Accountancy - Colombian style
26 Apr 10
Ernst & Young's Conor Campbell in Bogotá looks at the development of accounting standards in the South American country
A wide range of different bodies set the accounting standards in Colombia. If we take a financial services company for example, the rules and regulations are set out by four main bodies.
Supersociedades – the equivalent of Companies House;
Superintendencia Financiera – the Financial Services Authority;
Law 2649 of 1993 – the GAAP
DIAN – HM Revenues & Customs
As you can imagine, with so many different bodies issuing rules and regulations it does get a bit confusing and some of them can become contradictory which only adds to the "fun".
Another key difference for the preparers of accounts and the auditors is that the period end will always be 31 December with companies reporting at a maximum three months later. I’ve been told this is similar to much of Latin America. This plays havoc with people’s schedules during this time and it’s pretty much the only thing they are focused on. It also means many managers are off at the AGMs in the last two weeks of March and showing their faces so good luck trying to find them during this time...
One of the biggest differences I've found so far is that recognition of accounting entries is very strict. No deciding that this item could be classified in one account, nope, the GAAP says it goes here so that's where it goes, which is reminiscent of the US rules-based approach.
The problem for the financial statements is that because the placement of the numbers is fairly standardised, the quality of financial statements doesn't appear to be fantastic. The statements are full to the brim with numbers and tables which all look very nice, but there's no explanation on them. And the information provided normally isn't particularly useful, with a typical comment being something along the lines of "During the period, the company purchased X per cent of company XYZ". And that will literally be it...no further information and the user is left dangling in the wind trying to work out the impact.
But a lot of this will hopefully change in the next few years as IFRS is implemented. In July of last year Law 1314 was passed, essentially formalising the intention to require companies to convert to IFRS.
Unfortunately, the law was somewhat vague about when this would happen and what companies would be affected. However, when it does happen, it's going to be a shock for many people...
Please note, the views expressed are Conor Campbell's own