An Overview Of Challenges For Accounting Departments

Some of the crucial challenges for Accounting Departments are estimates of significance and an uncertain labor market.

FREMONT, CA: Accounting and financial reporting seem to become more complex every year due to new standards, economic changes, and corporate trends. Generally accepted accounting principles (GAAP) have been simplified by the Financial Accounting Standards Board (FASB). Due to a lack of in-house SMEs, high volumes of transactions, or the challenge of navigating and applying accounting standards, it can be difficult to stay abreast of financial reporting requirements.

As 2023 is going on and executives have prepared for a year with its own unique nuances and complexities, they need to think about how to position their accounting departments for success. Accounting basics will put pressure on companies, and major transactions will put even more pressure on them.

Some of the crucial challenges for Accounting Departments in the following year are described below:

Estimates of significance: Cash flow forecasts play an important role in a variety of accounting estimates, including asset impairment assessments, fair value assessments, and going concern analyses. Estimates will be affected by the ultimate path of interest rates and the eventual reality of a recession. For accounting departments to determine whether impairment charges are required, they must use cash flow forecasts to determine whether the company will have cash, revenues, or income in future periods to support its ability to continue as a going concern.

An uncertain labor market: Accounting departments will face challenges as the labor market continues to be uncertain. Accounting departments have difficulty finding qualified professionals who understand GAAP, how to close the books, and how to adhere to financial reporting requirements.

In addition to those challenges, remote and hybrid work arrangements are evolving expectations. In this environment, companies performing their first audit, going public, or lacking sound control environments could face several obstacles.

Standards for accounting and financial reporting: The most significant changes in accounting standards of recent years - revenue recognition and lease standards have now become a part of most companies' financial reporting processes. However, one new standard is carrying a lot of significance in 2023: reporting credit losses. Some companies will not notice the new rules on credit losses, but those with significant lending activities may find them quite important. ESG reporting standards likely will create a substantial reporting burden as companies articulate their impact on the environment even though the SEC has not yet finalized its proposal on environmental, social, and governance (ESG) reporting.