Executive Résumé
Jerome P. Kelliher
**** ******** ***** *********, **** 103, Naples, Florida 34104-5808
Phone: +1-508-***-**** Email: abnkfe@r.postjobfree.com
Executive Profile
Financial Leadership, International Business, Strategic Analysis, Project/Risk Management, Tax Structuring,
Business Expansion/Growth, SEC Reporting, Sarbanes-Oxley Compliance, Debt & Equity Financing
International financial professional with special emphasis on working with international technology firms,
primarily SEC registrants. A breadth of experience in diverse business environments; expertise in a wide range of
highly technical and complex accounting and financial issues. Strong project planning, problem solving and
management skills; successful in prioritizing and delegating multiple complex tasks to ensure that overlapping
deadlines are met in high-stress and fast-paced environments. Ability to conduct sensitive negotiations through
demonstrated skill, considered judgment, and the development of strong and open relationships. Capacity to
develop good working rapport with shareholders, boards of directors, attorneys, and financial institutional
executives. High-quality credentials paired with a strong sense of integrity, professionalism, and business
judgment.
Professional Experience
Ernst & Young 1995 to 2009
Began a long tenure with the company as a staff auditor and was promoted into numerous management roles over
the years with areas of focus on audit, global capital markets, and professional practice. Diverse financial and
business experience accrued from having worked with a broad range of companies in terms of size, industry, and
geographic scope. Developed significant focus on technology companies, including emerging software and biotech
entities as well as large international software and technology entities.
Career Progression
Partner, Moscow, Russia July 2007 to January 2009
Senior Manager, Moscow, Russia January 2007 to June 2007
Senior Manager, Dublin, Ireland July 2004 to December 2006
Manager/Senior Manager, Munich and Frankfurt am Main, Germany September 2001 to June 2004
Staff to Manager, Boston, MA, USA August 1995 to August 2001
Audit
• Gained direct audit engagement experience as well as US GAAP and SEC technical expertise serving
international companies reporting under or reconciling to US GAAP.
• Served as audit team member on various local clients and subsidiaries of large multi-national, both public and
private, reporting under US GAAP, IFRS, and local GAAP.
• Oversaw multiple concurrent audits or client projects that ranged from five to ten professionals per team
involving from 200 to 5,000 hours each.
• Maintained client relations for engagements to ensure professional and timely services.
• Coordinated different teams in various offices in multiple disciplines, including audit, tax, transaction
advisory, and IT auditors.
• Managed engagement budgets, invoicing, and profitability for USD 2.8 million in professional fees.
• Dealt with a variety of client issues including annual reporting, reconciliation to US GAAP, and
conversions, particularly for SEC clients.
• Participated in engagements that involved Sarbanes-Oxley Act Section 404 implementation and procedures, and
internal and external reporting that included evaluation of internal controls and communication of weaknesses.
Jerome P. Kelliher Page 2
• Acquired significant knowledge about taxation, financing, internal reporting, and operations for entities
operating in various international jurisdictions.
• Gained experience in consulting with clients in acquisition transactions, due diligence reviews, purchase date
audits, and consultations surrounding business combinations.
• Researched and interpreted recently-issued and existing accounting standards, and assisted client personnel with
the implementation of such standards.
• Assisted in the identification of opportunities and proposal of firm services to new and existing clients.
Global Capital Markets
• Assisted audit teams and clients performing cross-border transactions, both equity (primary and secondary) and
debt, into the US and/or Europe ranging from gross proceeds of USD 100 million to USD 1.75 billion.
• Specialized in US GAAP, SEC, Rule 144A, and EU Directive reporting requirements.
• Assisted in the preparation and review of registration statements, prospectuses, and comfort letters as well
as the performance and review of related audit procedures.
• Liaised with underwriters and legal counsel through the different stages of transactions, including auditor
due diligence meetings.
• Worked with audit teams on US GAAP, US GAAS, and SEC requirements for non-US companies that were
publicly listed in the USA (both domestic filers and foreign private issuers).
• Performed quality reviews of audits to ensure compliance with firm, PCAOB, and SEC audit requirements.
• Reviewed annual filings to ensure compliance with SEC and US GAAP annual reporting requirements.
• Assisted in developing policies, procedures, databases, and related checklists (EU directive disclosure
requirements and quality review requirements) associated with capital market transactions in Europe.
Professional Practice Group
• Performed or managed consultations on highly technical and complex accounting and financial reporting issues
encountered by clients and engagement teams, or as a member of the engagement team.
• Consultation topics included, but not limited to, revenue recognition, share-based compensation,
consolidation matters, debt instruments, SEC comment letter and PCAOB findings and responses, and
independence matters.
• Worked directly with Ernst & Young’s US National Accounting Office on various client technical
consultations.
• Prepared and taught various technical accounting courses internally and externally, primarily on US GAAP,
including topics such as revenue recognition (general and software) and share-based compensation.
Other
• Participated in Ernst & Young’s global audit quality review program for US foreign private issuers.
• Undertook audit risk management and practice integration of former Andersen SEC clients in Europe.
• Participated in recruitment events and interview sessions.
Employment Prior to 1995
Early career achievements include hands-on experience in the fields of small business, academia, research, and
accounting. Participated in the start-up of a referral-based landscaping firm servicing local clientele. Assisted with
key research projects in current accounting and auditing standards for professional and academic publications.
Developed research procedures and documented results of financial and managerial accounting topics. Established
tuition payment plans for clients attending universities and colleges nationwide.
Jerome P. Kelliher Page 3
Education & Professional Development
• Master of Science, Accountancy, with distinction, Bentley College Graduate School of Business,
Waltham, MA (May 1995).
• Bachelor of Arts, Finance, cum laude, Saint Anselm College, Manchester, NH (May 1995).
• Certified Public Accountant, Commonwealth of Massachusetts (September 1997 to present).
Completed and passed all sections of the National Uniform Certified Public Accountants Examination at first
sitting (May 1995).
Publication
• Doris M. Blasch (FASB), Jerome P. Kelliher and William J. Read (Bentley College). “The FASB and the IASC
Redeliberate EPS.” Journal of Accountancy (February 1996).
Professional Affiliations
• American Institute of Certified Public Accountants (1995 to present).
• American Accounting Association (1994 to present).
• Massachusetts Society of Certified Public Accountants (1994 to present).
Public Service
• Member, Accounting Principles & Auditing Procedures Committee, Massachusetts Society of Certified Public
Accountants (May 1996 to June 2001). Served on a committee that was established to review draft accounting
principles and auditing standards, and to respond to appropriate standard-setting organizations.
• Member, Charity Committee, Ernst & Young, Moscow, Russia (July 2007 to January 2009). Assisted in the
selection of a number of charitable causes for allocation of funds focusing on providing assistance to
disadvantaged children, supporting the arts, and rendering assistance to the disabled in Russia.
Professional Experience Summary
Jerome P. Kelliher
Clients
The following is a list of the companies that I have been involved with on engagements either at the corporate or
subsidiary level (excluding basic consultations):
Software
Advanced Business Technologies Baan Software Celerity Solutions
CEVA eCredit.com HealthShare Technology
Immersive Technologies Intershop Communications IONA Technologies
Konami Newpoint Technologies Oculus Technologies
Quodata Corporation Red Prairie Riverdeep Holdings
TIE Commerce Trema (Americas) Trintech Group
Internet
Boatscape.com Classwell Learning Group Cybernet Internet Services
mail.ru
Hardware & Equipment
Centennial Technologies CytoLogix Corporation GT Equipment Technologies
Hewlett Packard Indus River Networks Nortel Networks
RemoteReality Corporation Sonus Networks Temptronic Corporation
Biotech & Medical Devices
Alltech Cambridge NeuroScience CompuCyte
Epic Therapeutics Eppendorf GPC Biotech
IsoTis Micromet Mitotix
MorphoSys Pentose Pharmaceuticals Reprogenesis
SafeScience Trinity Biotech Xantos
ZymeQuest Corporation
Miscellaneous
Adecco Amedia BearingPoint
Blackwell Science CRH Crystal Systems
Global Accelerator Grossman's Houghton Mifflin
Moscow CableCom Multiregional Transit Telecom Pilkington Glass
Russian Copper Company Schindler Select Appointments NA
Smurfit Kappa Group telegate WNS
Professional Experience Summary Page 2
Technical Considerations
Significant accounting and reporting issues encountered include, but are not limited to:
•
Revenue Recognition General (SAB 101/104 and CON 5)
• Software (SOP 97-2)
• Multiple element arrangements, including VSOE analysis
• Barter transactions
• Roundtrip transactions
• Policies, procedures and internal control
•
SEC Reporting Annual and quarterly reporting, including SOX 404
• Registration requirements and statements
• Restatement requirements
• Significant subsidiary determination
• Change in reporting period
• Comment letter responses
•
Business Combinations Purchase price allocation, including deferred revenues
• Contingent consideration
• Leveraged buy-out accounting (EITF 88-16)
• Pushdown accounting
•
Share-Based Compensation Accounting and reporting for share-based compensation plans
• Repricings
• Policies, procedures and internal control
•
Miscellaneous Items Asset retirement obligations
• Debentures, including conversion features
• Earnings per share
• Equity method investments accounting and reporting
• Equity section accounting and reporting
• Financial statement close process
• Foreign currency, including change in functional currency
• Fresh-start accounting
• IFRS convergence
• Impairment accounting for goodwill and long-lived assets
• Income tax accounting and reporting (current, deferred and contingencies)
• Restructuring
• Segment reporting
• Software development costs
• Warranty accounting
Professional Experience Summary Page 3
Transactions
Significant capital market fundraising transactions that were completed are as follows:
• USD 500 million 5.625% notes due 2011 with SEC (September 2006)
CRH
• USD 1,250 million 6.0% notes due 2016 with SEC (September 2006)
• USD 600 million 6.375% notes due 2017 on London Stock Exchange
Intergas Central Asia
with Rule 144A component (May 2007)
• EUR 217.5 million 7.75% notes due 2015 with SEC (January 2005)
Smurfit Kappa Group
• USD 200 million 7.75% notes due 2015 with SEC (January 2005)
• EUR 325 million 11.5% notes due 2015 on Luxembourg Exchange with
Rule 144A component (January 2005)
• EUR 100 million 15.5% notes due 2013 on Luxembourg Exchange with
Rule 144A component (December 2002)
• USD 150 million 15.5% notes due 2013 on Luxembourg Exchange with
Rule 144A component (December 2002)
• EUR 350 million 10.125% notes due 2012 with SEC (September 2002)
• USD 750 million 9.625% notes due 2012 with SEC (September 2002)
• 7 million shares USD 25 million for 3% convertible notes due 2007 with
Trinity Biotech
SEC (July 2003)
•
Zhaikmunai 10 million Global Depository Receipts (GDRs) at USD 10.00 per GDR on
London Stock Exchange with Rule 144A component (March 2008)
Additionally, I have participated in a significant number of transactions, particularly equity, that failed due to market
conditions and/or decision of the boards of directors, and are not included in the listing above.
Due Diligence
Performed review of certain aspects of target company’s finance and accounting function (including revenue
recognition model and significant accounting policies) as part of due diligence engagements for the following
industries:
• Biotech
• Medical devices
• Telecommunications services
• Software
Key Accomplishment Summary
Jerome P. Kelliher
Successful Improvement of Client Relationship & Efficiencies Achieved
Situation
A large technology company purchased another large technology company. Both companies had maintained leasing
divisions for EMEA that were dissimilarly structured: one with a centralized leasing company handling cross-border
leasing and the other with individual leasing companies in each country in the region. The decision was made to
unify and consolidate under a single location model. The acquisition and this consequential centralization generated
numerous internal issues relating to operational and cultural integration. From an audit perspective, the
consolidation caused inadequate team staffing with loss of client attention from significant restructuring. Was
subsequently charged with a three-year rotation to facilitate coordination with the corporate team, enhance local
client relationship, and improve the overall audit.
Action Plan
• Developed and implemented a three-year plan with immediate and project-term goals.
• Properly staffed the engagement team and clearly designated responsibilities to more effectively balance the
audit and quarterly review procedures.
• Liaised with the corporate audit team to improve relationships through timely responsive communications and
quality of deliverables.
• Stabilized overall fee realization by better understanding and implementing procedures, staffing, and client
service requirements.
• Implemented an open communication system with responsive feedback and motivation to establish and
maintain positive relations with the local management team.
• Improved the audit and profitability of local entities’ statutory reporting through the utilization of work results
from the corporate audit and properly staffing the engagements.
• Implemented procedures in compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (SOX 404);
coordinated with external professionals.
• Overcame audit issues relating to specific accounts, which was of significant interest to corporate management.
• Implemented a continual improvement plan to drive optimum performance for audit and quarterly review
procedures as well as improvements in SOX 404 audit work, overall fee realization, and management
relationships.
• Identified deficiencies as part of SOX 404 audit procedures that triggered revisions to certain operational
processes.
• Identified issues yielding restatements of standalone statutory financial statements for the main operating entity
and a small subsidiary.
Results
Achieved recognition for efficiencies, planning, and audit performance. Successfully established, built, and
maintained relationships with local key decision-makers while effectively resolving client issues and ensuring long-
term satisfaction. Improved fee realization and achieved fee targets for the local office.
Key Accomplishment Summary
Jerome P. Kelliher
Development of Russian Capital Markets Group Increases Firm Marketability
Situation
Due to ever-expanding cross-border transactions in developing countries that were unfamiliar with capital market
transactions there was a need for a wider range of market experience in all aspects of a particular transaction to
reduce risk exposures. To counteract this, professional service firms (accountants, lawyers, and bankers) recognized
this deficit and have attempted to build capital market groups in their local offices or between their personnel in
advanced countries to provide dedicated assistance during these transactions. The Russian practice of Ernst &
Young made the decision to spearhead the founding of a local group whose purpose it was to provide this cross-
border capital market transaction assistance and required my assistance in building an effective infrastructure in
collaboration with two other partners in Russia.
Action Plan
• Identified and recruited skilled and knowledgeable professionals from inside and outside of the firm with capital
market transaction experience.
• Developed a formal internal network with other Ernst & Young offices to review inbound transactions and
ensure local regulatory compliance.
• Designed and implemented user-friendly policies and procedures to minimize professional risk and educate
personnel on global firm requirements for cross-border transactions.
• Initiated procedures to provide guidance on market trends on recent transactions by sending informational
emails enterprise-wide.
• Created and implemented checklist toolkit to ensure accuracy, standardization, and ease of documentation
between transactions.
• Directed hands-on training for all involved personnel through individualized coaching and guidance.
• Executed innovative training program focusing on the transaction process, comfort letters, due diligence, etc.,
effectively training 200 professionals in a six-month period, which was then implemented on a global basis.
• Maintained a localized database to maximize solutions sharing and to act as a knowledge base. Encouraged
group sharing through monthly presentations to expand knowledge transfer.
• Provided seamless quality client service in transactions enhanced by the development of relationships.
• Marketed group services to the investing community.
• Assisted in the preparation of an annual IPO retreat seminar for high-level executives and investment
professionals focused on current trends and requirements.
• Presented at numerous client-requested IPO Academy seminars for high-level executives attending to gain
information and guidance on the audit, capital markets, tax, and transaction components of raising capital.
Results
Achieved project goals within a two-year period. Built cohesive group in Russia, trained and developed
knowledgeable personnel, and strengthened firm profile which significantly increased visibility within the
marketplace. Expanded ability to assist in capital market transactions and to ensure transaction compliance at all
levels. Fortified firm relationships with industry professionals and decision-makers to build industry reputation. It
is difficult to quantify the actual results of the above process due to the slowdown in the capital markets in the
recessionary economic environment; however, firm leadership felt confident that requirements were met
successfully in order to lead revenue increases and cost efficiencies.
Key Accomplishment Summary
Jerome P. Kelliher
IPO Preparation Yields Lasting Client Relationship
Situation
A leading provider of Russian-language Internet services to international consumers decided to perform an initial
public offering (IPO) on the London Stock Exchange with a Rule 144A component into the US market. The
company had a profound lack of qualified personnel with no experience in IPO transactions, so it engaged top
consulting agencies to facilitate the process. The company was owned by three venture capitalist firms. Ernst &
Young was engaged to audit the 2007 annual financial statements prepared in accordance with US GAAP, perform
international tax structuring services, ensure US tax compliance for previous years, perform due diligence services
associated with London market listings, and perform traditional IPO services.
Action Plan
• Quickly processed through extensive client acceptance procedures and processed engagement letters for
multiple services.
• Reviewed staff schedules throughout the firm to identify team members for the 2007 audit, including
negotiating with other offices for staffing.
• Coordinated with previous audit firm for 2006 and 2005 financial statements work paper review and identified
significant errors requiring restatement of such prior year financial statements.
• Identified and coordinated with internal tax network to compile team to facilitate the resolution of tax issues in
US, Cyprus, and Russia, to consult on optimal tax structure and jurisdiction for the IPO entity, and to resolve
US tax compliance issues.
• Coordinated with multiple offices and disciplines to assemble project teams with the expertise necessary to
handle due diligence requirements for the financial reporting process report (Tax, TAS, and TSRS).
• Addressed significant technical accounting issues identified throughout the audit, resulting in material
adjustments.
• Selected secondary audit team for performing review procedures supplementing interim financial information
required in prospectus due to initial two-month IPO delay.
• Facilitated coordination between multiple internal teams and disciplines, as well as with underwriting, legal
counsel, and the client. Also maintained frequent communication with top-level management of venture
capitalists.
• Ensured timely invoicing of fees and maintained close review of hours, fees, realization, and profitability in
comparison to budgets while ensuring timely notification and invoicing of overruns.
• Developed stable advisory relationship with the client as a trusted advisor able to work collaboratively on
proposed transactions from both an audit and tax perspective.
Results
Due to market conditions and the numerous issues being addressed, the IPO was delayed. However, the major goals
were achieved and the company was successfully positioned and enabled to effectively move forward and focus on
current and future business. Client relationships were fostered and significant fees were recognized (in excess of
USD 5 million) at a moderately high realization for services performed. Project deliverables were successfully met
in the following areas: the annual audit was completed and financial statements issued, previous financial statements
were updated and restated, due diligence reports were issued identifying deficiencies, audit deficiencies letter was
issued identifying material weaknesses, US tax returns were amended and were filed with the IRS, and the US tax
structure was solidified with significant tax savings for overall operations.
Executive Insights
Jerome P. Kelliher
What is Expected of a Contemporary Financial Executive
Not Your "Traditional" Financial Exec
Traditionally, management's goal under a capitalistic model was to maximize shareholder value. This role continues
to evolve into maximizing shareholder value while undertaking/managing an acceptable amount of risk as well as
taking into consideration the impact on stakeholders and the environment. Financial executives not only need to be
focused on finances and accounting, but also on every aspect of an organization, creating responsibilities that are as
diverse and dynamic as they are important to the company's long-term success. They are now viewed as broad-
based business people who understand all aspects of business.
Leadership & Relationships
The contemporary financial executive must be able to work with the executive management team to formulate and
implement overall company strategy. This involves considering future financing trends and projects without
allowing short-term priorities to cloud strategic visions. A financial executive must be able to communicate the
aspects of finance to non-finance personnel, both management and employees. Further, the financial executive must
be able to develop relationships with the board of directors, the audit committee, legal counsel, banks, and peers.
Integrity
This is arguably the most important quality of a financial executive. He or she must be willing to do the “right
thing” no matter what the consequences are, either personally or for the organization. With the absence of integrity,
a company can be led astray, which we have seen with some recent high-profile corporate scandals. A financial
executive can lose credibility quickly by not being "up front" with issues. It is better to admit mistakes and highlight
issues as they happen so the management team can react appropriately.
Knowledge
While it is important to have financial executives from the organization’s industry, it is more important for them to
have varying experiences. Technical ability and broad business knowledge provide the capacity to handle most
situations and provide support to the management team. A financial executive is now being looked upon as a “jack
of all trades” with regards to general business knowledge.
Risk Management
Some well-run companies have encountered difficult times because they did not properly pay attention to and
manage risk. Financial executives are playing a greater role in enterprise risk management process as growing
uncertainty and business complexity demand a more unified, disciplined, and rigorous approach. This requires close
collaboration with many other individuals within the organization.
Internal Controls & Financial Process
Despite involvement in other organizational aspects, the financial executive must primarily be committed to
managing and developing the finance function. With the Sarbanes-Oxley Act, there is increased focus on financial
executives implementing and maintaining an effective internal control environment. Financial executives must also
develop a financial plan that supports the overall organizational strategy utilizing appropriate financing options
without unnecessary risk. With ever-increasing complexities in financial reporting, staying informed is of
paramount importance, particularly with the move towards IFRS expected in the next few years.
Operational Impact
The management team and the financial executive must find the right balance between supporting
innovation/operations and exercising control. The financial executive must be able to identify external trends that
will require internal change, causing the financial executive to act as a conduit of change. For example, cost cuts
must be achieved by way of working with managers throughout the organization; credit decisions may have to be
balanced between sales growth and collection of receivables; and, financial metrics (KPIs) must be developed and
used in evaluating strategic performance and implementing remediatory actions as necessary. This all must be done
without making members of the organization feel as though their freedoms and creativity are being suppressed.
Executive Insights
Jerome P. Kelliher
Mergers & Acquisitions of Technology Firms
General
M&A activity in technology industries is expected to remain robust, even during these tough economic times.
Whether it is for market share growth, achieving economies of scale, providing integrated solutions, or entering new
markets, companies should continue to be aggressive in the pursuit to add value.
Preparation
It is crucial to be properly prepared. Acquisitions should only be performed that coincide with the overall company
strategy and increase the company’s value. Preparation includes assembling all internal and external team members.
External professionals should understand the industry and should have been involved in similar types of deals.
Due Diligence
Evaluating a target’s purchase viability may lead to termination of any transaction; there will always be some issue
found from due diligence. The acquirer must be ready for such and identify ahead of time its appetite for risk. Due
to the nature of technology companies, intellectual property (IP) is an essential component of its value and the buyer
should obtain a proper understanding of: the target’s IP assets (current patent, license, trademark, service mark, trade
name, and copyright agreements); the target’s ownership interest in each (including transferability); and any claims
or encumbrances that are attached to them. Technology company due diligence also includes examining the target’s
financial statements (revenue recognition model), the quality of the employees and related agreements
(confidentiality, non-solicitation, and non-competition), liabilities, and internal controls (potential SOX compliance).
Tax Considerations
A key factor is the extent of taxable gain will be incurred by the seller as well as how the buyer can reduce the
transaction’s tax impact in current and future years. The parties have to determine the transaction structure (asset
acquisition or share purchase and taxable or tax-free), which will directly impact the purchase price. The earlier the
transaction’s structure is solidified, the better; it will directly impact other areas. Other considerations are sources of
financing, NOLs, carryover bases, and state and local taxes.
Valuation
Valuation models are very subjective; synergies and various pressures frequently enter the valuation model’s
assumptions in which value conclusions are largely based upon qualitative, not quantitative, analysis. The main
valuation methods are: earnings focused (discounted cash flows and free cash flow); asset focused (replacement
value and liquidation value); and, market focused (internal transaction price, current multiples, similar transactions,
etc.). Valuation methods have pros and cons beyond the scope of this paper. The best approach is to utilize a hybrid
of all the methods to determine an acceptable range with supporting valuations for negotiations.
Financing
Financing in the technology industry is usually based on equity financing either common, preferred, or a
convertible instrument. Debt financing is difficult to utilize as entities do not have substantial tangible assets to act
as collateral. Exchange of equity for the target’s shares is relatively straightforward, but may require SEC
registration or shareholder approval. The most important aspect is the time consideration it takes to acquire (private
placement memorandum, identifying potential investors, negotiations, due diligence, closing process, etc.) in light of
the timeline for the transaction.
Integration
The top reason most transactions fail is poor integration; the inability to merge cultures, key employees leaving after
the acquisition, and loss of target customers/goodwill. The cultures of both companies are important and should be
considered when merging them into a new entity. When target company employees are moved over, the best
practice is to put those employees through the same interview process as regular candidates. It is important to
eliminate customer fears through communication, which can include meeting with customers, sponsoring social
events, and letters from both the buyer and seller to customers.
Executive Insights
Jerome P. Kelliher
Accounting & Finance Aspects of Global Operations
Globalization
Today’s business requires a global strategy. Technology companies are getting global, faster, and at an earlier stage,
primarily due to lower barriers. Global organizations are one step ahead of multinational organizations, sharing and
sourcing resources on a global basis to provide superior quality products and services at the lowest cost possible.
Structure
Doing business in foreign countries should be consistent with a company’s overall strategy and should be periodically
reviewed. Management must decide how to divide responsibilities and activities, and how to coordinate the
decentralized segments the extent of decision making; the feasibility of coordinating various operations; and the impact
of decentralized decisions on other units. A global entity must operate effectively making quick decisions, but with
appropriate input; keeping the required people informed, but not being bogged down in communication; and transferring
the required sense of urgency across boundaries, but without losing the message across cultures. Activities should also
be grouped, usually by function, product, or geography. A hybrid of these approaches is commonly utilized.
Finance Function & Internal Controls
Global business adds complexities to the finance function from currency to contracts to business culture. Companies
must be prepared to handle more complex business and regulatory requirements with each market entered with a strict
adherence to financial reporting and internal control, particularly with Sarbanes-Oxley. Management should focus on
responsibility accounting and monitoring results, with costs traced to the individual at the lowest responsibility level. A
consistent chart of accounts is needed to collect data, not just by products or types of expense, but also by responsibility
centers. Standard accounting policies and procedures alleviate fraud risk and improve risk management. Maintaining a
company’s integrity and discipline with revenue recognition is key, including appropriate structuring of contractual
arrangements (both strategy and legal perspectives) and fulfilling financial reporting requirements (recognition and
VSOE analysis).
Tax Planning
A company needs to determine how its operations will be structured (legal structures and jurisdictions), influenced by
overall strategy. Typical progression is to conduct business through direct export to joint venture (with local firm) to
unincorporated branch to subsidiary with transition speed dictated by speed of product acceptance. Location should not
be chosen solely on tax-related issues; infrastructure, political instability, property rights, compensation costs, etc. need
to be considered, as well as cost of “maintenance.” Tax management of intercompany transactions is also important:
financing arrangements in light of thin capitalization rules and acceptable pricing transfer pricing procedures. To be
considered also are future tax rate changes; potential for negotiation; operating risks; competitors’ tax structure; profit
repatriation; employee compensation; and tax havens. The company must also monitor the risk of permanent
establishments and accidentally creating a tax scenario that it did not anticipate.
IT Systems
Building IT structures early to handle the escalating complexity of business needs and reporting requirements is
essential. Best practice is to implement an ERP system to centralize the overall maintenance and management of IT
systems to allow for standardization among locations while providing management with necessary information on a
consolidated basis. Quality consolidation software is integral in the overall process due to the efficiency and increased
control/reduced risk that it provides. There may also be a need to maintain parallel systems to accommodate statutory
reporting requirements. Today, worldwide organizations can easily build IT systems to support worldwide electronic
capabilities through instant messaging, a wide-area network, and videoconferencing.
Global Culture vs. Local Culture
Companies have to define culture as a worldwide system of shared goals, values, and behaviors an ongoing task that
requires systemic efforts and time. Companies have to adapt a style of functioning that adheres to the country’s cultural
background. They must understand the different cultures, including local laws, culture, customs, business norms, politics
and social behavior. A company with a strong culture that respects local cultures and practice will flourish globally.