BETTER BUSINESS
Issue Fourteen, November 2006

In this months issue:

International Financial Reporting and Accounting Standards
Securing your laptop against theft
Employee Performance Reviews

 

INTERNATIONAL FINANCIAL REPORTING
AND ACCOUNTING STANDARDS

There has been recent media coverage regarding new international financial reporting and accounting standards which will soon replace current practices.

The new standards will help achieve several things:-

• Provide guidance on several complex areas of accounting where there is currently little guidance
• Help give comparability between worldwide financial statements (particularly important with the increase in global trade and investment)
• New Zealand gaining the benefit of these best practice standards without having to spend large amounts of time and money “re-inventing the wheel”

Everyone will need to adopt these new standards to some degree with the level of changes depending largely on the size and complexity of your business operations. The Ministry of Economic Development (MED) is still reviewing the Financial Reporting Act 1993 to clarify who has to comply with what in NZ. While from a practical perspective most small business owners may not have their day-to-day routines changed, your accountants will be doing some things differently which you may notice in your end of year financial statements provided to you.

There are however some significant items which may necessitate potential changes to your accounting systems and financial statements as follows: -

1. Revenue recognition
   The changes here have no impact on sellers of goods or services but significant impact on financial institutions, telecommunications, and entities with other unusual revenue streams.
   
2. Intangible assets
   Internally generated brands and goodwill will be written off on transition to the new reporting standards. Intangibles will be written off over their useful life. An entity cannot revalue most intangibles.
   
3. Goodwill
   Purchased goodwill is no longer written off. Instead, there is an annual impairment test (see below).
   
4. Impairment testing
   This is a complex revaluation process required annually and applies mainly to fixed assets, goodwill, and intangible assets.

This is by no means an exhaustive list. HWI is currently reviewing the impact of these changes and will be in touch with clients early in the new year with further details.

 

SECURING YOUR LAPTOP AGAINST THEFT

Technological developments have, without a doubt, had a positive impact on the way business is conducted today. However, as with any form of advancement there are weaknesses or flaws which must be weighed up when conducting cost-benefit analysis. Laptop computers have allowed people to become more mobile, however, that mobility has also meant that these portable computers are more easily stolen. The cost of a stolen laptop can in reality be far in excess of the replacement value – data which is easily overlooked in backup procedures can be impossible to replace.

New laptops are coming out with advanced data encryption which means that information is unusable to anyone without the coding key. Tracing technology has also been developed whereby laptop owners can install software and subscribe to a service which allows the tracking of a laptop when it connects to the Internet. Finally remote data destruction software has also been developed which, as a last ditch measure, will remotely destroy all files on a laptop except for the operating system. This is useful if there is industry sensitive data and you are worried about it falling into the hands of competitors.

Finally, there are physical measures such as alarms, which when triggered, let off 95 decibels to impede any thieves. Common sense also goes a long way to protecting your laptop: taking care when travelling, storing the machine in a safe when not in use and regularly backing up your data.

 

EMPLOYEE PERFORMANCE REVIEWS

An important part of retaining staff is communicating with them on a regular basis as to their performance. Staff appreciate feedback as to how they are going, whether it be constructive criticism to assist self-development, or praise for good work. Set aside time at least once a year for this process which does not necessarily need to tie in with any remuneration reviews. HWI offers some tips for staff performance reviews as follows: -

• Concentrate on what you and the employee can achieve together in the future. Don’t use performance reviews just as a means of telling workers everything they’re doing wrong.
• Strive for consistency and fairness by applying performance criteria to all employees, not just a few. Well-documented office policies can assist in educating staff what is expected of them.
• Encourage employees to evaluate themselves and to discuss their own strengths, future goals, past challenges and achievements. Your view of an employee and the employee’s view of himself should match fairly well otherwise, it’s a warning signal.
• Be honest about poor performance, but not brutal. Document your observations in writing and maintain everything on a secure employee file.
• If you’re a small enough business and constant communication and feedback are already taking place, then you may be able to avoid performance reviews - just don’t convey the message that performance isn’t critical.

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Website of the Month

www.homebizbuzz.co.nz

This is an independent site which was setup in 2000 to help small businesses and the self-employed. The site contains a wealth of information on a wide variety of topics.

 

Disclaimer: Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or rely on it without first seeking professional advice.