November 18, 2024 • 33 mins
🚀 Join Adam Larson in this episode of Count Me In as he chats with Katrina Nacci, a top Cross-Border Accounting Advisor. 🎙️ From her days at PwC Boston to launching her own advisory firm in Germany, Katrina shares her inspiring career journey and insights on cross-border accounting.
Learn how Katrina helps European companies break into the US market affordably and hear about the challenges and rewards of international finance. 🌍💼 From IPOs to using AI tools like ChatGPT, Katrina's approach as a fractional chief accounting officer is full of practical tips and innovative strategies. Plus, hear a fascinating case study where she saved a UK tech firm big bucks!
This episode is a must-listen for finance pros and anyone curious about global business. Tune in for a candid, engaging conversation with one of the industry's brightest minds! 💡📈
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Episode Transcript
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Adam Larson (00:21):
Welcome to another episode of Count Me In. Today,
we're excited to have KatrinaNaki, a seasoned cross border
accounting adviser join us.Katrina shares her journey from
PwC to working in nationally inGermany and with private equity.
Now as an entrepreneur, shehelps European companies
navigate US accounting centers,especially those targeting US
IPOs. In this episode, Katrinadiscusses the challenges of
(00:42):
cross border accounting, hermotivation for independence, and
how she uses technology toempower her clients.
So tune in for an insightfulexpertise on cross border
financial strategies. Let's diveright in. Trina, welcome to the
podcast. Excited to be talkingto you about cross border
(01:03):
accounting. And I figured tostart off, we could talk a
little bit about your experienceof how you kind of got, got to
this space, especially youstarted at PWC and, maybe your
your approach to cross borderaccounting.
So let's let's start there in abroad sense.
Katrina Nacci (01:18):
Sure. Well, first of all, thanks for having me,
Adam. Really looking forward tothis conversation. I've been in
the cross border space for about11 years now. I moved to Germany
initially in 2013.
I'm originally from RhodeIsland. So I started my career
with PwC in Boston in the auditpractice, standard public
(01:38):
company audits focused mostly ontech companies. I was there for
3 years and I was approached bya recruiter to move to Germany
for a joint German and US listedcompany. I'd always wanted to
live in, in Europe for a littlewhile, just experience different
culture. I had traveled there acouple of times when I was
younger.
(01:58):
With that being said, I didn'tknow anything about Germany or
any German at the time. So Ijust decided to take the leap
and try it out for a year andsee how I liked it. So I moved
over to Frankfurt to work forthat company, but actually ended
up back at PwC as a local hire.Actually, specifically in the
capital markets and accountingadvisory group. So we had this
(02:20):
specialist team here inFrankfurt and also sitting in
Amsterdam.
That was other local Americanslike myself or a lot of people
that would just come out tocomment for a couple of years.
And we were really focused ontaking European companies public
in the US or doing GAAPconversions when there were
acquisitions happening betweenthe two continents. So that's
(02:40):
where I have the bulk of mytechnical experience from. I was
also with them for a couple ofyears on secondment in Dubai. So
still capital marketsactivities, some US IPO, some UK
IPOs, and a lot all around theregion, Dubai, Oman, Egypt.
So that was pretty cool. Andthen after PwC, I was in private
(03:01):
equity for 3 years. So I wasactually working for a Toronto
based real estate assetmanagement company. They brought
me in as their 1st Europeanfinance hire as they started to
buy up assets in Europe tobasically build out all the
processes, procedures, and andthe team from scratch. And then
we were quite inquisitive aroundEurope as well.
So I think between all of that,I have exposure now to at least
(03:24):
10 different statutory andregulatory environments kind of
around, around Europe. And 2years ago, I went into business
for myself in the cross borderaccounting advisory space. So I
was initially working actuallythrough other accounting
advisory firms that occasionallyhad cross border work, but
didn't have the local expertisein house. But pretty quickly
(03:48):
realized that I shouldn't bewhite labeling myself that way
because my experience is sounique. So I started to bring in
clients on my own in the pastyear and a half, I'll say.
So now I'm really focused evenniched down even further into
working with European companiesthat are bringing in US
stakeholders. Either they'vedone a big fundraise with US
(04:10):
private equity, they are lookingto get acquired by a US company,
or they're thinking of goingpublic in the US. So I'm really
helping them through theaccounting conversions for that,
also with IPO readiness andexecution if they need it. And
like, so I kinda have thisinteresting place in the market
where, especially with scale upcompanies, they can't afford to
work with big advisory firms,and they don't really need a
(04:33):
full time person in house withthat skill set. So I kinda have
this, you know, unique sellingpoint that, haven't found
anybody else in the solopreneurspace kinda tackling.
Adam Larson (04:44):
Wow. I mean, that's quite a story. The experience in
all the different places you'veworked in is is something very
unique that not everybody cansay they have. And sometimes,
question I like to ask peoplewho are entrepreneurs is what
what kind of motivated you tostart your own firm? You know,
obviously, you had all thoseexperiences with all these
different organizations.
But what was that motivationthat kinda said, you know, I'm
gonna do this and go out on myown?
Katrina Nacci (05:06):
I never actually planned to be an entrepreneur.
It kind of just happened byaccident. I always had this idea
in the back of my head because Ireally enjoyed doing this cross
border work that I wanted tohave the flexibility to bring in
clients, both in the US and inEurope and go back and forth
between as much as I wanted. Italso allowed me just from a
(05:26):
personal perspective to feellike it was more sustainable to
stay out here in Europe, but goback and see my family in the US
when I wanted. And as much as afirm like PwC is obviously a
huge global network, you stilldon't necessarily have that type
of working arrangement in termsof the flexibility.
And so I always thought like,yeah, I'll probably have to go
(05:46):
out and kind of consult on myown at some stage to really have
that specific model that I want.But I always thought that I was
going to have to wait until, youknow, I made partner and had
this huge Rolodex of, you know,I was 30 years into my career.
And I'm really glad that Ididn't wait. There were actually
some, some personal reasons whyI wanted to stay out in Germany
(06:07):
as well. I was a partner outhere.
But I had been consideringmoving back to the US. So that's
what kind of allowed me to takethe leap was when I was
considering that move andactually interviewing with other
accounting advisory firms inBoston. I told them flat out
because I had, 3 different joboffers and I wanted to, you
(06:28):
know, see what they could do forme. So I just said, you know, I
wanna keep my residency inGermany, but I would like to go
back and forth to the US andspecifically focus on your cross
border activities. You know, howcan you help me to do that?
And of course they couldn'treally hire me either because
they don't have the legal setup,but one of them worked with me
to bring me in as a contractor.And so that's what kind of got
(06:51):
my foot in the door and allowedme to take that dive off the
deep end, which I don't know ifI would have done without having
that, that income stream atfirst, which allowed me to kind
of get stood up and thenestablish my own brand sales
marketing to be able to go toclients directly.
Adam Larson (07:06):
Wow. That's quite a story because not everybody has
the ability to just kinda dropeverything and say, I'm just
gonna start my own business. Andand the way that you're able to
do it. I I appreciate yousharing that story that because
it's it's not the normal waythat sometimes you hear people
starting in their ownorganization.
Katrina Nacci (07:23):
Yeah. Yeah. Definitely. I mean, everybody, I
think, has their own kind ofstrange story and I'm still kind
of figuring out myself what Iwant that to look like. To be
honest, it's kind of evolvingand I'm not very good at setting
even like 1 to 3 year targetsfor the business because I just
have to kinda see what themarket's like and go from there.
Adam Larson (07:44):
For sure. So to kinda focus in on our topic of
the day, maybe we could talkabout some specific challenges
and complexities when it comesto cross border accounting. You
know? Because if you're workingwith a US company, you gotta
deal with US GAAP, internationalcompanies, IFRS, you know, and
then sometimes you gotta mix the2. You know?
What are some of thosecomplexities and challenges that
you've run into as you've beenworking at the in this space?
Katrina Nacci (08:07):
So I would answer that question in 2 parts because
I'm dealing normally veryclosely with European
stakeholders. So even whenthere's a US company that's done
something in Europe, I typicallyfocus more on the working
aligned with the European team.And from their perspective,
there's obviously kind of aknowledge gap that needs to be
(08:30):
bridged in terms ofunderstanding what it means to
report under a US gap. Andpotentially also if they're
doing something with a publiccompany in Europe, you know,
what it means to actually getstood up essentially as a public
company and have all of the SECreporting and SOX internal
controls, etcetera. So that's,you know, a very specific
complexity that they would bedealing with.
(08:53):
But there could also be aEuropean company that comes to
me because they're looking toexpand in the US, and it's
really like a acquisitionenvironment. It's more like
fundraising to get into the USecosystem, potentially setting
up a subsidiary. And thenthere's another host of issues
or complexities that comes alongwith that. In that, you know,
(09:14):
they have to understand each ofthe state by state regulations
and all the different taxreporting requirements and
things like that, that I myself,I'm not a specialist in, you
know, transfer pricing, forexample. But I have a wide
network and I at least know thequestions that they need to
answer.
So I'll usually direct them tothe right people to kind of get
the ball rolling on that. And soI think from the Europe to US
(09:37):
side, that's where a lot of thecomplexities come in. However,
when I'm talking to, US financeteams that are doing something
in Europe, where again, I mightbe getting brought more into
their European team to help out.Their struggle is typically
getting their head around whathas been done locally so far.
(09:59):
And more importantly, what needsto continue to be done locally.
Because I see a lot of times UScompanies making acquisitions
and, maybe they don't even keepthe European finance team intact
and they just try to take it allin house and headquarters. And
they'll just start booking allthe transactions under US GAAP
(10:20):
and kind of ignore the old kindof legacy local GAAP that was
happening. That's not really theright approach because then when
it comes to tax reporting time,they realize the mistake that
they've made, that they don'thave the records that they need
to locally, and they have tospend a lot of time to go back
and unpeel that. So a lot ofthat is just educating them on,
(10:43):
you know, keeping the integrityof their local books intact,
kind of what that means in termsof their local tax and VAT
reporting. And again, I'm notnecessarily experts in all those
things across all the differentcountries, but can at least
speak to them and get them theright support there.
But, you know, I've experiencedthe pain myself in industry
where even if you're reportingunder US GAAP, some of those
(11:05):
line items, when you're talkingabout, VAT receivable, VAT
payable, for instance, those arebasically being driven by what's
happening and what you're filinglocally. So if you don't
understand those reports and youcan't reconcile them back to
your kind of consolidatedfigures, you're already kind of
losing the battle there. Sothose are kind of the 2 siloed,
(11:27):
I guess, complexities. And thenthe overall complexity on both
sides, it's just how to stand upand maintain, you know, a multi
gap, multi FX environment. A lotof companies would be doing that
for the first time.
So I'm just trying to help themthere to understand, you know,
how things to be, need to bemapped and presented, how you
deal with all the differentforeign currency roles and
figuring out what is yourfunctional reporting currency.
(11:51):
And so that's also somethingthat's normally coming along at
the same time as the projectsthat I'm working on.
Adam Larson (11:59):
You have to wear a lot of hats. So you're not only
an accountant, but you're also atrainer. You have to educate
people. You have to make surethat they all understand things,
and then they continue on. Howdo you help the your clients
navigate that?
What are some approaches you'vetaken?
Katrina Nacci (12:15):
It's really interesting that you mentioned
the trainer aspect becausethat's what I love. And what I'm
hoping, you know, is whatbringing business in the door
because doing things like thisand just educating people on
what it means to kind of go intothat international environment,
What it means to go through anaccounting conversion, to make
sure that you're owning theprocess, even if you're not
(12:37):
working with me and you decideto work with a bigger firm. And
what it means to potentiallylike disrupt the way that you're
getting accounting advice andtrying to get a more niched
expert as opposed to going afirm, going to a firm that
services everybody andeverything. So I really enjoy
the training aspect of it. Andfor me, it's really just being
(12:58):
where my potential clients are.
So I'm in a lot of different CFOcommunities on both sides of the
pond. And there's a lothappening, of course, in person
that I'm trying to attendconferences and keep my ear to
the ground on all the newdevelopments in tech and things
that aren't necessarily exactlywhat I'm doing, but it's part of
the host of, you know, thingsthat are on a CFO's mind. And
(13:21):
then of course, a lot of thoseare also async communities on
Slack or otherwise where I'mjust kind of paying attention to
the conversation and whatthey're asking. And a lot of
times there will be questionsthat aren't specifically
something that I'm the expertin, but it's still related to
some sort of internationalexpansion. So I'll give them you
know, some thoughts and offer tomake recommendations.
Adam Larson (13:44):
It's really cool that you've kinda built a big
network. You and you kinda needto have that network because one
person can't know everything,and you kinda have to kind of
build that build that up to toincrease your knowledge and help
your clients as well.
Katrina Nacci (13:57):
Right. Yeah.
Adam Larson (14:00):
So are there come are there any common
misconceptions that, when peoplecome into or misunderstandings
that when people are coming toyou and saying, hey. I wanna
start I wanna, you know, have todo this cross border accounting
thing. Are there are therethings that people often
overlook, and and that theyshould be aware of when it's
kinda looking into this?
Katrina Nacci (14:19):
Yeah. Most people are coming to me to say, hey, we
see that you do cross borderaccounting advisory. And then
Yeah. They say something elsethat either allows me to think
that they're coming to me tooearly or too late in the
process. It's actually very rarethat somebody comes to me at the
point in time that they reallyshould be.
And what I mean by that andbeing too early in the process
(14:41):
is I have a lot of European CFOsthat I talk to. I'm so happy to
have the conversation because ithelps me to kind of stay in
their ecosystem, but they willcome to me and say, Hey, we're
just setting up a US subsidiaryor a US branch so we can start
doing X, Y, Z activity. Can youhelp us with this? And most of
(15:03):
the time, they don't really needmy technical accounting help.
They don't really need to gothrough a full accounting
conversion.
They really just need a localkind of boots on the ground
bookkeeper and tax firm that canhelp them with that subsidiary,
tax reporting and so on. And soI'll make those referrals and
kind of just keep an eye on thembecause maybe it indicates that
(15:24):
they're doing something orpotentially getting ready for a
US investment. Other times Ihave companies that are coming
to me too late in the processwhere they've already closed a
transaction. They've already hadthe acquisition, you know, the,
the sale and purchase agreementhas been signed, or they already
brought in that investorfunding. And now they're saying,
(15:45):
Hey, we need to go through a gapconversion.
And I think this is very commonbecause they don't want to deal
with kind of the nuances of allof that compliance reporting
before they have to, which Ifully understand. And there's
definitely a lot of pieces thatyou don't need to do before the
transaction closes. However, Ithink it's a mistake if they're
(16:06):
not at least assessing thisstuff before the transaction
happens, because you're notreally able to speak to the
appropriate kind of end gapduring the diligence process,
either with investors or theacquiring firm. If you haven't
done an assessment of, okay,this is what we're doing
(16:27):
currently. This is what ourinvestor, acquirer, or
stakeholder, etcetera, wouldwant us to be doing.
And so let's make sure that wecan speak intelligently to that.
So we show that we know whatwe're doing. And I think that
that could go a long way interms of being able to kind of
prove that the team is in placethat can handle this going
forward after the transaction.
Adam Larson (16:48):
Mhmm. Let's say somebody is looking to get into
this. Like, they're looking todo a, a gap conversion, or
they're looking to acquisitionin a across borders. Are there
some things that they should bepreparing before they come to,
organization like yours or someor some other big firm that
you've mentioned? What is thewhat are what are some steps
(17:09):
they should take before theythey they come to you?
Katrina Nacci (17:13):
I think the more documentation that you can have
already on what you're doingcurrently, the better. And
normally firms that I work withare in the scale up space where
maybe they've had a first auditor 2, but they don't necessarily
have a lot written down in termsof what their accounting
policies are or specific memosaround significant areas. And
(17:36):
that's something that, you know,I'm happy to kind of take the
full GAAP conversion a to z and,and figure out and document, you
know, what you're doingcurrently. I can surely do that.
You know, I'm kind of adept atgetting my hands dirty and
figuring out what's going oninside of your business.
However, I'm not necessarily theperson that's best placed to do
that. It's just that sometimesthat gets offloaded to me
(17:57):
because the team doesn't havethe time. And so I think when
you, when you have some timeavailable and you can kind of
focus on those things, even ifyou don't necessarily need them
at the moment, it could go along way to being able to bring
in an advisor later. And this issomething that the big
accounting firms won'tnecessarily tell you. Because
(18:20):
from my experience, you know,working with PwC, they kind of
when, when they come in andpropose on a, a gap conversion,
they really want to take thefull kind of A to Z work for
you.
You know, they have so muchoverhead, they need justify
their costs. And so they want tocome in for that full big
project. Right? But me on theother hand, because I'm just one
(18:42):
individual person, I actuallykind of flipped that on its head
and I'm operating on theopposite model. That I would
actually prefer to leverage yourinternal finance team where I
can and have you only use mereally specifically for my
expertise, because that makesthings a lot more scalable for
me.
And then I can work on moreclients that wants more
(19:02):
interesting things and kind ofbring in even more best
practices to you. So from myperspective, I'll always walk a
company through like each of thespecific sub steps within a gap
conversion and say, this is whatyour team could potentially do,
where I could leverage them. Andthen I'll take myself out of the
equation, out of the pricing,and it makes it a lot more
(19:24):
budget friendly for them aswell. And so they can start to
see and link molds that theycan, you know, use my expertise
in different ways.
Adam Larson (19:33):
Really cool. So you mentioned that, you you know,
your key you keep up with what'shappening, technological wise in
the industry. How is thetransformation to a lot more
digital things within theaccounting industry kind of
impacted the cross borderaccounting process and and other
challenges? And it might evenbring new challenges.
Katrina Nacci (19:53):
Yeah. I would say in general, and again, speaking
from a former big firm, I thinkthat there is a slowness to
adapting some of those new techthings that I can be a little
bit more nimble on because I amjust an independent person. That
(20:14):
being said, You know, becauseI'm just one person, I can't go
off and invest 100 of 1,000 ofdollars in developing my own AI
bot to answer clients oranything like that. I'm
definitely, you know, using chatGPT quite a bit, and I am still
kind of having to maintain thatexpert lens through the fact.
And this can be potentiallydangerous when it comes to cross
(20:36):
border accounting as well,because I've played around with
the tool quite a bit and askedit specific prompts to say, what
are the differences in this lineitem between IFRS and US GAAP?
And a lot of times it will getit wrong because of the way that
the LLM models work and theassociation that they're just
looking for words that are closeto each other. So if it's
(20:56):
looking at a big four guide ofdifferences where IFRS is in one
column and US GAAP is in theother, sometimes they get like
intertwined. And, I actually hadthis happen to me last week and
it's with a large company that'spaying me a pretty significant
retainer. And I happen to bekind of in contact briefly with
(21:19):
somebody on the team. That's notmy, my normal contact in the
finance team where they're doingsomething.
And he was asking me questionson US GAAP and I gave him my
opinion and he went back andfound some other guidance that
says something different. And Isaid, well, you know, actually
US GAAP doesn't say a whole lotspecifically in the technical
guidance about this area. And alot of the big firms guides
(21:41):
don't really touch it either. SoI'm curious where you got this
information from. If it'scorrect, like I'm happy to dig
into it a little bit further andwe can try to change the
argument.
But he came back to me and saidthat he had used Copilot to put
it together. So I wasn't veryconfident that my answer was
wrong. Wrong. So I think that'sa good example of like still
needing to keep the experts inhouse. But where I'm using tech
(22:02):
more handily, isn't so much onall the up and coming AI stuff.
It's more just ways of workingmore on an async basis with my
clients so that I don't have tosit in a lot of meetings with
them, which helps me a lotbecause I'm working across a lot
of time zones. So I'll usethings like just getting
individual client boards set upin ClickUp and having kind of
(22:24):
the Gantt chart showing where weare in the process, where the
deliverables are, kind of who'sdoing what in terms of the
request list. I use Loom forexample, to record kind of if
I'm walking them through anExcel file, I can mostly do that
async and just send them thevideo and say, Hey, look at this
one. You have a chance. Thingslike that that kind of slowly
add up in terms of being able towork more effectively with
(22:47):
people when you're notphysically sitting right next to
them.
Adam Larson (22:49):
Yeah. That's great. It I love how tools have kinda
shrunk the world in a lot ofways. You know, in the past,
you'd have to sit into meetings.You have to make sure you're
there.
You have to make sure you seeface to face or even you know?
And and when video calls firstcame out, now everybody was
comfortable with them. Andbecause of COVID, everybody's
comfortable with them. And I'msure those things have kind of
helped navigate. And and beingvery nimble yourself, you're
(23:11):
able to kind of adapt newtechnologies to kinda help your
process faster, I'm sure.
Katrina Nacci (23:17):
Yeah. Yeah. Definitely. And like I said, I
can easily have a little bit ofshiny object syndrome sometimes
with the new tech rules outbecause I could just go and
easily subscribe to it to sitout in a way that the bigger
firms don't really do. So therecould be something interesting
that comes out that could helpmore on the accounting side as
well.
Adam Larson (23:37):
Yeah. That's great. So one thing I was thinking we
could you know, if you're up fortalking about it, you know, you
don't have to give any specificsfor what company it was. But are
there any, like, specific casestudies or or an example of of a
project that you've worked on?And you could talk a little bit
about the challenges you faceand how you overcame them when
working with the organization.
Katrina Nacci (23:57):
Sure. I I can think of a couple. The one case
study I always like to highlightis, a UK tech firm that came to
me last year after they broughtin funding from US Private
Equity. And again, the, thefunding had closed months
before, so they were kind of allof a sudden in a time crunch
where they were already engagingtheir auditors to go through
(24:19):
their 1st US GAAP audit, butthey hadn't done US GAAP yet.
And the issue with a lot ofcompanies is that when they're
going through a transaction likethat, their default is to just
ask their auditors for areferral.
And most of the time theirauditors are just going to refer
them to another big firm. And asa, you know, a series B scale
(24:42):
up, you can't really affordthose fees. And so I happened to
see it because they posted in aCFO group to say, Hey, we're
going through this gapconversion and we got cro quoted
this ridiculous amount. Doesanybody else have other like
firms that they work with? Andso of course I raised my hand.
And I kind of walked themthrough, and this is how I
started to really develop andsee the feasibility and the
(25:04):
practicality of having thisphased approach with them.
That'll only tackle one piece ofthe project at a time, and I'll
try to show them where they canleverage their internal team.
Because they didn't get thatapproach from the other firm.
They just got quoted 6 figuresto do the full project. And so
when I proposed it in phases,they agreed and said that that
was like more practical way tomove forward.
(25:26):
So I was able to basically getthe gap conversion done for them
in, in 2 months. I helped themto identify all of the gap
differences, like qualitatively.And, did a workshop with them to
show them what the differencesare and how you would need to
calculate that. And theyactually leveraged their
internal team to go through anddo the calculations themselves.
(25:49):
And similarly, when it came topreparing the financial
statements, I gave them someexamples of what their peers
that are listed would do.
Gave them some templates, helpthem. I, I basically put
together their disclosurechecklist, but they were
responsible for actuallypopulating the financial
statements and writing thenotes. Because again, think the
ones that are best placed to dothat. So in the end, we, we got
(26:12):
through the audit, no problem ontime, even though it was kind of
a last minute rush to the finishthat they get with over the
course of 4 months or so. Andthey actually told me what they
had been quoted from that otherfirm, and I saved them 50% of
the cost.
So that was a pretty good kindof proof of concept. Yeah.
Adam Larson (26:31):
That is a great proof of concept. And, also,
you're empowering their team togo forward and continue it on.
Because once you guys onceyou're done with that
conversion, they're gonna needto continue with that
accounting. And so it's likeyou're you're not only helping
them get there, but you're alsosaying, hey, guys. You're you're
teaching them to fish and to gowith that old adage.
Katrina Nacci (26:51):
Exactly. Yeah. That's not the first time that
someone has used that simile forme. So I I appreciate that. And
that's also one of the ways thatI'm trying to differentiate
myself from the bigger firms isto really focus on the knowledge
transfer aspect because I don'tnecessarily I mean, I would I
would love a model that's morerecurring revenue to keep my
(27:12):
clients kind of somehow in myecosystem, of course.
But I don't want them coming tome with all the standard US GAAP
questions that they shouldalready understand from going
through the conversion. I feellike I've failed as they don't
understand how to maintain itday to day going forward. And so
I've actually developed a modelwhere I would kind of work as
their fractional chiefaccounting officer to get
(27:35):
layered into their internalteam, which if their internal
team is strong enough in localgap, and now they understand
that day to day, they're notgonna need me more than an hour
or 2 a month to just askquestions. If there's new
transactions coming up, I wouldkeep them updated on the new
standards and how it affectstheir business. And then I could
continue to be layered into, youknow, the disclosure checklist
and financial statements.
(27:55):
But it's really just trying toempower their team to make sure
that they understand whatthey're doing. Mhmm. It's
Adam Larson (28:04):
cool. I like that. So when we look at something
like cross border accounting,regulations are changing all the
time, but yet they move as slowas molasses. What do you think
the future is gonna look likeas, you know, new technologies
come out as, you know, firmsstart to understand the use of,
you know, large language modelplatforms and AI, stuff like
that? What do you think this fewthe future is gonna look like as
(28:24):
as those things kinda develop?
Katrina Nacci (28:28):
Yeah. That's a good question. And I think that
the question about regulationand question about technology
are kind of diverging becauselike you said, regulation does
happen very slowly. And evensince I was in college 15 years
ago, people have been talkingabout IFRS and US GAAP being
converged and it hasn't happenedyet. Of course, you know, every
(28:49):
time they release a newstandard, now they're trying to
align them, but there's stillcertain differences.
I do think that it will getcloser and closer. And maybe
there will be some sort of madrush for everybody trying to
align those standards at somepoint. But on the technology
side of things, Could definitelymake it easier for investors to
(29:15):
not need proper, full US GAAPfinancial statements to
understand exactly how theywould take that invested entity
and, like, consolidate it andreport it into their US GAAP
statements. You know, I'mthinking of things like, what is
it called? The tagging that theyhave in the US?
If that was something that wasalso happening in the different
(29:37):
local gaps that you couldpotentially tag those in such a
way that they would know how toget mapped into US GAAP, for
example. But I don't see thatbeing something that's happening
in the, you know, near future.
Adam Larson (29:49):
Definitely not. You know, I know when the new
revenue recognition guidelinescame out in the US, they were
like, you know, GAAP and I firsthave, like, they've, you know,
they've come closer together,but they're still far apart. And
with all the differentregulating bodies, you think
that eventually that everybodywould wanna kinda be on the same
standard, but, you know, whoknows how what regulators think
(30:11):
when they're creating theirrules?
Katrina Nacci (30:13):
Right. And I think that IFRS and US GAAP are
are one thing because those arewhat I would call a more
sophisticated regulated Yeah.External standard. The issue is,
and this is again something thata lot of US companies don't
appreciate when they're cominginto Europe or making European
investment. They're typicallynot dealing with IFRS and US
(30:35):
GAAP differences.
They're typically dealing withGAAP differences in all of the
different countries that are,they're investing in. Because
unless that European company hassome reason to have converted to
IFRS already, which theygenerally don't in like a scale
up stage, They're only doinglocal GAAP reporting and that's,
(30:55):
I wouldn't really call that likean accounting body that's
regulating them. It's more justpart of the legal and tax code.
And so I think that's why therewon't be many changes that will
align those necessarily to IFRSor US GAAP because it's just
based on like the way that thecountries wanna tax income of
(31:18):
the country.
Adam Larson (31:19):
So I think what you just outlined there is is shows
how important it is fororganizations before you make
any large changes to understandwhat your local regulations are,
understand where you're gonna bedoing your accounting
regulations are, and start doingresearch before you even you
know, even if you're havingconversations, you need to start
doing the research on that earlyon because you can get caught
(31:41):
off guard very quickly, itsounds like, especially when
you're maybe you don'tunderstand your local gap, and
then you have to do this othergap or this other one. And it
there's a lot there's a lot to
Katrina Nacci (31:51):
Definitely. Yeah. I mean, you definitely need to
in involve the right advisers asearly in the process as as
possible. Because if you'reworking with anyone like me,
that they just like to havethose conversations, even if
it's not immediate work forthem, just makes the customer
(32:11):
buying process a lot easierbecause then you're gonna come
back and be educated about theprocess and you can actually
speak to it instead of justletting somebody kind of run
what your strategy should be.Like that should always be in
house.
You should be the one that'srunning your gap conversion
strategy. And when you'reoutsourcing it to a big firm and
you haven't spent the timeupfront to actually understand
(32:32):
what you're getting yourselfinto and what the process looks
like and where you couldleverage your internal team,
you're giving away a lot of thatpower kind of unintentionally
and and not to your benefit.
Adam Larson (32:45):
Well, Katrina, I've sure learned a lot, and I hope
our audience has learned a lot.And I encourage them to reach
out to you if they're interestedin learning more. And, just
thank you so much again forcoming on the podcast.
Katrina Nacci (32:54):
Yeah. Thanks for having me, Adam.
Announcer (32:58):
This has been Count Me In, IMA's podcast providing
you with the latest perspectivesof thought leaders from the
accounting and financeprofession. If you like what you
heard and you'd like to becounted in for more relevant
accounting and financeeducation, visit IMA's website
at www.ima net.org.
Welcome to another episode of Count Me In. Today,
we're excited to have KatrinaNaki, a seasoned cross border
accounting adviser join us.Katrina shares her journey from
PwC to working in nationally inGermany and with private equity.
Now as an entrepreneur, shehelps European companies
navigate US accounting centers,especially those targeting US
IPOs. In this episode, Katrinadiscusses the challenges of
(00:42):
cross border accounting, hermotivation for independence, and
how she uses technology toempower her clients.
So tune in for an insightfulexpertise on cross border
financial strategies. Let's diveright in. Trina, welcome to the
podcast. Excited to be talkingto you about cross border
(01:03):
accounting. And I figured tostart off, we could talk a
little bit about your experienceof how you kind of got, got to
this space, especially youstarted at PWC and, maybe your
your approach to cross borderaccounting.
So let's let's start there in abroad sense.
Katrina Nacci (01:18):
Sure. Well, first of all, thanks for having me,
Adam. Really looking forward tothis conversation. I've been in
the cross border space for about11 years now. I moved to Germany
initially in 2013.
I'm originally from RhodeIsland. So I started my career
with PwC in Boston in the auditpractice, standard public
(01:38):
company audits focused mostly ontech companies. I was there for
3 years and I was approached bya recruiter to move to Germany
for a joint German and US listedcompany. I'd always wanted to
live in, in Europe for a littlewhile, just experience different
culture. I had traveled there acouple of times when I was
younger.
(01:58):
With that being said, I didn'tknow anything about Germany or
any German at the time. So Ijust decided to take the leap
and try it out for a year andsee how I liked it. So I moved
over to Frankfurt to work forthat company, but actually ended
up back at PwC as a local hire.Actually, specifically in the
capital markets and accountingadvisory group. So we had this
(02:20):
specialist team here inFrankfurt and also sitting in
Amsterdam.
That was other local Americanslike myself or a lot of people
that would just come out tocomment for a couple of years.
And we were really focused ontaking European companies public
in the US or doing GAAPconversions when there were
acquisitions happening betweenthe two continents. So that's
(02:40):
where I have the bulk of mytechnical experience from. I was
also with them for a couple ofyears on secondment in Dubai. So
still capital marketsactivities, some US IPO, some UK
IPOs, and a lot all around theregion, Dubai, Oman, Egypt.
So that was pretty cool. Andthen after PwC, I was in private
(03:01):
equity for 3 years. So I wasactually working for a Toronto
based real estate assetmanagement company. They brought
me in as their 1st Europeanfinance hire as they started to
buy up assets in Europe tobasically build out all the
processes, procedures, and andthe team from scratch. And then
we were quite inquisitive aroundEurope as well.
So I think between all of that,I have exposure now to at least
(03:24):
10 different statutory andregulatory environments kind of
around, around Europe. And 2years ago, I went into business
for myself in the cross borderaccounting advisory space. So I
was initially working actuallythrough other accounting
advisory firms that occasionallyhad cross border work, but
didn't have the local expertisein house. But pretty quickly
(03:48):
realized that I shouldn't bewhite labeling myself that way
because my experience is sounique. So I started to bring in
clients on my own in the pastyear and a half, I'll say.
So now I'm really focused evenniched down even further into
working with European companiesthat are bringing in US
stakeholders. Either they'vedone a big fundraise with US
(04:10):
private equity, they are lookingto get acquired by a US company,
or they're thinking of goingpublic in the US. So I'm really
helping them through theaccounting conversions for that,
also with IPO readiness andexecution if they need it. And
like, so I kinda have thisinteresting place in the market
where, especially with scale upcompanies, they can't afford to
work with big advisory firms,and they don't really need a
(04:33):
full time person in house withthat skill set. So I kinda have
this, you know, unique sellingpoint that, haven't found
anybody else in the solopreneurspace kinda tackling.
Adam Larson (04:44):
Wow. I mean, that's quite a story. The experience in
all the different places you'veworked in is is something very
unique that not everybody cansay they have. And sometimes,
question I like to ask peoplewho are entrepreneurs is what
what kind of motivated you tostart your own firm? You know,
obviously, you had all thoseexperiences with all these
different organizations.
But what was that motivationthat kinda said, you know, I'm
gonna do this and go out on myown?
Katrina Nacci (05:06):
I never actually planned to be an entrepreneur.
It kind of just happened byaccident. I always had this idea
in the back of my head because Ireally enjoyed doing this cross
border work that I wanted tohave the flexibility to bring in
clients, both in the US and inEurope and go back and forth
between as much as I wanted. Italso allowed me just from a
(05:26):
personal perspective to feellike it was more sustainable to
stay out here in Europe, but goback and see my family in the US
when I wanted. And as much as afirm like PwC is obviously a
huge global network, you stilldon't necessarily have that type
of working arrangement in termsof the flexibility.
And so I always thought like,yeah, I'll probably have to go
(05:46):
out and kind of consult on myown at some stage to really have
that specific model that I want.But I always thought that I was
going to have to wait until, youknow, I made partner and had
this huge Rolodex of, you know,I was 30 years into my career.
And I'm really glad that Ididn't wait. There were actually
some, some personal reasons whyI wanted to stay out in Germany
(06:07):
as well. I was a partner outhere.
But I had been consideringmoving back to the US. So that's
what kind of allowed me to takethe leap was when I was
considering that move andactually interviewing with other
accounting advisory firms inBoston. I told them flat out
because I had, 3 different joboffers and I wanted to, you
(06:28):
know, see what they could do forme. So I just said, you know, I
wanna keep my residency inGermany, but I would like to go
back and forth to the US andspecifically focus on your cross
border activities. You know, howcan you help me to do that?
And of course they couldn'treally hire me either because
they don't have the legal setup,but one of them worked with me
to bring me in as a contractor.And so that's what kind of got
(06:51):
my foot in the door and allowedme to take that dive off the
deep end, which I don't know ifI would have done without having
that, that income stream atfirst, which allowed me to kind
of get stood up and thenestablish my own brand sales
marketing to be able to go toclients directly.
Adam Larson (07:06):
Wow. That's quite a story because not everybody has
the ability to just kinda dropeverything and say, I'm just
gonna start my own business. Andand the way that you're able to
do it. I I appreciate yousharing that story that because
it's it's not the normal waythat sometimes you hear people
starting in their ownorganization.
Katrina Nacci (07:23):
Yeah. Yeah. Definitely. I mean, everybody, I
think, has their own kind ofstrange story and I'm still kind
of figuring out myself what Iwant that to look like. To be
honest, it's kind of evolvingand I'm not very good at setting
even like 1 to 3 year targetsfor the business because I just
have to kinda see what themarket's like and go from there.
Adam Larson (07:44):
For sure. So to kinda focus in on our topic of
the day, maybe we could talkabout some specific challenges
and complexities when it comesto cross border accounting. You
know? Because if you're workingwith a US company, you gotta
deal with US GAAP, internationalcompanies, IFRS, you know, and
then sometimes you gotta mix the2. You know?
What are some of thosecomplexities and challenges that
you've run into as you've beenworking at the in this space?
Katrina Nacci (08:07):
So I would answer that question in 2 parts because
I'm dealing normally veryclosely with European
stakeholders. So even whenthere's a US company that's done
something in Europe, I typicallyfocus more on the working
aligned with the European team.And from their perspective,
there's obviously kind of aknowledge gap that needs to be
(08:30):
bridged in terms ofunderstanding what it means to
report under a US gap. Andpotentially also if they're
doing something with a publiccompany in Europe, you know,
what it means to actually getstood up essentially as a public
company and have all of the SECreporting and SOX internal
controls, etcetera. So that's,you know, a very specific
complexity that they would bedealing with.
(08:53):
But there could also be aEuropean company that comes to
me because they're looking toexpand in the US, and it's
really like a acquisitionenvironment. It's more like
fundraising to get into the USecosystem, potentially setting
up a subsidiary. And thenthere's another host of issues
or complexities that comes alongwith that. In that, you know,
(09:14):
they have to understand each ofthe state by state regulations
and all the different taxreporting requirements and
things like that, that I myself,I'm not a specialist in, you
know, transfer pricing, forexample. But I have a wide
network and I at least know thequestions that they need to
answer.
So I'll usually direct them tothe right people to kind of get
the ball rolling on that. And soI think from the Europe to US
(09:37):
side, that's where a lot of thecomplexities come in. However,
when I'm talking to, US financeteams that are doing something
in Europe, where again, I mightbe getting brought more into
their European team to help out.Their struggle is typically
getting their head around whathas been done locally so far.
(09:59):
And more importantly, what needsto continue to be done locally.
Because I see a lot of times UScompanies making acquisitions
and, maybe they don't even keepthe European finance team intact
and they just try to take it allin house and headquarters. And
they'll just start booking allthe transactions under US GAAP
(10:20):
and kind of ignore the old kindof legacy local GAAP that was
happening. That's not really theright approach because then when
it comes to tax reporting time,they realize the mistake that
they've made, that they don'thave the records that they need
to locally, and they have tospend a lot of time to go back
and unpeel that. So a lot ofthat is just educating them on,
(10:43):
you know, keeping the integrityof their local books intact,
kind of what that means in termsof their local tax and VAT
reporting. And again, I'm notnecessarily experts in all those
things across all the differentcountries, but can at least
speak to them and get them theright support there.
But, you know, I've experiencedthe pain myself in industry
where even if you're reportingunder US GAAP, some of those
(11:05):
line items, when you're talkingabout, VAT receivable, VAT
payable, for instance, those arebasically being driven by what's
happening and what you're filinglocally. So if you don't
understand those reports and youcan't reconcile them back to
your kind of consolidatedfigures, you're already kind of
losing the battle there. Sothose are kind of the 2 siloed,
(11:27):
I guess, complexities. And thenthe overall complexity on both
sides, it's just how to stand upand maintain, you know, a multi
gap, multi FX environment. A lotof companies would be doing that
for the first time.
So I'm just trying to help themthere to understand, you know,
how things to be, need to bemapped and presented, how you
deal with all the differentforeign currency roles and
figuring out what is yourfunctional reporting currency.
(11:51):
And so that's also somethingthat's normally coming along at
the same time as the projectsthat I'm working on.
Adam Larson (11:59):
You have to wear a lot of hats. So you're not only
an accountant, but you're also atrainer. You have to educate
people. You have to make surethat they all understand things,
and then they continue on. Howdo you help the your clients
navigate that?
What are some approaches you'vetaken?
Katrina Nacci (12:15):
It's really interesting that you mentioned
the trainer aspect becausethat's what I love. And what I'm
hoping, you know, is whatbringing business in the door
because doing things like thisand just educating people on
what it means to kind of go intothat international environment,
What it means to go through anaccounting conversion, to make
sure that you're owning theprocess, even if you're not
(12:37):
working with me and you decideto work with a bigger firm. And
what it means to potentiallylike disrupt the way that you're
getting accounting advice andtrying to get a more niched
expert as opposed to going afirm, going to a firm that
services everybody andeverything. So I really enjoy
the training aspect of it. Andfor me, it's really just being
(12:58):
where my potential clients are.
So I'm in a lot of different CFOcommunities on both sides of the
pond. And there's a lothappening, of course, in person
that I'm trying to attendconferences and keep my ear to
the ground on all the newdevelopments in tech and things
that aren't necessarily exactlywhat I'm doing, but it's part of
the host of, you know, thingsthat are on a CFO's mind. And
(13:21):
then of course, a lot of thoseare also async communities on
Slack or otherwise where I'mjust kind of paying attention to
the conversation and whatthey're asking. And a lot of
times there will be questionsthat aren't specifically
something that I'm the expertin, but it's still related to
some sort of internationalexpansion. So I'll give them you
know, some thoughts and offer tomake recommendations.
Adam Larson (13:44):
It's really cool that you've kinda built a big
network. You and you kinda needto have that network because one
person can't know everything,and you kinda have to kind of
build that build that up to toincrease your knowledge and help
your clients as well.
Katrina Nacci (13:57):
Right. Yeah.
Adam Larson (14:00):
So are there come are there any common
misconceptions that, when peoplecome into or misunderstandings
that when people are coming toyou and saying, hey. I wanna
start I wanna, you know, have todo this cross border accounting
thing. Are there are therethings that people often
overlook, and and that theyshould be aware of when it's
kinda looking into this?
Katrina Nacci (14:19):
Yeah. Most people are coming to me to say, hey, we
see that you do cross borderaccounting advisory. And then
Yeah. They say something elsethat either allows me to think
that they're coming to me tooearly or too late in the
process. It's actually very rarethat somebody comes to me at the
point in time that they reallyshould be.
And what I mean by that andbeing too early in the process
(14:41):
is I have a lot of European CFOsthat I talk to. I'm so happy to
have the conversation because ithelps me to kind of stay in
their ecosystem, but they willcome to me and say, Hey, we're
just setting up a US subsidiaryor a US branch so we can start
doing X, Y, Z activity. Can youhelp us with this? And most of
(15:03):
the time, they don't really needmy technical accounting help.
They don't really need to gothrough a full accounting
conversion.
They really just need a localkind of boots on the ground
bookkeeper and tax firm that canhelp them with that subsidiary,
tax reporting and so on. And soI'll make those referrals and
kind of just keep an eye on thembecause maybe it indicates that
(15:24):
they're doing something orpotentially getting ready for a
US investment. Other times Ihave companies that are coming
to me too late in the processwhere they've already closed a
transaction. They've already hadthe acquisition, you know, the,
the sale and purchase agreementhas been signed, or they already
brought in that investorfunding. And now they're saying,
(15:45):
Hey, we need to go through a gapconversion.
And I think this is very commonbecause they don't want to deal
with kind of the nuances of allof that compliance reporting
before they have to, which Ifully understand. And there's
definitely a lot of pieces thatyou don't need to do before the
transaction closes. However, Ithink it's a mistake if they're
(16:06):
not at least assessing thisstuff before the transaction
happens, because you're notreally able to speak to the
appropriate kind of end gapduring the diligence process,
either with investors or theacquiring firm. If you haven't
done an assessment of, okay,this is what we're doing
(16:27):
currently. This is what ourinvestor, acquirer, or
stakeholder, etcetera, wouldwant us to be doing.
And so let's make sure that wecan speak intelligently to that.
So we show that we know whatwe're doing. And I think that
that could go a long way interms of being able to kind of
prove that the team is in placethat can handle this going
forward after the transaction.
Adam Larson (16:48):
Mhmm. Let's say somebody is looking to get into
this. Like, they're looking todo a, a gap conversion, or
they're looking to acquisitionin a across borders. Are there
some things that they should bepreparing before they come to,
organization like yours or someor some other big firm that
you've mentioned? What is thewhat are what are some steps
(17:09):
they should take before theythey they come to you?
Katrina Nacci (17:13):
I think the more documentation that you can have
already on what you're doingcurrently, the better. And
normally firms that I work withare in the scale up space where
maybe they've had a first auditor 2, but they don't necessarily
have a lot written down in termsof what their accounting
policies are or specific memosaround significant areas. And
(17:36):
that's something that, you know,I'm happy to kind of take the
full GAAP conversion a to z and,and figure out and document, you
know, what you're doingcurrently. I can surely do that.
You know, I'm kind of adept atgetting my hands dirty and
figuring out what's going oninside of your business.
However, I'm not necessarily theperson that's best placed to do
that. It's just that sometimesthat gets offloaded to me
(17:57):
because the team doesn't havethe time. And so I think when
you, when you have some timeavailable and you can kind of
focus on those things, even ifyou don't necessarily need them
at the moment, it could go along way to being able to bring
in an advisor later. And this issomething that the big
accounting firms won'tnecessarily tell you. Because
(18:20):
from my experience, you know,working with PwC, they kind of
when, when they come in andpropose on a, a gap conversion,
they really want to take thefull kind of A to Z work for
you.
You know, they have so muchoverhead, they need justify
their costs. And so they want tocome in for that full big
project. Right? But me on theother hand, because I'm just one
(18:42):
individual person, I actuallykind of flipped that on its head
and I'm operating on theopposite model. That I would
actually prefer to leverage yourinternal finance team where I
can and have you only use mereally specifically for my
expertise, because that makesthings a lot more scalable for
me.
And then I can work on moreclients that wants more
(19:02):
interesting things and kind ofbring in even more best
practices to you. So from myperspective, I'll always walk a
company through like each of thespecific sub steps within a gap
conversion and say, this is whatyour team could potentially do,
where I could leverage them. Andthen I'll take myself out of the
equation, out of the pricing,and it makes it a lot more
(19:24):
budget friendly for them aswell. And so they can start to
see and link molds that theycan, you know, use my expertise
in different ways.
Adam Larson (19:33):
Really cool. So you mentioned that, you you know,
your key you keep up with what'shappening, technological wise in
the industry. How is thetransformation to a lot more
digital things within theaccounting industry kind of
impacted the cross borderaccounting process and and other
challenges? And it might evenbring new challenges.
Katrina Nacci (19:53):
Yeah. I would say in general, and again, speaking
from a former big firm, I thinkthat there is a slowness to
adapting some of those new techthings that I can be a little
bit more nimble on because I amjust an independent person. That
(20:14):
being said, You know, becauseI'm just one person, I can't go
off and invest 100 of 1,000 ofdollars in developing my own AI
bot to answer clients oranything like that. I'm
definitely, you know, using chatGPT quite a bit, and I am still
kind of having to maintain thatexpert lens through the fact.
And this can be potentiallydangerous when it comes to cross
(20:36):
border accounting as well,because I've played around with
the tool quite a bit and askedit specific prompts to say, what
are the differences in this lineitem between IFRS and US GAAP?
And a lot of times it will getit wrong because of the way that
the LLM models work and theassociation that they're just
looking for words that are closeto each other. So if it's
(20:56):
looking at a big four guide ofdifferences where IFRS is in one
column and US GAAP is in theother, sometimes they get like
intertwined. And, I actually hadthis happen to me last week and
it's with a large company that'spaying me a pretty significant
retainer. And I happen to bekind of in contact briefly with
(21:19):
somebody on the team. That's notmy, my normal contact in the
finance team where they're doingsomething.
And he was asking me questionson US GAAP and I gave him my
opinion and he went back andfound some other guidance that
says something different. And Isaid, well, you know, actually
US GAAP doesn't say a whole lotspecifically in the technical
guidance about this area. And alot of the big firms guides
(21:41):
don't really touch it either. SoI'm curious where you got this
information from. If it'scorrect, like I'm happy to dig
into it a little bit further andwe can try to change the
argument.
But he came back to me and saidthat he had used Copilot to put
it together. So I wasn't veryconfident that my answer was
wrong. Wrong. So I think that'sa good example of like still
needing to keep the experts inhouse. But where I'm using tech
(22:02):
more handily, isn't so much onall the up and coming AI stuff.
It's more just ways of workingmore on an async basis with my
clients so that I don't have tosit in a lot of meetings with
them, which helps me a lotbecause I'm working across a lot
of time zones. So I'll usethings like just getting
individual client boards set upin ClickUp and having kind of
(22:24):
the Gantt chart showing where weare in the process, where the
deliverables are, kind of who'sdoing what in terms of the
request list. I use Loom forexample, to record kind of if
I'm walking them through anExcel file, I can mostly do that
async and just send them thevideo and say, Hey, look at this
one. You have a chance. Thingslike that that kind of slowly
add up in terms of being able towork more effectively with
(22:47):
people when you're notphysically sitting right next to
them.
Adam Larson (22:49):
Yeah. That's great. It I love how tools have kinda
shrunk the world in a lot ofways. You know, in the past,
you'd have to sit into meetings.You have to make sure you're
there.
You have to make sure you seeface to face or even you know?
And and when video calls firstcame out, now everybody was
comfortable with them. Andbecause of COVID, everybody's
comfortable with them. And I'msure those things have kind of
helped navigate. And and beingvery nimble yourself, you're
(23:11):
able to kind of adapt newtechnologies to kinda help your
process faster, I'm sure.
Katrina Nacci (23:17):
Yeah. Yeah. Definitely. And like I said, I
can easily have a little bit ofshiny object syndrome sometimes
with the new tech rules outbecause I could just go and
easily subscribe to it to sitout in a way that the bigger
firms don't really do. So therecould be something interesting
that comes out that could helpmore on the accounting side as
well.
Adam Larson (23:37):
Yeah. That's great. So one thing I was thinking we
could you know, if you're up fortalking about it, you know, you
don't have to give any specificsfor what company it was. But are
there any, like, specific casestudies or or an example of of a
project that you've worked on?And you could talk a little bit
about the challenges you faceand how you overcame them when
working with the organization.
Katrina Nacci (23:57):
Sure. I I can think of a couple. The one case
study I always like to highlightis, a UK tech firm that came to
me last year after they broughtin funding from US Private
Equity. And again, the, thefunding had closed months
before, so they were kind of allof a sudden in a time crunch
where they were already engagingtheir auditors to go through
(24:19):
their 1st US GAAP audit, butthey hadn't done US GAAP yet.
And the issue with a lot ofcompanies is that when they're
going through a transaction likethat, their default is to just
ask their auditors for areferral.
And most of the time theirauditors are just going to refer
them to another big firm. And asa, you know, a series B scale
(24:42):
up, you can't really affordthose fees. And so I happened to
see it because they posted in aCFO group to say, Hey, we're
going through this gapconversion and we got cro quoted
this ridiculous amount. Doesanybody else have other like
firms that they work with? Andso of course I raised my hand.
And I kind of walked themthrough, and this is how I
started to really develop andsee the feasibility and the
(25:04):
practicality of having thisphased approach with them.
That'll only tackle one piece ofthe project at a time, and I'll
try to show them where they canleverage their internal team.
Because they didn't get thatapproach from the other firm.
They just got quoted 6 figuresto do the full project. And so
when I proposed it in phases,they agreed and said that that
was like more practical way tomove forward.
(25:26):
So I was able to basically getthe gap conversion done for them
in, in 2 months. I helped themto identify all of the gap
differences, like qualitatively.And, did a workshop with them to
show them what the differencesare and how you would need to
calculate that. And theyactually leveraged their
internal team to go through anddo the calculations themselves.
(25:49):
And similarly, when it came topreparing the financial
statements, I gave them someexamples of what their peers
that are listed would do.
Gave them some templates, helpthem. I, I basically put
together their disclosurechecklist, but they were
responsible for actuallypopulating the financial
statements and writing thenotes. Because again, think the
ones that are best placed to dothat. So in the end, we, we got
(26:12):
through the audit, no problem ontime, even though it was kind of
a last minute rush to the finishthat they get with over the
course of 4 months or so. Andthey actually told me what they
had been quoted from that otherfirm, and I saved them 50% of
the cost.
So that was a pretty good kindof proof of concept. Yeah.
Adam Larson (26:31):
That is a great proof of concept. And, also,
you're empowering their team togo forward and continue it on.
Because once you guys onceyou're done with that
conversion, they're gonna needto continue with that
accounting. And so it's likeyou're you're not only helping
them get there, but you're alsosaying, hey, guys. You're you're
teaching them to fish and to gowith that old adage.
Katrina Nacci (26:51):
Exactly. Yeah. That's not the first time that
someone has used that simile forme. So I I appreciate that. And
that's also one of the ways thatI'm trying to differentiate
myself from the bigger firms isto really focus on the knowledge
transfer aspect because I don'tnecessarily I mean, I would I
would love a model that's morerecurring revenue to keep my
(27:12):
clients kind of somehow in myecosystem, of course.
But I don't want them coming tome with all the standard US GAAP
questions that they shouldalready understand from going
through the conversion. I feellike I've failed as they don't
understand how to maintain itday to day going forward. And so
I've actually developed a modelwhere I would kind of work as
their fractional chiefaccounting officer to get
(27:35):
layered into their internalteam, which if their internal
team is strong enough in localgap, and now they understand
that day to day, they're notgonna need me more than an hour
or 2 a month to just askquestions. If there's new
transactions coming up, I wouldkeep them updated on the new
standards and how it affectstheir business. And then I could
continue to be layered into, youknow, the disclosure checklist
and financial statements.
(27:55):
But it's really just trying toempower their team to make sure
that they understand whatthey're doing. Mhmm. It's
Adam Larson (28:04):
cool. I like that. So when we look at something
like cross border accounting,regulations are changing all the
time, but yet they move as slowas molasses. What do you think
the future is gonna look likeas, you know, new technologies
come out as, you know, firmsstart to understand the use of,
you know, large language modelplatforms and AI, stuff like
that? What do you think this fewthe future is gonna look like as
(28:24):
as those things kinda develop?
Katrina Nacci (28:28):
Yeah. That's a good question. And I think that
the question about regulationand question about technology
are kind of diverging becauselike you said, regulation does
happen very slowly. And evensince I was in college 15 years
ago, people have been talkingabout IFRS and US GAAP being
converged and it hasn't happenedyet. Of course, you know, every
(28:49):
time they release a newstandard, now they're trying to
align them, but there's stillcertain differences.
I do think that it will getcloser and closer. And maybe
there will be some sort of madrush for everybody trying to
align those standards at somepoint. But on the technology
side of things, Could definitelymake it easier for investors to
(29:15):
not need proper, full US GAAPfinancial statements to
understand exactly how theywould take that invested entity
and, like, consolidate it andreport it into their US GAAP
statements. You know, I'mthinking of things like, what is
it called? The tagging that theyhave in the US?
If that was something that wasalso happening in the different
(29:37):
local gaps that you couldpotentially tag those in such a
way that they would know how toget mapped into US GAAP, for
example. But I don't see thatbeing something that's happening
in the, you know, near future.
Adam Larson (29:49):
Definitely not. You know, I know when the new
revenue recognition guidelinescame out in the US, they were
like, you know, GAAP and I firsthave, like, they've, you know,
they've come closer together,but they're still far apart. And
with all the differentregulating bodies, you think
that eventually that everybodywould wanna kinda be on the same
standard, but, you know, whoknows how what regulators think
(30:11):
when they're creating theirrules?
Katrina Nacci (30:13):
Right. And I think that IFRS and US GAAP are
are one thing because those arewhat I would call a more
sophisticated regulated Yeah.External standard. The issue is,
and this is again something thata lot of US companies don't
appreciate when they're cominginto Europe or making European
investment. They're typicallynot dealing with IFRS and US
(30:35):
GAAP differences.
They're typically dealing withGAAP differences in all of the
different countries that are,they're investing in. Because
unless that European company hassome reason to have converted to
IFRS already, which theygenerally don't in like a scale
up stage, They're only doinglocal GAAP reporting and that's,
(30:55):
I wouldn't really call that likean accounting body that's
regulating them. It's more justpart of the legal and tax code.
And so I think that's why therewon't be many changes that will
align those necessarily to IFRSor US GAAP because it's just
based on like the way that thecountries wanna tax income of
(31:18):
the country.
Adam Larson (31:19):
So I think what you just outlined there is is shows
how important it is fororganizations before you make
any large changes to understandwhat your local regulations are,
understand where you're gonna bedoing your accounting
regulations are, and start doingresearch before you even you
know, even if you're havingconversations, you need to start
doing the research on that earlyon because you can get caught
(31:41):
off guard very quickly, itsounds like, especially when
you're maybe you don'tunderstand your local gap, and
then you have to do this othergap or this other one. And it
there's a lot there's a lot to
Katrina Nacci (31:51):
Definitely. Yeah. I mean, you definitely need to
in involve the right advisers asearly in the process as as
possible. Because if you'reworking with anyone like me,
that they just like to havethose conversations, even if
it's not immediate work forthem, just makes the customer
(32:11):
buying process a lot easierbecause then you're gonna come
back and be educated about theprocess and you can actually
speak to it instead of justletting somebody kind of run
what your strategy should be.Like that should always be in
house.
You should be the one that'srunning your gap conversion
strategy. And when you'reoutsourcing it to a big firm and
you haven't spent the timeupfront to actually understand
(32:32):
what you're getting yourselfinto and what the process looks
like and where you couldleverage your internal team,
you're giving away a lot of thatpower kind of unintentionally
and and not to your benefit.
Adam Larson (32:45):
Well, Katrina, I've sure learned a lot, and I hope
our audience has learned a lot.And I encourage them to reach
out to you if they're interestedin learning more. And, just
thank you so much again forcoming on the podcast.
Katrina Nacci (32:54):
Yeah. Thanks for having me, Adam.
Announcer (32:58):
This has been Count Me In, IMA's podcast providing
you with the latest perspectivesof thought leaders from the
accounting and financeprofession. If you like what you
heard and you'd like to becounted in for more relevant
accounting and financeeducation, visit IMA's website
at www.ima net.org.
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