When I was in business, my accountant was using the term “Generally Accepted Accounting Principles,” known as GAAP. GAAP was a guide for Canadian accountants on how to record transactions and display the state of the business on its financial sheets. This does not mean all accountants would do things the same way; rather, it just narrows the range of accounting interpretations. By staying within GAAP, different accountants should produce similar, if not exact, financial sheets. In other words, all businesses under GAAP are presented reasonably fairly. Reasonably good decisions can be made with these statements.
The first spolu will need to produce a similar guide like GAAP. It might even just adopt its local version of GAAP.
But there will be some other accounting rules spolus need to abide by.
Profit Distribution
I recommend that, after annual financial statements are completed, spolus are obligated to distribute at least 40% of stated profits to the various stakeholders. The senior management team can decide to distribute more than 40%.
I can see many spolus wanting to maintain a certain cash reserve. When a few months of cash flow is covered by these reserves, the senior management team would be more likely to distribute 80% to 100% of its stated profits.
When a spolu undergoes expansion, it should keep its profit distribution closer to the 40%. Cash will be tight.
If a spolu does not have a profit — as per its financial sheets, it does not distribute profit. However, I predict most spolus will have at least a little profit to distribute.
Spolu Reporting
Financial sheets for all spolus will be available for public viewing. The first spolu will manage this database. Accounting has become more automated, so interim monthly statements can be generated and posted. This information will be useful for investors using the Spolu Exchange.
Depreciation & Amortization
The spolu accounting rules will specify the rules for estimating how assets are being consumed. I suspect the spolu network will use similar rules already in place.
For taxation purposes, the governments have their own rules. I don’t see the discrepancy going away for the spolu network.
Management Salaries
There will be a cap on management salaries. The next section will address this issue.
Consulting Fees
The corporate world has little accounting tricks to move money around. The spolu auditors need to verify whether “consulting fees” — management, legal, accounting, marketing, engineering, training, etc. — are legitimate business expenses, not for tax minimization or corruption. So these fees need to explicitly explained in the accounting statements.
Published on Medium 2024
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