Foreign language translation and legal translation and interpreting services play an important role in international business and financial transactions. Recently the International Accounting Standards Board released its book of accounting rules for SMEs.
This publication was highly anticipated because how a SME is defined will have significant legal and tax consequences, particularly as more and more SMEs go global – thanks to the advance in technology. The issue arose because every country had a different definition for SME and were essentially creating tax havens for these companies by writing definitions that could include even the largest corporations.
An example of these discrepancies can be seen in the U.S., which defines an SME as having less than 1,500 employees, whereas in the U.K. such a company is considered rather large. In such a situation, a U.S. SME with a legal entity in the U.K. will have to deal with different levels of accounting compliance requirements.
According to the IASB rule, SMEs are defined as having two essential criteria:
- They do not have public accountability, and,
- They publish general purpose financial statements for external users.
In order to understand the accountancy requirements of a company, it is essential that one understand the law as it applies to SMEs in a particular jurisdiction. Using the IASB rule, one must obtain a foreign language translation of the statutes of incorporation and, based on these findings, incorporate the company accordingly.