Use of event-level information in accounting was worked on in a joint development workshop with actors of different backgrounds in April. The harmonisation of reporting is considered possible with the help of event-level standardised accounting material. The financial administration sector hopes for flexible solutions, such as a narrow, standardised reference chart of accounts with various monitoring items for reporting. This is investigated in more detail in the ongoing trial.
In the Real-Time Economy project, joint development is done in trials and workshops in cooperation with businesses, public administration and stakeholders, among other things. A joint development workshop open to everyone was organised in April on the standardisation and use of transaction-level information in accounting.
A total of 24 actors from different fields and 11 project workers participated in the workshop. The participants provided important understanding of the standardisation of transaction-level material, and participants felt that it is useful to have a joint discussion on the matter, even though the development work is only in the initial stages.
Event-level information could satisfy various information needs, but the implementation of standardisation requires further investigation
Statistics Finland, the Tax Administration and tax consultants would benefit from a code set for both value-added taxation and income taxation. However, there would still be challenges to be solved in implementing income taxation on a transaction-by-transaction basis.
Even before the workshop, we knew that the information content of Liikekirjuri’s chart of accounts rather well satisfies the information needs of income taxation and certain statistics. However, it alone does not provide sufficient information about, for example, deductibility in taxation. We could get the missing information with the help of standardised monitoring items.
The participants saw that balance sheet changes and taxation depreciation percentages are difficult to implement as monitoring targets. As such, they would also be insufficient, as information is needed, for example, about the depreciation procedure.
The workshop identified that division of sales by sector would be useful especially for the Statistics Finland, and in some cases also for tax audits. The information needs of accounting audit and tax audit are largely the same.
In a due diligence process related to a business transaction, a financial statement is sufficient for making an assessment, but more extensive use of the sources and uses of funds statement would be beneficial for companies. For the short-term financing needs of businesses, it would be good to get information at a more detailed level about balance sheet items and accounts receivable.
Using the chart of accounts and monitoring items in accounting
The workshop participants gained important understanding of how the combination of the chart of accounts and additional monitoring items could work in accounting and reporting. An important consideration that was raised is that different ways of reporting must be found for businesses, while a narrow standardised reference chart of accounts and certain monitoring items enable flexibility better than, for example, a single reference chart of accounts used for reporting.
We also gained valuable insight into the feasibility of the proposed monitoring items.
Based on the workshop outcome, the commenting on the tax base for value-added taxation and income taxation and itemisations for the current needs of statistics can be implemented. Therefore, we will continue promoting the trial with standardised data so that these specifications would be implemented with separate monitoring items selected in the workshop.
The workshop revealed the different needs and abilities of companies for the use of monitoring items
It was perceived in the workshop that the quality of accounting would improve if the commenting on tax base needed for using the reporting requirements is done in real time. It would also distribute the accountant’s workload across the year. Additional work might be generated in accounting by any new monitoring items required for reporting purposes in addition to the company’s own monitoring items. It can be challenging to convert it into feasible business.
For companies, the sufficiency of resources to meet possible new requirements caused concern. The level of costs caused by the changes can be proportionally higher for small and medium-sized companies.
Reporting monitoring items would enable better data analysis and automation checks. For a company operating in an international environment, additional challenges would be posed if the reporting requirements in different countries differ greatly from each other. We need further clarification on a more functional implementation of monitoring items, on different solution possibilities, the most efficient implementation of taxation commenting for different tax types, and ensuring data security.
Software already exists on the market that has extensive automation in terms of posting. In the workshop, it was considered possible that automation and artificial intelligence offer many opportunities for automatically including monitoring items in posting. In addition, there may be software limitations regarding the number of monitoring items.
What next?
The project will next promote the experimentation with transaction-level data with the monitoring items deemed to be working in the workshop. The trial will test how the standard form and content of transaction-level accounting data would work for income tax and value-added tax reporting, statistics and auditing. The trial aims to determine the usability of the data, for example, in auditing, tax audit, and financing, analysis and benchmarking processes.
The project produces publicly available test data for the Minisuomi environment, from which it can be freely retrieved and experimented on. We encourage those interested to test the material and hope that those interested also share lessons learned with the Real-Time Economy project about the functionality of the material and any findings from the testing.