Accounting standards differ between the United States and the Netherlands. Holland in the Valley spoke with Frank van Hulsen, Accountant at Ernst & Young, to shed some light on these differences.
Compatible Accounting Systems
To begin with, accounting in the EU is done according to the International Framework of Reporting Standards (IFRS), whereas the US makes use of its own United States Generally Accepted Accounting Principles (US GAAP). Assuring compatibility between the two systems is challenging and important to assure before setting up a business in Silicon Valley.
The big accounting firms operate both in Holland and in the US, so Dutch companies who want to investigate the compatibility of their accounting practices with those of the US need only seek the right people within those firms for specific advice.
When seeking funding, VCs and banks may ask to see financial statements. Make sure you are prepared with the proper financial statistics and statements from the beginning.
There is a great network of Dutch and international entrepreneurs and accountants in Silicon Valley who have experience setting up businesses in the region. It is definitely worthwhile to make use of this network, whether it is through the Consulate or through other means.
Switching Accounting Systems
It can happen that you set up an accounting system that you later determine is not correct. Switching to another system can be expensive and cumbersome, so it is best to do the research to assure that you are setting up correctly in the beginning.
Many people assume that the tax system in California is simpler than in the Netherlands. In fact, it is generally more complex than the Dutch one. Make sure to get proper advice before filing the tax report. In addition, tax rates on Intellectual Property can be much higher in the US than in the Netherlands, which comes as a surprise to many international entrepreneurs.
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