What is the true value of a good accounting position paper?

In our July 2025 article, we (re)addressed the growing importance of accounting position papers in supporting high-quality financial reporting and audits, and provided insight into:

• Why are accounting position papers important? 
• What does a good accounting position paper look like?
• In what circumstances would you expect to see management prepare an accounting position paper?
• What are some of the common mistakes management makes in preparing accounting position papers?

In this follow-on article, we look to provide further context with respect to the broader value these papers deliver, including:

• Reducing compliance risk.
• Strengthening governance and audit readiness.
• Serving as a strategic asset (“blueprint”) for finance teams and boards navigating complex reporting challenges.

The question then for Senior Management, Audit Committees, and Boards, is WHO is best equipped with the necessary skill set (and time) to prepare accounting position papers?

Is this person whin the organisation… or… should external technical consultants be engaged?

When may it be appropriate for finance teams prepare their own accounting position papers?

It may be appropriate for Finance teams to prepare an entity’s accounting position papers internally in situations where their staff:

• Are sufficiently experienced and knowledgeable with respect to both:
  • The nature of the transaction and/or event.
  • The relevant financial reporting standards and other publicly issued guidance that would need to be considered with respect to the transaction and/or event.
• Have sufficient time and resource available to ensure that the analysis and resulting accounting position paper is thorough, accurate, and complete. 

It is crucial for Senior Management, Audit Committees, and Boards to remember that many of the transactions and/or events that will require accounting position papers are inherently unique and complex and therefore will typically relate to areas of judgement that sit outside of their finance teams day-to-day business-as-usual roles and work streams.

Accordingly, common factors to be considered before embarking on having finance teams prepare accounting papers internally include (but are not limited to): 

• Time and effort: In the current economic climate, finance teams are becoming increasingly lean and focused on managing ‘business as usual’ functions and matters. Consequently, our observations are that few, if any, corporate finance teams have the available capacity to dedicate staff time to: 
  • Undertaking the necessary task (see below) required to prepare accounting position papers (particularly for those transactions and/or events that they may not have been involved with, or have no previous experience with); and 
  • Discussing and supporting the entity’s position of the proposed accounting treatment with auditors and regulators etc. 
• Compliance risk: Comprising the risk of financial statement restatement, stakeholder dissatisfaction, reputation risk and the cost of a damaged brand name.
• Cost: The direct and indirect costs of lost staff time and heightened compliance risk. 

Having full visibility over the true time and cost (and risk) 

Engaging external technical experts represents a real, cost to an entity, which ultimately may motivate Senior Management, Audit Committees, and Boards to have accounting position papers handled inhouse.

While we recognise these competing demands on an entity’s cash flows, including those placed on its financial reporting function, our experience shows how quickly and easily disputes over financial reporting matters can escalate. 

In this context, the belief that preparing position papers in-house is a cost-effective solution can often prove to be a false economy.  

So, when does a technical consultant’s fee quote represents value for money?

To answer this question, it is helpful to consider (as a first step) the value of the finance staff's time lost to preparing an accounting position paper. 

Estimating the cost of internal preparation

Consider a transaction and/or event that is complex in nature, with various “non-vanilla” terms, conditions, features, clauses etc.

The documentation for this agreement is likely to be extensive, and may directly or indirectly be linked to other documents that themselves are likely to be extensive and “non-vanilla”.

A technical consultant, with sufficient previous experience, might estimate that a thorough, complete, and accurate assessment of the transaction and/or event such would take approximately [X] hours to complete, including tasks that may include (but not limited to): 

• Review and summarise the agreement
• Preparation of draft advice,
• Internal review of the draft advice
• Finalisation of the draft advise.
• Discussion of the draft findings with Management.
• Discussion of the draft findings with other senior stakeholders, for approval.
• Discussion of the findings with the clients’ auditor, and
• Finalising the advice. 

While it may appear more economical to allocate internal resources to tasks like preparing the position paper, this can be a false economy. 

Instead, engaging an experienced technical consultant ensures that:

• A thorough, complete, and accurate assessment of the transaction and/or event is undertaken.
• High-quality and understandable output is produced.
• The entity’s Senior leadership team is able to remain focused on their primary objectives (i.e., executing the entity’s strategic initiatives that deliver broader organisational impact, etc.). 
• The entity is able to clearly demonstrate it has considered the appropriate use of its internal resources and reinforces the value of specialised external support when necessary.

The hidden time burden for internal teams

Undertaking the preparation of an accounting position papers internally is no easy task.

There is often a significant amount of time and cost that staff need to invest before anyone begins to put pen to paper, including sufficient time spent:

• Reviewing the primary documents and agreements, and identify secondary/supplementary documents and agreements to be read.
• Following up questions from this review with relevant parties involved in the transaction and/or event, including Senior leadership, the entity’s lawyers, etc.)
• Source, read, understand and summarise the relevant accounting pronouncements (i.e., financial reporting standards and other publicly issued guidance).
• Review the most recent published technical thinking among the standard setters, accounting firms and professional bodies on the interpretation and implementation of the applicable accounting pronouncements.
• Identify the key terms and conditions of the financing agreement relevant to accounting treatment(s) required under applicable accounting pronouncements.

Then, and only then, will staff be in a position to:

• Prepare a draft version of the position paper for consideration by the board and the company’s auditor
• Engage with the company’s auditor (and possibly the auditor’s technical accounting team) on the proposed accounting treatment.
• Engage with the company’s audit committee on the proposed accounting treatment, and 
• Finalise the position paper for distribution to the company’s auditor, board and audit committee. 

From the nature and extent of the points above, it is obviously hard to estimate accurately from the outset how much more time staff might need to execute compared to a technical consultant; however, it is safe to assume this would by more than an insignificant amount of additional time.

Risks that compound the cost

Focusing purely on time and cost ignores a number of potential risks and opportunities that could make the preparation of the position paper much more challenging and costly, including: 

• Staff being able to actually find the necessary (quality) time in their calendar to dedicate to the preparation, socialisation and finalisation of the position paper.
• Either or both the company’s auditor and audit committee challenging the proposed accounting treatment, and the time associated with engaging with either or both of these parties to resolve their concerns, and 
• Re-assessing and re-drafting the position paper should the facts and circumstances change bot as a result of or irrespective of the position (i.e., if the transaction or/event is not in a final stage).

All of these potential risks and opportunities will undoubtedly have the potential to impose further internal time and costs to multiple parties within the entity. 

But the potential risks (and costs) don’t necessarily stop here. 

Longer-term risks to consider

Longer-term risks for an entity to contemplate in relation to the accounting position paper are whether the outcome of accounting position paper will be challenged by a future review, for example: 

• If the entity were to change auditor.
• If the entity were to be acquired by a new parent.
• If the entity were to list on a public exchange.
• If a new CFO, Director etc. were appointed.
• If a regulator were to review the entity’s accounting records.
• If the entity were to come under the remit of a receiver or liquidator (who would then be reviewing the entity’s accounting records).

Accordingly, Senior Management, Audit Committees, and Boards need to ensure that the accounting position papers that are ultimately prepared (which will form part of the entity’s accounting records) are sufficiently thorough, complete, and accurate such that they are “robust” from any potential future review and critique.

Final reflections

In our experience, the time (and energy) spent in socialising and building confidence and consensus on an accounting treatment is often the same as (but can easily be greater than) the time it takes to prepare the position paper.  

As financial reporting continues to evolve, so too does the need for clarity and rigour in how accounting positions are formed and communicated. 

Whether prepared internally or with expert support, a good accounting position paper remains one of the most effective tools available to finance teams, boards and auditors navigating complex reporting challenges.

Need help?   

Please contact our Financial Reporting Advisory team for assistance in your entity’s accounting position papers and audit readiness assessments.

For more on the above, please contact your local BDO representative.

This article has been based on an article that originally appeared on BDO Australia, read the original article here.