There are a variety of concerns when considering an international structure, from regulatory requirements and income tax efficiency to ease of moving capital or even employee benefit impacts. However, one that rarely seems to enter into the decision-making process is statutory audit and financial statement requirements.
A previous blog post on September 30, 2013, discussed what makes a statutory audit different than what a U.S. company might consider a traditional financial statement audit to be. Businesses should also be aware that a statutory audit still requires effort on the part of an outside professional, which can be costly. In many countries the audited financial statements are also required to be made available to the public on a government website.
If you’re going to operate abroad, the cost and lack of privacy that result from the statutory audit might be unavoidable. However, your costs can be further impacted and your privacy further reduced in a complicated global structure due to the requirement in many jurisdictions to file consolidated financial statements. For example, if a U.S. company uses an entity in the European Union (EU) to hold all of its foreign operations, it’s possible that the consolidated results of those foreign operations will be made publicly available in the EU; moreover, the EU auditor may have to be responsible for auditing all of the foreign subsidiaries, which increases costs further. This situation can be further complicated by the inclusion of additional holding companies in the global structure that also separately have consolidated statutory financial statement requirements.
Has your company considered the hidden costs of its global structure? Does your global strategy consider the privacy needs of your company?
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