The timely production of financial information is a key issue for growing companies. Are your financial statements up to date?

The growth of a business requires the entrepreneur to deal with several decisions involving the expansion into a new territory: hiring additional labour, investing in new machinery and many other strategic decisions.

These decisions are largely based on an analysis of the business’s financial situation. The production of timely financial information is therefore a pivotal issue for growing companies.

Producing financial information more quickly

Generally, financial statements should be produced no later than the 10th day of the following month. As financial reports present the past situation, shortening the production time allows the business to benefit from proactive financial management.

Several factors can accelerate the production of financial information, while ensuring that it is complete, relevant and free from material misstatements.

First of all, the company must define its business processes, that is, the flow of activities to achieve the desired result.

This exercise then allows management and the employees to understand the interactions between each activity, as well as their role and responsibilities within the company.

This first step determines the information required to complete the financial statements and identifies the person responsible for producing this information.

The entity must then determine its information needs, that is, the information it wants to obtain in order to quickly evaluate its performance.

Financial reports should prioritize relevant financial information for decision-making regarding financial statements, sales projections, cash flow monitoring, etc.

Pre-identifying information needs eliminates the time wasted in producing reports that management does not consult.

Technologies and developing skills

In addition, the company must ensure that the employees in charge of the financial information production process have the necessary training and experience to effectively carry out their duties.

Technological changes often require professional development. These training courses can optimize the use of accounting software or encourage the use of various automated tools (such as Excel), thus reducing information processing time.

Lastly, since financial information must be produced quickly, it is important to implement effective internal controls to minimize the risk of error or fraud.

Once this process is completed, the company will be able to accelerate the production of its financial statements and benefit from an efficient administrative team. These factors will allow it to improve its financial situation analysis in order to make informed business decisions.

This article was written in collaboration with Kamille Lambert.

The Organisation of Co-operation and Economic Development (“OECD”) has published on October 9, 2019 its Secretariat Proposal for a “Unified Approach” under Pillar One.

This document is part of the work performed by the OECD on the tax challenges arising from the digitalisation of the economy, and follows a Program of Work that was published earlier this year. The Secretariat Proposal addresses the question of income allocation rules to market jurisdiction, and the revision of the Nexus rules.

More to read on GTI site.

Persons who have relinquished or intend to relinquish their U.S. citizenship can, under certain conditions, benefit from a new tax relief program.

This temporary program, with no specific termination date, provides some U.S. citizens living abroad – including in Canada – to correct their tax situation and avoid significant penalties.

Note that all U.S. citizens are required to report their world income and pay U.S. tax, regardless of where they live and work.

The new program, Relief Procedures for Certain Former Citizens, was announced on September 6, 2019 by the Internal Revenue Service (IRS). It is more generous than other similar programs.

Eligible persons will be exempt from paying any tax due, along with applicable interest and penalties. This includes expatriation tax and penalties for failing to file certain tax and financial information returns.

The expatriates tax relief is a significant benefit, because individuals who have relinquished their U.S. citizenship but failed to complete form 8854 (Initial and Annual Expatriation Statement) are usually subject to this tax.

New program: eligible persons

The program applies solely to U.S. citizens, not to green card holders.

To avail themselves of the program, individuals have to meet several conditions, they:

• relinquished their U.S. citizenship after March 18, 2010;
• have never filed the U.S. general tax return (Form 1040); however, to submit their application, they must file this form and the required international information forms for the year of expatriation and for the five previous years;
• do not owe more than a total of US$25,000 in federal taxes in the year of expatriation and in the five previous years, excluding taxes and penalties;
• have a net worth of less than US$2 million at the expatriation date and at the date of making a submission under the program;
• have completed and filed form 8854 for the year of expatriation;
• failed to satisfy their tax obligations involuntarily, based on the good faith assumption.

Note that there is no restriction on the number of days the person stayed in the United States.

Failing to satisfy U.S. tax requirements is risky. Note as well that Canadian financial institutions are required to communicate some of your financial information to the IRS. It’s very important to correct your tax situation or you could be exposed to significant penalties.

How to I apply for this program?

One of the benefits of the new program, unlike other tax exemption programs such as Streamlined, is that it’s not necessary to have a U.S. Social Security Number (SSN). This simplifies the process for individuals who do not have an SSN.

However, the program has a strict process that requires various forms to be submitted, including those mentioned above. Since this is a temporary program, we recommend that you take the required steps as soon as possible.

Our International Mobility team can help by taking charge of your file. We’ll ensure you satisfy the program criteria and file the necessary documents.

We invite you to contact our team if you have any questions in this regard.