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New service: Financial Statement Compliation and Review for Assets  
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Author Topic: New service: Financial Statement Compliation and Review for Assets  (Read 1297 times)

nxtgt

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What is the nature of the service?
I am considering starting a fee-based service for the compilation of financial statements for NXT asset issuers on a quarterly, bi-annual or annual basis. The purpose of a compilation is to produce financial information for investors and the general public. I will also perform a review service, which is more involved and provides limited assurance as to whether or not the financial information provided by the asset issuer is misleading.

A compilation engagement will produce a basic set of financial statements: balance sheet, income statement, cash flow statement.
A review engagement will produce a report with limited but independent assurance as to the reliability of financial information produced by the company. For independence reasons, I cannot provide a review if I compile your financial information because that would threaten the integrity of the review.

Why is this important?
If you are investing any form of money that has value, whether it be fiat currency in the NYSE or NXT in the AE, you want to have as much high quality information as possible before entrusting it to someone over the internet. Everything on the AE is extremely risky because most of these asset issuers are providing the community with little more than a forum post and a virtual promise. Not to mention, many of these IPOs are issuing virtual shares at arbitrary prices that give them million dollar valuations (yes, in real money)!

Now think about this for a second: Would you invest money in a person who contacted you over the internet and said "Hey, buy some of these virtual thingies in my company, they're going to be worth millions one day" and who has no proof of any type of business operation whatsoever? Maybe if you treat NXT like a virtual thingy too; but if you're like me, you believe your NXT will be valuable one day and want to be careful about where you put it.

Some are trying to solve this issue by creating indexes with ratings for different assets. But how can you rate something that doesn't provide any information other than a few periodic updates over a forum? Is reputation really enough to go on?

Who would be interested in a service like this?
Investors: The investing public should demand financial information from asset issuers before trusting them with your NXT! If a company is issuing 1 million shares at 20 NXT per share for 10% of their venture, don't you deserve to know what that $1M+ USD is being used for? And wouldn't you want to know if the issuer is investing their own 90% of the deal? As an investor, wouldn't you want to know what the maximum amount of shares the company will be allowed to issue? If the company keeps issuing shares just to raise money, your investment becomes diluted and is worth less! If they claim to pay dividends, wouldn't you want to know if you're getting your rightful share of the profits?

Asset Issuers: Surely there are many of you who are actually trying to start legitimate services and businesses on the AE. Producing financial statements for your operations is a time consuming job that requires a certain level of expertise to produce meaningful information. How can you differentiate your asset/company on the AE's ever growing list? Releasing representationally faithful financial information to your investors increases their confidence in your asset over time. Being transparent about your operations welcomes new investments into your asset/company. Additionally, the strength of your reputation grows proportionally to mine by association. If investors find my service useful, the value of your investment grows!

Why should you trust me?
Alas, a chicken and the egg problem. But this goes back to the last line of the preceding paragraph. The success of my service literally depends on the integrity of the service I provide. If I scam one person, there's no reason for anyone to trust what I'm doing and this whole experiment would be an ironic lesson in why it's hard to trust people on the internet. But if people find this useful even though at this stage it's imperfect, then the strength of the AE as a real option for investment grows, and NXT as a whole benefits. A win-win, so to speak. In the future, perhaps a full blown financial audit function will be required and this service will evolve along with it.

I am a recent accounting master's graduate studying for my CPA in the U.S., which I should have by August (fingers crossed). I've been following the NXT project since last November and this is really the first place where I can contribute in some small way.

Who pays for this service?
The asset issuer.

Any feedback would be greatly appreciated!
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bluemeanie1

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #1 on: June 02, 2014, 12:43:21 am »

this will be supported in the upcoming Virtual Corporations feature:

https://nxtforum.org/virtual-corporations/corporate-statement-feature/

-bm
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bluemeanie1

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #2 on: June 02, 2014, 12:52:26 am »

there are a number of services one could build on top of this basic feature though ranging from auditing, processing, to the defining of various statement types.

also it might be useful to set up a caching service as well.
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nxtgt

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #3 on: June 02, 2014, 12:58:45 am »

there are a number of services one could build on top of this basic feature though ranging from auditing, processing, to the defining of various statement types.

also it might be useful to set up a caching service as well.

Very interesting, thank you for the heads up. I would imagine the processing part would be difficult to automate, given the diverse nature of each venture's operations. Even if specialized code was written for a particular business to facilitate the production of financial statements, the NXT community would then need to establish standards so that the information is comparable across assets.
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allbits

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #4 on: June 02, 2014, 01:02:27 am »

Adoption of this type of service by asset issuers would go a long way to legitimizing the AE.  I hope the asset issuers will consider this.  What type of rates are you considering?  It might be something you want to do a loss leader on in the beginning.  Once investors see what this looks like, they'll begin demanding that issuers use the service.
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bluemeanie1

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #5 on: June 02, 2014, 01:02:58 am »

there are a number of services one could build on top of this basic feature though ranging from auditing, processing, to the defining of various statement types.

also it might be useful to set up a caching service as well.

Very interesting, thank you for the heads up. I would imagine the processing part would be difficult to automate, given the diverse nature of each venture's operations. Even if specialized code was written for a particular business to facilitate the production of financial statements, the NXT community would then need to establish standards so that the information is comparable across assets.

yes I imagine that the community will define some basic types(such as a P&L) and perhaps some niche types for specific kinds of assets(let's say one particular sort of statement for precious metals based assets that is an authorized audit of metals reserves).  A statement does have a TYPE field, and that can be an XML DTD link, so I think this basic simple feature set offers a great deal of flexibility to support any kind of annotation you can imagine.  Im sure people will come up with all sorts of ideas.

-bm
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bluemeanie1

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #6 on: June 02, 2014, 01:06:09 am »

also was talking with antanst on incorporating this extra statement data into his Asset Charts on NXTBLOCKS.INFO.  ex. we have a Profits & Losses statement and I can see the profit declarations alongside the share market price.  There are lots of very cool things you can do with this basic function.  You can emphasize anything you like about an entire class of assets.

So basically officers can issue statements and the statement will have the corporate office in the record.  As explained elsewhere the officers are elected by shareholders.  The offices themselves are defined at incorporation time.

-bm
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gs02xzz

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #7 on: June 02, 2014, 01:17:12 am »

This service will be good for everyone, investors, asset issuers, and Nxt. I suggest that all legit and real assets issuers and business persons contact the OP because this service will bring more competitive edge and customers to you.
« Last Edit: June 02, 2014, 10:51:05 am by gs02xzz »
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frohlocke

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #8 on: June 02, 2014, 01:57:27 am »

Imo that is a good idea. But nearly all listed companies do not have any revenue stream or are in business. So for early adopters a different approach may be useful. I have had ideas to messure future maket share, selling points- all the marketing stuff. Based on that create different scenarios and risk profiles.
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nxtgt

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Re: New service: Financial Statement Compliation and Review for Assets
« Reply #9 on: June 02, 2014, 12:41:21 pm »

Thank you for the support and input. At this stage, I can help issuers create detailed, professional prospectuses for their offerings and compile financial statements as their operations unfold. Fees for prospectus drafting would be either fixed or set as a percentage of the initial offering. Compilation fees would be set according the the work required for the engagement. Review engagements are probably too in depth at this point in time.
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