Don’t wait to tackle 2024’s top challenges for finance and accounting

What will 2024 bring for finance and accounting professionals? I see five developments that may shape finance and accounting in the new year, and my advice on all five is simple: don’t wait.

1.????? ESG reporting: don’t wait for the SEC

Most companies, public and private, are likely aware that the US Securities and Exchange Commission (SEC) has proposed new Climate-Related Disclosures rules that will require SEC reporting companies to provide much more extensive reporting on environmental, social, and governance (ESG) factors. Although the rules were proposed in March 2022, the SEC has not yet finalized them. The SEC current rulemaking agenda indicates it will make the rules final by the April 2024; assuming the rules are finalized it remains to be seen when SEC reporting companies would be required to provide the disclosure.

What many companies may not realize is that they’re potentially already subject to ESG reporting requirements. The European Union and California have enacted their reporting requirements, and those will apply to organizations with sales or operations—not just headquarters—in those jurisdictions. Great Britain and Japan aren’t far behind. And many large companies’ procurement rules now require suppliers to report carbon emissions and other sustainability metrics.

ESG disclosure is building momentum, and there are many ways that your organization can be impacted by these regimes. For 2024, familiarize yourself with the landscape—and don’t hesitate to contact Deloitte if you have questions on how these new rules may apply to you.

2.????? Planning an IPO: don’t wait for 2025 to prepare

Last fall, the market for initial public offerings (IPOs) began to show signs of life—but many companies are still cautious. In an environment of political uncertainty, many would-be public companies are likely to remain on the sidelines, just as we saw at the end of the Obama administration. But 2024’s elections should help clear the air—making 2025 a target year for a potential rush of IPOs.

Evolving a private company’s accounting, reporting, and governance structures to keep up with the demands of the public markets takes time. Based on the experience of Deloitte’s IPO Readiness and Execution Services, I advise private clients that they should allow from six to 18 months to prepare to launch as a public company. That’s time to ensure they have the executive team, board, policies, and accounting and reporting processes needed to meet the rigors of public ownership. It’s also good practice to allow a couple of quarters to refine the cadence at which the company executes its internal governance and ultimately reports to investors.

If you’re thinking 2024 or 2025 might be your company’s IPO year, get started now. Test your readiness with Deloitte’s IPO SelfAssess tool, and contact Deloitte for experienced advice you may need to meet that IPO target.

3.????? Pillar Two Taxation: don’t wait for a tax bill

2024 is the year when Pillar Two—the new global minimum tax system put forth by the Organisation for Economic Co-operation and Development (OECD)—will roll out. Companies operating across the globe could face new tax liabilities as the countries that have adopted Pillar Two strive to comply with this framework that seeks to eliminate tax competition, re-allocate revenues and profits across taxing jurisdictions, and ensure that all companies pay a minimum tax of 15%, wherever they operate.

Pillar Two is complex, multilayered, and potentially costly. Companies planning for Pillar Two need to start by examining their financial reporting and internal controls. Reporting deadlines, both quarterly and year-end, may need to be adjusted, particularly as quarterly income-tax reporting becomes more complex. Most companies can expect analysts to probe the new rules’ impact.

In preparation, senior leaders at organizations should be asking themselves: Where are we in understanding the earnings impact of Pillar Two? How are we going to disclose its effects in our financial statements? And what should our response be when analysts ask about the impact of Pillar Two on our business?

To prepare, you may decide you need an advisor—particularly if you decide to implement new technology to help with compliance. Deloitte can draw upon a wide range of resources to help you understand Pillar Two’s requirements.

4.????? Internal controls: don’t wait for a material weakness to emerge

When was the last time you really examined your organization’s internal controls? Your business has evolved, you’ve seen constant changes in processes and products—and in the risks your organization might face. When did you last inventory those current risks and consider how they map into your internal controls? Are your controls really effective in mitigating the risks that your business confronts today?

Every year, we see organizations surprised because their controls systems were no longer suited for their current environment. In the worst cases, they end up with material financial weaknesses and restatements that tie up management, damage trust among employees and investors, and depress those companies’ market value.

In 2024, you should aim to resolve to steer clear of those problems by taking a hard look at your current risks and the controls you’re counting on to mitigate them. This refresh can drive value into the organization through stronger controls to prevent and detect any risk of material misstatements. To help with that review, consider the deep experience offered by Deloitte’s Accounting and Reporting Advisory Services (ARA). Our ARA professionals bring an auditor’s perspective in helping you face the challenges presented by evolving accounting standards and business models, disruptive technology transformation, and global economic trends.

5.????? Cybersecurity disclosures—don’t wait for a breach

Last July 2023, the SEC adopted final rules requiring companies to provide enhanced and standardized disclosures on cybersecurity risk management, strategy, governance, and incidents. The rules require companies to disclose to investors how they’re preparing to prevent cyber incidents—and to report more quickly on a broader range of incidents. An incident that may not be material by itself, for example, could trigger reporting requirements under these rules if it’s deemed interrelated to other incidents.

Here's another instance of where your internal controls probably need to be sharpened and intensified. Are they attuned to spotting immaterial cyber risks and looking for patterns that in the aggregate could trigger a reporting requirement? Is your cybersecurity governance structure up to the challenge of meeting the new rules? Talk to your Deloitte accounting advisor if you need help in conducting an SEC readiness assessment and implementing the necessary changes.

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Five meaty issues for 2024--that’s a full agenda for your finance and accounting team! Just remember: you don’t have to tackle it alone. I’d encourage you to reach out to me and my Deloitte colleagues as you get up to speed on these issues in the new year.

This posting contains general information only, does not constitute professional advice or services, and should not be used as a basis for any decision or action that may affect your business. Deloitte shall not be responsible for any loss sustained by any person who relies on this posting.

The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstance.

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