Accounting Standards Board (FASB): Comprehensive resource for accounting standards updates and implementation guides
- American Institute of CPAs (AICPA): Technical guides and professional development resources
- Institute of Management Accountants (IMA): Research and best practices for accounting professionals
Technical Accounting Research Tools
- FASB Accounting Standards Codification: Official source of GAAP
- Deloitte Technical Library: Comprehensive technical accounting resources and guides
- EY Technical Accounting Portal: Implementation guides and technical insights
Implementation Resources
- Lease Accounting Guide by KPMG
- SEC Reporting Manual: Essential resource for public company reporting
