Preface xiii How This Toolkit is Organized xiv Guide to Toolkit Organization xv Table of Best Practices xvii Table of Policies xviii Table of Checklists xviii Table of Process Narratives xviii Table of Standards of Internal Control xix Introduction 1 Improving the Fiscal Close 3 Best Practice 1: Consider the Use of a Single ERP System 4 Best Practice 2: Employ Cloud-Based Computing 5 Chapter 1: Why the Continued Focus on the Fiscal Closing Process? 7 An Overview of the Fiscal Close 9 Cycle Time to Monthly Close 10 Chapter 2: Key Pain Points and Bottlenecks 13 Chapter 3: The Components of the Fiscal Close 15 Cutoff Dates 16 Best Practice 3: Implement Cutoff Dates 16 Chapter 4: Governing the Fiscal Close Process 19 Best Practice 4: Implement a Fiscal Close Governance Process 20 Composition of GAAP 21 GAAP Hierarchy 22 Other Disclosure Standards 22 Chapter 5: The Transaction Accumulation, Reconciliation, and Sub-Ledger Close 27 Best Practice 5: Complete General Ledger Reconciliations 30 Accounting Bodies 31 Other Regulatory Requirements 31 Chapter 6: Introduction to the Standards of Internal Control 33 Best Practice 6: Implement an Internal Controls Program 34 Ensuring Success 36 Chapter 7: Roles and Responsibilities During the Fiscal Close 39 Tactical Responsibilities 40 Executive Responsibilities 43 Chapter 8: The General Ledger and Trial Balance 45 Chapter 9: The Common Chart of Accounts 47 Best Practice 7: Implement a Common Chart of Accounts 47 Sample Chart of Accounts 49 Chapter 10: Cost Centers 53 Best Practice 8: Define Business Rules for Establishing Cost Centers 54 Best Practice 9: Define Allocation Risks 55 Common Allocation Challenges 57 Best Practice 10: Implement an Indirect Cost Allocation Methodology 59 Chapter 11: The Journal Entry Process 63 Best Practice 11: Streamline Recurring Journal Entries 64 Chapter 12: Spreadsheet Controls 65 Best Practice 12: Address Spreadsheet Risks and Implement Controls 65 Balancing Risks with Controls 67 Chapter 13: Checklists for the Transaction Accumulation, Reconciliation, and Sub-Ledger Close 69 Checklist 1: Transaction Accumulation and Fiscal Close Checklist 69 Checklist 2: Fiscal Year-End Close Sample Schedule 72 Checklist 3: Accounts Payable Roles and Responsibilities Year-End Checklist 73 Checklist 4: Reconciliation Template 74 Chapter 14: Sample Policies for the Transaction Accumulation, Reconciliation, and Sub-Ledger Close 75 Policy 1: Account Reconciliation Policy 75 Policy 2: Accounts Payable Accruals 78 Policy 3: Spreadsheet Controls 81 Controls Standards 83 Best Practice Guidelines 84 Chapter 15: Process Narratives for the Transaction Accumulation, Reconciliation, and Sub-Ledger Close Process 87 Process Narrative 1: Journal Entry (JE) Process 87 Process Narrative 2: Management Approval of Journal Entries 88 Process Narrative 3: Other Current and Long-Term Assets 89 Process Narrative 4: Other Current and Long-Term Liabilities 92 Chapter 16: Standards of Internal Control for the Transaction, Accumulation, Reconciliation, and Sub-Ledger Close Process 97 Standards of Internal Control 1: Journal Entry (JE) Process 97 Standards of Internal Control 2: Management Approval of Journal Entries 99 Standards of Internal Control 3: Other Current and Long-Term Assets 101 Standards of Internal Control 4: Other Current and Long-Term Liabilities 109 Chapter 17: Corporate Close and Consolidation 117 Differences Between IFRS and U.S. GAAP That Impact the R2R Process 118 How Often are New IFRS Pronouncements Issued? 119 Is IFRS, as Issued by the IASB, the Same for All Companies and Industries, in All Countries? 119 What is The Principal Standard Governing Conversion to IFRS? 120 Does IFRS Use the Same Financial Statements as Those Required under U.S. GAAP? 121 How Will IFRS Impact Internal Control Reporting and Certification under the Sarbanes Oxley Act of 2002? 122 Chapter 18: The Number of Consolidation Points 123 Best Practice 13: Automate the Consolidation Process 124 Best Practice 14: Include the People Who Impact the Close 124 Best Practice 15: Create Consistent Closing Schedules 124 Best Practice 16: Consider Fiscal Close Process Improvements 125 Chapter 19: The Number of Closing Cycles 127 Best Practice 17: Reduce the Number of Closing Cycles 127 Chapter 20: Post-Closing Entries 129 Financial Closing Strategies 129 Best Practice 18: Develop Business Rules for Post-Closing Entries 130 Chapter 21: Communication and Accountability 131 Fiscal Close Postmortem Meetings 132 Chapter 22: Financial Statement Assertions 133 Financial Statement Assertion Requirements and Application 134 Chapter 23: Checklists for the Corporate Close and Consolidation Process 137 Checklist 5: Corporate Close and Consolidation 137 Checklist 6: Executive-Level Closing Checklist 139 Checklist 7: Twenty Critical Areas to Review at Year-End 142 Checklist 8: The Year-End Financial Statement Checklist 143 Checklist 9: The Year-End Transaction Checklist 144 Checklist 10: The Year-End Payroll Process Checklist 146 Chapter 24: Sample Policies for the Corporate Close and Consolidation Process 149 Policy 4: Fiscal Close and Consolidation Process 149 The Timely Communication of Delays 152 Adjustments Requested by Field and Corporate Personnel 152 Adjustments Between Preliminary and Final Results 153 "Late" Adjustments 153 Chapter 25: Process Narratives for the Corporate Close and Consolidation Process 155 Process Narrative 5: Balance Sheet Consolidation 155 Process Narrative 6: Assets Held for Sale Due to Discontinued Operations 157 Chapter 26: Standards of Internal Control for the Corporate Close and Consolidation Process 161 Standards of Internal Control 5: Balance Sheet Consolidation 161 Standards of Internal Control 6: Assets Held for Sale Due to Discontinued Operations 164 Chapter 27: Analysis and Reporting (The Final Mile) 169 Chapter 28: Internal and External Reporting 171 Internal Reporting 171 Best Practice 19: Ask Key Questions to Define Your Internal Financial Reporting Process 172 External Reporting 175 Chapter 29: Budgeting and Forecasting 181 About the Budget Process 182 Types of Budget Processes 182 Best Practice 20: Consider Five Steps for a Successful Budget Process 184 Ten Considerations for a Successful Budget Process 188 Variance Analysis 191 Other Factors to Consider 192 Corporate Performance Management (CPM) 194 A Moving Target 194 Chapter 30: Reduce Fiscal Close Cycle Times by Moving Your Finance Function to "Dynamic" Budgeting and Planning 197 Dynamic Budgeting and Planning 197 Chapter 31: Fixed Assets and the Capital Budget 199 Best Practice 21: Establish a Capital Budget Process 199 Developing the Capital Budget 200 Best Practice 22: Implement the Capital Review and Approval Board (CARB) Process 201 Construction in Process Accounting 207 Fixed Asset Management 207 Depreciation Methods 208 Intangible Assets 211 Asset Appreciation and Asset Impairment 212 Disposal of Fixed Assets 214 The Capital Budget and Fixed Assets Business Process Risks and Challenges 217 Chapter 32: The Forecast Process 221 About the Forecast Process 222 Types of Forecasting Models 222 The Forecasting Process for Small Businesses 224 Chapter 33: The Fiscal Close and Strategic Planning 227 Expected Outcomes of the Strategic Plan 227 Best Practice 23: Include Finance and Accounting in the Strategic Planning Process 228 Best Practice 24: Use a Strategic Planning Readiness Checklist 229 Best Practice 25: Follow These Seven Steps for Your Strategic Planning Process 230 Best Practice 26: Implement Six Key Elements for Your Strategic Plan 230 Best Practice 27: Use a Standardized Table of Contents for Your Strategic Plan 231 Strategic Planning Methodologies 232 Best Practice 28: Establish Performance Metrics to Determine the Effectiveness of Your Strategic Plan 236 Chapter 34: Analytics to Detect Financial Statement Fraud 237 Best Practice 29: Use Red Flags to Detect Financial Statement Fraud 238 The National Commission on Fraudulent Financial Reporting (The Treadway Commission) 240 Use Detection Methods for General Financial Statement Fraud 243 Chapter 35: Checklists for the Analysis and Reporting Process 247 Checklist 11: Quarter-End Fiscal Close (10Q) 247 Checklist 12: Year-End Fiscal Close (10K) 251 Checklist 13: Performing Financial Statement Analysis 257 Checklist 14: Trend Analysis 264 Chapter 36: Sample Policies for the Analysis and Reporting Process 271 Policy 5: Basic Policies on Financial Reporting 271 Chapter 37: Process Narratives for the Analysis and Reporting Process 273 Process Narrative 7: Disclosure Checklist 273 P.