Closing the books is one of the more detailed and complicated procedures that a company must deal with. This comprehensive hard close must be completed in order to generate sufficiently accurate financial statements for general consumption. Some accountants have found a way to mitigate the work of closing the books by using a soft close. In The Soft Close, we will discuss the soft close concept and the situations in which it can be used. We'll also cover the risks associated with using a soft close and the situations in which this type of close can be used. Ancillary topics are also covered, including recommended disclosures and how to employ a soft close in a multi-subsidiary environment.
Upon successful completion of this course, participants will be able to:
- Recognize the situations in which financial statements that have been produced with a soft close can be issued.
- Identify the reporting periods in which a public or private company could use a soft close.
- Note the situations in which a soft close is more likely to result in financial statement errors.
- Recognize the calculation methods used to estimate ending inventory.
- Recall the types of risk environments in which a soft close should and should not be used.
Table of Contents
Soft Close Overview
Soft Close Advantages
Soft Close Disadvantages
Applicability of the Soft Close
Types of Activities Not Addressed
Deleted Step – Account Reconciliations
The Bank Reconciliation
Deleted Step - Accruals
Altered Step – Depreciation and Amortization Recognition
Deleted Step – Physical Inventory Counts
The Gross Profit Method
The Retail Inventory Method
Altered Step – Overhead Allocations
Deleted Step – Intercompany Eliminations
Altered Step – Reserve Account Updates
Deleted Step – Revenue Accruals
What to Include in the Soft Close
The Soft Close in Multiple Subsidiaries
The Risk Environment for a Soft Close
Soft Close Disclosures
Review Question Answers and Rationales
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