Role of CMAs in MNCs: Key Challenges and Solutions

Multinational corporations (MNC) face squeezing pressure, particularly from trade unions and governments, for higher levels of accountability. This situation has underscored the need for more insights on MNCs as a starter for policy-making at national and international scales. 

But, for certified management accountants (CMA), handling the accounting part for MNCs is complex, multidimensional, and dynamic. This is because the data generally resides in multiple formats and systems. So, US CMAs in charge of closings have to dedicate many productive hours to monitoring data or going through spreadsheets. And despite this hard work, errors are bound to happen. 

This article discusses some of the significant challenges CMAs USA encounter while accounting for MNCs in India, and across continents, and ways to tackle them. 

The Challenges USA CMAs Face 

Country-specific Laws

The Generally Accepted Accounting Principles (GAAP) differ from one country to another. Case in point, SFRS, IFRS, and Ind AS – there is no one universally-accepted accounting rulebook. As norms around legal matters, accounting, and taxation vary for nearly every nation worldwide as well, CMAs USA have to work through different lenses. In doing so, there are odds of them committing unintentional financial or accounting mistakes. And this, in turn, hurts the profitability of the MNC they are working for.

Measuring Intercompany Cost Allocations and Transfer Pricing 

Transfer pricing (TP) compels MNCs to set prices among their various divisions. Additionally, CMAs in India can use this metric as a profit allocation technique to attribute an MNC’s net profit or loss before calculating tax to countries where it runs. There are multiple rules and laws associated with TP. Moreover, ensuring compliance in various jurisdictions under which the MNC functions is getting increasingly costly and challenging as regulations and businesses are in constant evolution.

Language Barriers

Domestic laws and onboarding of local staff make it essential to keep accounting records in the national language and currency in several countries, without the need to store them in a different language (the parent or subsidiary’s language). This makes it difficult for CMAs in India to translate and analyze an MNC’s internal financial documents correctly when presented by different companies.

Exchange Rate Fluctuation 

While entering a new market, MNCs have to run their business in the national currency – it is a legal obligation in numerous countries. However, handling multiple currencies makes financial operations riskier and more complex. Exchange rates continuously rise or fall throughout the day. So, understanding the impact of these volatilities on MNCs’ earnings is critical. To address the effects of exchange rate fluctuation, USA CMAs need to deliver frequent updates. That said, converting financial information into a common currency for further assessment takes of lots hours and effort.

Consolidating Entities 

CMAs have to maintain the accounts of individual entities of an MNC according to the rules and accounting standards of the region of operation. However, given the constant volatility in various currency rates, ensuring proper application of foreign exchange rates for analyses and converting respective national currencies into reporting currency is crucial. As this impacts all aspects of an entity – expenses, revenue, and share capital - the process itself reflects its own challenges and is pretty time-intensive for CMAs.

The Solutions USA CMAs Have 

Apply Various Accounting Standards

Efficient accounting management in MNCs banks on having compatibility with various tax rules and accounting standards, with the ability to use multiple accounting formulas for the same business transaction. This refines the closing and consolidation of entities and enables CMAs to conduct more accurate reporting that adheres to international accounting standards, including GAAP or IFRS.

Integrate and Analyze Financial Reports

CMAs must consolidate the financial statements of MNCs and examine them. For this, they should embrace tech-based systems that support multi currency management to stave off the need for manual conversions. With automatic currency conversion, CMAs can properly manage international businesses, as the currency readjustment makes it simpler to integrate financial reporting across all business units of MNCs.

Create Different Books

In a bid to carry out efficient accounting for MCNs, CMAs must craft multiple stacks of books with varied rules that will deal with diverse administrative, financial, and tax needs. Case in point, a company based in Europe with an Indian subsidiary will have to employ accounting rules of both regions, relying on financial reports wherein the business transactions will be included. Here, again CMAs can turn to technology to automate the creation of different accounting books.