The document discusses the importance of having up-to-date accounting policies and procedures to ensure regulatory compliance and proper internal controls. It provides guidance on what makes good policies and procedures, including keeping them concise, accessible, and reflective of the current business. A multi-phase approach is outlined to develop comprehensive accounting policies and procedures.

1. Accounting and Finance
Policies & Procedures
Discussion Document

2. ACCOUNTING POLICIES
Table of Contents
Why Policies and Procedures are Important
Policy vs. Procedure
Policy and Procedure Overview
What makes a good accounting Policy and Procedure?
What are the characteristics of a good “Accounting Policy and Procedure Set”?
Suggested format and typical policy list
Approach

3. WHY POLICIES AND PROCEDURES ARE IMPORTANT
The rules by which companies must conduct business have changed and are
subject to new rules and requirements. With numerous companies changing their
processes to meet demands, supportive Policies & Procedures are paramount to
success.
For companies to operate and be in compliance with the new, changing and
evolving rules, companies need to have an up to date suite of policies and
associated procedures.
An up to date and complete suite of polices ensure that
 A proper control framework is established
 Operating managers understand the “rules of the road”

4. WHY POLICIES AND PROCEDURES ARE IMPORTANT,
CONTINUED
Companies have always had polices and procedures, but one of the learning's
from SOX documentation process is policies;
 do not reflect the latest rulings and required accounting treatments – even
though the company may be following the rules ( amortization of
goodwill, accounting for derivatives, etc)
 policies on standard topics such a signatory authorization do not reflect
the current organizational structure
 general policies on Accounts Payable, Accounts receivable and other such
accounting areas do not reflect the latest system sources (new ERP or
consolidation system)

5. WHY POLICIES AND PROCEDURES ARE IMPORTANT,
CONTINUED
 With an renewed focus on controls, finance and operational professionals
look to the Corporate polices to provide guidance in their decision making
and without a firm stake in the ground, individuals are left to make
decisions using their own judgment and understanding of the topic
 Polices and procedures must also be readily accessible, consequently the
thick binder of policies sitting on a shelf is not going to foster an
environment where the polices are going to be adhered to and makes the
enforcement considerably more difficult.

6. ACCOUNTING POLICIES VS. PROCEDURES
What is the difference between a Policy and Procedure?
Policy :
• Long-lived – should seldom change
• Not open to interpretation
• Sets the standard for how business is to be conducted
• Not constrained or dictated by the current business environment
• Has global/enterprise application
In rare cases, a policy and procedures may be combined to ensure consistent application
across the enterprise – such as for inter-company accounting

7. ACCOUNTING POLICIES VS. PROCEDURES, CONTINUED
What is the difference between a Policy and Procedure?
Procedure:
• Usually left up to local management
• Provides the Who, What, Where, When and How
• Enables continuous improvement by providing a tactical roadmap which can
be improved upon as time passes
• May be system/application dependent, by including specific references

8. POLICIES & PROCEDURES: OVERVIEW
What are “Policies & Procedures” (P&P)?
P&P are the “standards” that enterprise management has established, set down in
writing, and made widely available to all those with the need to know.
 Clear P&P’s reduce time wasted questioning another’s judgment;
 Rules for key transactions are stated “in black and white”;
 The existence of P&P can provide evidence to audit committees and others of
an “organization in control”.

9. POLICIES & PROCEDURES: OVERVIEW, CONTINUED
What do Policies & Procedures do for an Enterprise?
Control: P&P can help management insure transactions are executed in
accordance with their general or specific instructions;
Productivity: With P&P, people will not have to “reinvent the wheel” to find the
proper treatment each time a similar issue arises;
Leverage Policy and Procedures development can leverage the expertise of
Expertise: the company’s best people on a subject anywhere in the world;
Communication: P&P enable people to easily locate the answer in a hurry;
Consistency/Stand With P&P, the same transaction will be treated the same way across
ardization: the enterprise; further, standardized practices set the stage for
achieving savings from shared service centers, and enable
companies to get the most out of their systems and technology;
Official and Ling- P&P carry more weight than a memo – especially if the memo
lived: writer is no longer around;
Education: The P&P web site can be a place where new people learn the key
company standards;

10. POLICIES & PROCEDURES: MISCONCEPTIONS
Misconceptions about Policies & Procedures:
 P&P create bureaucracy, slow the business down, stifle entrepreneurial
spirit:
•Properly designed P&Ps enable managers to channel their entrepreneurial
efforts to areas where there is the potential to find a competitive edge, and
not waste their efforts in areas where there is little opportunity. These latter
functions should instead be done in the standardized, efficient manner
company-wide.
 P&P do not fit a decentralized management structure:
•The advantage of a decentralized management structure is to provide the
local manager with the flexibility to make decisions in the key areas of
success for their particular business. This does not include the ability to
waste valuable resources in areas where company-wide standards will yield
the most cost-effective solution.

11. POLICIES & PROCEDURES: MISCONCEPTIONS,
CONTINUED
Misconceptions about Policies & Procedures:
 Senior/executive management can’t dictate Policy and Procedures – they
don’t understand the “front-line issues”:
•Corporate-wide policies should be created as a team effort with those
“front-line” people having the opportunity to provide input and review for
practicality prior to official issue.

12. POLICIES & PROCEDURES: COMMON PROBLEMS
Some Common Problems Companies have in the Policies and Procedures
area:
 P&Ps are not kept up to date
 P&Ps are not readily accessible
 P&Ps are written for the accounting and finance professional and are not
easily understood by non-financial professional
 P&Ps do not reflect a global business and do not reflect, address or may
allowance for local customs
 Reliance on memos – which are lost, disregarded after a while, may not be
clear or well thought out before being distributed, author has left the
position or the company
 Too many duplicative Policy and Procedures sets – one for each division,
one at corporate, one for each geography, etc.
 Policies are not cross referenced to provide a more detailed understanding
of the topic – e.g. a policy on capital appropriation should reference the
policy on signature authorization
 Mergers & acquisitions – failure to integrate P&P

13. WHAT MAKES GOOD ACCOUNTING POLICY?
 Concise
 Written in simple language and not filled with acronyms and technical terms
 Specifies management and fiscal accounting requirements and responsibilities
(where appropriate)
 Specifies the accounting treatment in general terms
 As necessary, delineates periodic and annual activities
 May include a summary or highlights section for longer more detailed policies
 Provide guidance on conceptual and theoretical matters to facilitate practical
application (e.g. Company Policy is that fixed asset have zero salvage value)
 Make it “easy” to enforce – do not create situations where one is called upon to
question management judgment
 Logical groupings of policies, either by topic (sales accrual) or by the
components of the business cycle (revenue, expenditure, intercompany, etc.)

14. WHAT MAKES GOOD ACCOUNTING PROCEDURE?
 Specific with references to systems, organizations, positions, timetables and
approvals
 Written in simple language and not filled with acronyms and technical terms
 Written locally by the individuals responsible for the activity and reviewed and
approved by local management
 Specifies management and fiscal accounting responsibilities in detail
 Illustrates the proper accounting treatment and may include examples of
journal entries or “T Accounts”
 Details day and time of requirements when necessary
 Provide technical reference on topics and reference the applicable policy (s)
 Make it “easy” to enforce – do not create situations where one is called upon to
question operational managements judgment
 Logical groupings of policies, either by topic (sales accrual) or by the
components of the business cycle (revenue, expenditure, intercompany, etc.)
 Does not include specific names or other references that may change very
frequently

15. ACCOUNTING POLICIES AND PROCEDURES
Suggested Format
 Title and Number
 Date Issued, Date Revised
 Objective
 Scope
 Policy and/or Procedures Summary
 Policy and/or Procedures Detail
 Exceptions (may be needed for only a few policies and where the policy may
conflict with local statutory regulations)
 Responsibilities
 Definitions (applicable to the Policy and Procedures)
 References
 Appendices

16. CHARACTERISTICS OF GOOD ACCOUNTING P&P’S
What are characteristics of good “Accounting Policy and Procedures
Management”?:
 Policy and Procedures Set is complete – a Policy and detailed Procedure exists
for each key area
 Polices are up to date and reviewed on a regular schedule
• Business or Accounting Changes are routinely incorporated
• If a Policy and Procedures is planned, provide a date when it will be available
 Readily accessible (e.g. Website)

17. CHARACTERISTICS OF GOOD ACCOUNTING P&P’S,
CONTINUED
 There is a formal process for Policy and Procedure development/update that
allows the entire company to be involved.
• Focal point for requests for the development of a Policy or Procedure on a
specific topic
• Predefined process for drafting, reviewing and approving policies
• Prioritization process (e.g.)
• First priority may be assigned to policies which must be executed at
subsidiaries and remote locations (e.g. revenue recognition)
• Second priority may be those topics/subjects that are performed at
corporate under direct control (e.g. accounting for stock options)

18. ACCOUNTING POLICIES, CONTINUED
 Policies should be clearly identified as such
 Policies should be Separate from other general financial information and clearly
identified
 Policies should not be commingled with other materials or incorporated into
general communication.
such as: These things tend to be
• System descriptions and procedures updated frequently, where
policies are more long-lived.
• Organization charts or announcements
• News articles
• Closing schedules
• Internal control standards
• Others

19. A Recommended Policy List – Starting Point
Capitalization of Softw are for Internal Use
Policy
Balance Sheet Account Reconciliations Capitalization of Softw are to be Sold
Expenditures Policies
Annual Balance Sheet Review s Purchased Intangibles
Expenditures – general Management Representation Letters Equity Investments
Accounts Payable Back-up Contingency Plans Impairment – non-physical assets
Business Expense Policy
Unclaimed property (Escheat) Topics & Subjects
Commissions
Charitable contributions Foreign Corrupt Practices Act
Vacation Monthly/Quarterly/Annual Reporting
International shipment compliance
Prepaid expense Income Taxes
Finance Function Quality System
Debit memos Consolidations
Records Retention
Liability & expense accruals FX Gain/Loss
Revenue Cycle Policies
Employee benef it Intercompany transactions & account reconciliations
Revenue Recognition
Taxes not based on Income Global Treasury/hedges
Discounts and Allow ances
Income Taxes Risk Management
Def erred Revenue and Cust. Advances
Property, Plant & Equipment Transfer Pricing
Cash Receipts Cutof f
Capital Appropriations T&E
Early payment discounts Insider Trading
Capitalization of PP&E
Credit and Collection Policies Internal Audit
Depreciation of PP&E
Granting of Customer Credit Business Ethics
Retirement & Disposition of PP&E
Accounting f or Bad Debts Signature Matrix
Physical Inventory of PP&E
Financial Reporting and Accounting Alphabetical Index
Impairment of PP&E
Consolidation Account Def initions Translation of foreign Currency
Lease vs. Buy
Posting Account Def initions Capitalization of Interest
Inventory & Cost Accounting
Currency Accounting & Reporting Approval of Incentive Plans
Inventoriable costs
Interim (Quarterly) Fin’l Reporting Pension & Severance Plans
Product Standard Cost
Interdivisional w arranty Reserves
Inventory provisions and related valuation reserves Accounting f or Stock Options
Information systems – Disaster recovery
Inventory disposition and w rite-of f Employee stock purchase plan accounting
Transactions w ith employees
Product w arranty Research & Development
Allocation of costs to Business Units
Physical inventory taking Accounting f or Contingencies and other accrued liabilities
Allocation of Corporate O/H
Cycle counting of inventory Non-Monetary Transactions
Demo/Loan
Aging of inventory accounts Intercompany Accounting
Customer inventory Intercompany prof it elimination
Business Controls Policies Intercompany accounting: Overall Policies
Corporate Approval Policy Intercompany reconciliation and balancing process
Budget and Forecast Intercompany invoicing
Balance Sheet Account Reconciliations Policies on Accounting f or Other Assets:

20. CORPORATE FINANCIAL POLICY AND PROCEDURE DEVELOPMENT
The following pages depict a 4 phase approach to the development of
policies and procedures.
Phase 1 – Needs assessment, end-state design, planning
Phase 2 – Policy and Procedures draft development cycle
Phase 3 – Policy and Procedures review and approval cycle
Phase 4 – Implementation & Roll-Out

21. CORPORATE FINANCIAL POLICY AND PROCEDURES
DEVELOPMENT
Phase 1 – Needs assessment, design, planning
 Rationalize the list of policies to be developed
 Identify subject matter expert for each set of policies and procedures
 Agree on Policy and Procedures format, level of detail
 Develop and agree on at least 1 “pilot” policy and procedures
 Develop project approach and timetable
 Announce project to the organization;
 Gain commitment from Subject Matter Professionals and reviewers to make
quality time available

22. CORPORATE FINANCIAL POLICY AND PROCEDURES
DEVELOPMENT, CONTINUED
Phase 2 – Policy and Procedures draft development cycle
 Gather information on each policy and procedures or set from SME
• Interview SME
• Review existing documents, memos, policies/procedures
 Prepare a first draft of each policy and/or procedure
 Review with SME and revise as necessary

23. CORPORATE FINANCIAL POLICY AND PROCEDURES
DEVELOPMENT, CONTINUED
Phase 3 – Review and approval cycle
 Send draft policy and procedures for review and comment to affiliates and other
key impacted individuals
 Receive comments back, summarize, develop recommended resolutions
 Review with senior finance for decisions or further analysis
 Resolution of issues with senior finance

24. CORPORATE FINANCIAL POLICY AND PROCEDURES
DEVELOPMENT, CONTINUED
Phase 4 – Implementation & Roll-Out
 Final versions of each policy and procedures created
 Loaded to media (e.g. internal web site) and made available to all personnel
 Official announcement, effective date
 Set forth process for adoption by any operating units that will require
accounting change

25. CONTACT INFORMATION
Kevin J. Duffy
duffyri@yahoo.com
www.linkedin.com/in/duffyri