Many agriculture lenders are now requiring companies to have financial statements prepared by a certified public accountant. When it is determined that your company needs to have CPA-prepared financial statements, there are a few areas to consider.
To start, refer to the loan agreement between your business and the financial institution providing the loan. Many lenders will require financial statements; however, the level needed may vary between compilation, review or audit, and can be ranked in terms of assurance.
An audited financial statement provides the highest level of assurance for lenders. In preparing this, a certified public accountant will verify the accuracy of information reported as well as provide an opinion on the financial statements. A compilation is the most basic method, as it is limited to presenting the financial information in the format of financial statements with no assurance provided. A review falls in between an audit and a compilation. In a review, the CPA firm looks at trends and ratios, and performs other procedures to provide limited assurance on the financial statements.
If prepared financial statements are not mandatory, it is important to weigh the cost versus benefit of having CPA-prepared financial statements. For example, if it is not required by a loan agreement to provide any financial statements, providing additional information may increase your likelihood of receiving a loan. Also, having financial statements prepared annually may help you down the road if you choose to sell your business. Once you determine what services you need, be sure to budget for the cost.
CREDITS
column by STEVEN E. CRISMAN
Bio: Steven Crisman is the managing partner of Cross, Fernandez & Riley, LLP’s (C/F/R) Winter Haven office and leads its Agriculture Practice Group. He primarily serves the agriculture, manufacturing, warehousing and distribution industries. He has specific experience with citrus growers, cattle ranchers, citrus and other horticultural nurseries, citrus harvesters and other support industries, as well as watermelon, blueberry and other growers. In addition, Steve provides comprehensive tax and estate planning, attestation and business succession-planning services.
