Currently, lawyers and in-house counsel are required to be able to read financial reports. These two professions are also expected to be able to provide input regarding the company’s business strategy as well as detect violations in financial reports.
Legal professions such as lawyers or in-house counsel (company legal advisors) increasingly have an important role in today’s business world. Not only do they provide input regarding regulations, but these two professions are also expected to contribute to business strategies for the clients or companies where they work.
One of the important competencies that both professions must have regarding this business strategy is the ability to understand the company’s financial reports. Because, with these capabilities, lawyers and in-house counsel can provide a broader perspective for corporations in carrying out their business activities.
IT and Business Management expert and Director of Microsoft Indonesia’s Genuine Software Initiative, Sudimin Mina, said that the role of lawyers and in-house counsel who can analyze financial reports is very necessary at this time. Especially, when a corporation is developing its business activities. In conditions like this, a combination of legal aspects with business strategy is really needed.
“A lawyer or in-house counsel can help with many scenarios, for example mergers, acquisitions, new market penetration and IPO (initial public offering),” said Sudimin at the 2018 Online Legal Training event entitled “Training on Basic Understanding of Financial Accounting in Company Business Transactions” in Jakarta , Tuesday (9/10/2018). Also read: This is the reason why lawyers and in-house counsel must understand financial reports
According to Sudimin, to understand financial reports, lawyers and in-house counsel need to understand accounting terms. In this way, lawyers and in-house counsel involved in business strategy meetings can understand the discussion. Some examples of basic terms that lawyers and in-house counsel must understand, such as EBITDA (earnings before interest, tax, depreciation and amortisation) or profit before interest, tax, depreciation and amortization, liabilities and assets.
“By understanding accounting terms, conversations between lawyers or in-house counsel can be connected,” said Sudimin.
Not only that, Sudimin explained that there is a close relationship between financial reports and legal aspects. Thus, lawyers or in-house counsel who are observant (understand accounting terms) when examining problematic financial reports, can find unusual transactions, even the risk of fraud and legal violations.
Currently, lawyers and in-house counsel are required to be able to read financial reports. These two professions are also expected to be able to provide input regarding the company’s business strategy as well as detect violations in financial reports.
One of the violations that often occurs in financial reports is windows dressing or manipulation of report results. The practice of window dressing is carried out for various purposes such as tax avoidance or increasing the value of company shares. For tax avoidance, based on the company’s financial statements, profits will be reduced. Meanwhile, increasing the value of shares is actually done by beautifying the financial reports before presenting them to investors or clients.
Lawyers or in-house counsel who are astute in examining problematic financial reports can also find other types of legal violations such as corruption, bribery, illegal gratuities and economic extortion. Another thing that lawyers or in-house counsel must understand is how to prepare financial reports according to Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) accounting guidelines.
“So, lawyers and in-house counsel must know how to prepare their client’s or company’s financial reports using GAAP or IFRS (standard guidelines). “Generally, Indonesia uses IFRS,” said Sudimin.
Value-added
On the same occasion, Microsoft Indonesia’s Director of Corporate External and Legal Affairs, Reza Toposubroto, said that a lawyer and in-house counsel must have other competencies besides regulatory issues. One of the competencies that must be possessed is the business analysis skills of lawyers and in-house counsel.
Reza explained that by having an understanding of business analysis, companies will increasingly need lawyers and in-house counsel, especially when discussing and formulating the company’s business strategy. Therefore, he suggested that someone who pursues these two professions should study business or accounting.
“For career development, he (lawyer and in-house counsel) must be able to demonstrate added value for the company and its clients. “Indeed, lawyers are not the main core of a business, but they must be able to provide advice from the legal and business side as well in order to contribute to the company,” said Reza.
