How Software Firms Handle U.S. GAAP Compliance Outsourcing

Hiring an external party to perform accounting services doesn’t mean software firms can ignore their compliance in following the law. But how can they comply with the U.S. GAAP compliance outsourcing?

For information, Generally Accepted Accounting Principles (GAAP) are a set of rules that define accounting standards in the United States. These rules are used by corporations and publicly traded companies in the U.S., like software companies, for instance.

While U.S. GAAP dictates financial reporting within the country, any accounting outsourced from outside the U.S. is included in the rules. Find out how software companies stay compliant while using outsourcing accounting services.

Understanding U.S. GAAP Requirements for Software Firms

It is important to know the essential requirements from these principles for software companies. Since GAAP revolves around recording financial data, these rules will regulate software company accounting processes. 

For the U.S. companies, GAAP is governed by FASB (Financial Accounting Standards Board) by using ASC’s (Accounting Standards Codification) rules. Here are several requirements involving software accounting from these rules:

• ASC 606, which is a set of rules that regulate the revenue recognition for software delivered as a SaaS or subscription product. Revenue recognition is a GAAP principle about how and when revenue is to be recognized in accounting.
• ASC 350-40 & ASC 985-20, which is a set of rules that regulate the software development costs. ASC 350-40 provides the guidance about internal-use software, whereas ASC 980-20 provides the guidance about costs of software developed to be sold, leased, or marketed.
• ASC 730, which is a set of rules that regulate the costs of R&D (research & development) in software. These rules state that R&D costs must be recognized as current assets to provide transparency in a software company’s growth investment.

The Advantages of Outsourcing the Philippines for GAAP Compliance

The importance of U.S. GAAP has made software companies look for external parties that also comply with these rules. Outside the U.S., the Philippines stands out as the viable outsourcing solution that follows compliance.

However, what truly makes outsourced Philippines accounting services a good option, especially for the U.S. company? There are strong advantages from the Philippines that fit perfectly with the U.S. companies:

U.S.-Trained Accountants

First, they are trained to be able to work with software companies from the United States. Any of the Philippines accountants have these criteria to work as software company accounting:

• Familiar with U.S. tax laws and reporting procedures. The Philippines accountants can easily adapt to the regulatory system in the United States, including IRS reporting and payroll processing.
• Equipped with U.S. CPA (Certified Public Accountants). This shows the Philippines accountants have met the U.S. standards when it comes to providing accounting services.
• Master global accounting standards, including U.S. GAAP. This makes them able to work with American software firms that may need to follow multiple accounting standards.
• Have a sufficient level of English proficiency. Software firms from English-speaking countries like the U.S. can avoid repetitive translation when outsourcing accounting from non-western countries like the Philippines.

Proven Experience with U.S. Clients

Many of the accountants from the Philippines have previously worked with U.S. companies. The U.S. GAAP compliance Philippines trained on is also giving them some experience and knowledge of how financial reporting for U.S. software firms works.

Cost-Effective and Collaborative

The Philippines accountants are familiar with Western business practices and U.S. working hours. With that and their high English proficiency skill, both these capabilities support the cross-collaboration between the Philippines and the United States.

What’s more, they are also proven to be cost-effective. Not only is their annual average base salary significantly less compared to the United States, but their outsourcing services also often include other perks and benefits.

Framework for Effective GAAP Compliance Offshore

In order to comply with U.S. GAAP compliance outsourcing, software companies must know this framework to have an effective compliance:

Training and Certification Programs

The first and foremost is to make sure the accountant receives a proper U.S. GAAP accounting & financial reporting program. Usually, these programs will teach necessary skills like revenue recognition, which is for ASC 606.

Through this training, the accountant will explore the FASB codification system, apply ASC guidance for financial statements, and use advanced financial reporting applications. To make it easier, they are available in the form of an online course.

Dual Review and Quality Control

To ensure the financial reports meet the U.S. GAAP standard, a thorough review and quality control are absolutely necessary. Dual review refers to extensive checking by two individuals, usually performed by a senior accountant and auditors or another accountant.

Standardized Policies and Documentation

The U.S. GAAP principles standardize software company accounting financial policies and documentations. By adhering to these principles, software companies can create transparent, consistent, and accurate financial reporting.

For example, U.S. GAAP dictates how to handle several financial elements. Whether using straight-line or accelerated depreciation methods in asset valuation, determining when to record income for revenue recognition, and finding appropriate timing to record the company’s expenses.

Technology Integration and Audit Readiness

Implementing integrated technology like ERP (enterprise resource planning) can help comply with U.S. GAAP, because it can provide accurate financial data in real-time. 

For audit readiness, AI-driven audit trail tools help software companies to prepare for auditing. These tools utilize artificial intelligence and machine-learning data analytics to create precise financial reports.

Managing Risk in the U.S. GAAP Compliance Outsourcing

Following compliance means software companies have to expect an unexpected situation where it may pose a risk to the U.S. GAAP compliance. How does an outsourced accounting service manage the risk?

• Implement data security with the SOC 2 certification standard. Leverage IT network tools that access controls to prevent unauthorized access and security breaches. Plus, strengthen privacy by adhering to AICPA’s principles.
• Maintaining the accuracy of financial reports and audit trails. By using the advanced integrated technologies stated above, they can ensure accurate financial reports and automated audit records.
• Staying updated on any regulatory changes. Considering U.S. GAAP can be periodically revised by FASB, staying informed is necessary to maintain risk management.

Partner with Global Virtuoso for U.S. GAAP Compliance Outsourcing

As one of the best outsourced Philippines accounting services, Global Virtuoso understands the importance of following U.S. GAAP compliance. Hence, U.S.-based software firms can stay in compliance by outsourcing GV’s finance and accounting service.

Global Virtuoso provides cost-efficient, U.S.-trained experts to help companies streamline their operations and focus on their growth. Consult our experts today for customized solutions that adhere to the U.S. GAAP compliance outsourcing.