Navigating Cross-Border Accounting: From the US to Europe

Megan - 00:00:18: Today, my guest is Katrina Nacci. Katrina is an experienced finance professional with a decade of cross-border expertise. She began her journey with PwC in Boston before moving to Germany to broaden her exposure to international businesses. Over the years, she has specialized in assisting European companies go public in the U.S. And facilitating U.S. Companies' acquisitions in Europe, managing IPO readiness, accounting conversions, and complex cross-border transactions. Her career has spanned various geographies, including a stint in Dubai, handling IPOs and debt issuances across the Middle East, and building a European finance team for a North American private equity firm. Her unique blend of big four and industry experience, coupled with a deep understanding of U.S. GAAP, IFRS, and local European GAAP, enables her to effectively educate and support finance leaders in navigating the complexities of cross-border accounting. Katrina, thank you very much for joining me on today's episode of CFO Weekly.

Katrina - 00:01:53: Thanks for having me, Megan. Really looking forward to the chat.

Megan - 00:01:55: Yeah, today our topic is cross-border accounting between U.S. And Europe or accounting conversion projects. And I'm looking forward to learning about you and learning from your experiences. So let's jump right in. So you've had an impressive career journey that spans both the U.S. And Europe. Can you share with us a bit about what initially sparked your interest in accounting, as well as a bit about your career to date and what motivated you to specialize in cross-border accounting?

Katrina - 00:02:28: Sure. So I majored in accounting in university. I was actually originally a biotech and biophysics major. I wanted to do pharmaceutical research, so I was kind of nerdy in the sciences, but realized what I liked about the science was more the math and the logic behind it. So I actually transferred to a different school, majored in initially finance and applied math. I was doing a double major. And it was one of my finance classes. I had to take accounting and we had a business case. I don't even remember what it was, but it was specific to like something with PwC. And when I learned about PwC, I was like, oh, I really want to work there. And the process of trying to get an internship, I realized that it was easier to get recruited if you had an accounting background versus a finance background. And so that just made it feel like a little bit more tangible to me. Okay. I want to pivot from finance to accounting. I really enjoy. I initially thought I enjoyed kind of the rules around the accounting, but I'm now realizing having dabbled in so many different accounting standards that it's definitely as much of an art as a science. So yeah, I ended up graduating with an accounting and applied math degrees, moved up to Boston, started my career with PwC in the audit practice, doing the normal course, public company audits, focusing in the tech space. Did that for three years, but always wanted to live in Europe for a little while. I was fortunate that when I was younger in high school, my parents brought us on a couple of different European trips. So I had some exposure to that already. And I just really wanted to pursue that further. And I was actually contacted by a recruiter while I was working in Boston. It's basically like, hey, I've got this opportunity for you. It's in Frankfurt. I didn't know anything about the company or the city or even the country, really. I just decided to move over here to Germany and try it out. And now I've actually been abroad for almost 11 years.

Megan - 00:04:18: Has it been in Germany the entire 11 years?

Katrina - 00:04:21: No. So, I initially moved over to work for a joint German-US listed company to do their SEC reporting. They needed a US specialist. So that's what brought me over to Frankfurt initially in 2013. But I actually pivoted back to PwC through my network. I was put in contact with a partner out here. So I came back to PwC Frankfurt as a local hire in their capital markets and accounting advisory group, which was actually a perfect fit because they had this specialist team that was other Americans that were either local hires. Like myself or people that were just passing through on secondment for a couple of years. And we were helping European companies to go public in the US or when there were acquisitions happening between US and Europe to go through those accounting conversions. So that's where I've got the bulk of my technical experience for what I'm doing now independently. And I actually was on secondment with PwC to Dubai for two years between 2016 and 2018. So I also have some experience in the capital markets and accounting conversion work between the Middle East and the US. The Middle East and the UK have a few different jurisdictions under my belt now, but ultimately moved back to Frankfurt in 2018 when that comment was up. Started to feel like home for me at that point, which was a nice feeling. I left PwC in 2019 to work in private equity for three years. I was building up a European finance function from scratch for a Toronto-based real estate asset management firm. Did that for three years and really enjoyed it. We were quite acquisitive all around Europe. So now I have exposure to a lot of different statutory and regulatory frameworks as well, but ultimately missed the accounting advisory work that I was doing in between having this now cross-border niche, having been abroad for more than a decade, and also having the combination of the big four and the industry experience. I felt like I had this perfect opportunity to go into business for myself doing this specialized cross-border accounting advisory work.

Megan - 00:06:15: And I'm just curious, but what's been the most difficult part of branching out on your own to you? Or what surprised you along the way?

Katrina - 00:06:24: I can almost answer both of those questions with the same answer. And that would be the work that's involved outside of the technical accounting piece. So I always consider myself a pretty nerdy technical accountant, which worked to my advantage because even though I'm relatively introverted, I could easily talk about these types of topics just because I really enjoyed them and knew a lot about them and speak off of the cuff. But just having to focus on other elements of sales and marketing and how do I put together proposals and do business development, all of that was where I knew pretty quickly that I didn't know what I didn't know and I needed to get help. So I've enlisted a couple of different business coaches. I'm in a lot of different communities and accelerators to just help me figure out those elements of it. But I've also really enjoyed it because I don't just have to have my nose stuck in Excel all day. I can go out and a lot of my calendar now is just talking to people and educating them on what it means to go into the US as a European company. I just develop a lot of those types of educational materials, which if I just had a normal kind of director, even partner role in an advisory firm, you can only spend your time doing that to a certain extent. You also need to focus on the business, which of course is still very much a juggling act for me. I go through ups and downs in terms of the client work and how busy I am. And when it's very busy, still trying to make time for those other elements of the business is something that I'm still sorting out on my end.

Megan - 00:07:48: And as you look back on your career to date, what's been the most rewarding project or experience for you? And how has it shaped your approach to advising companies on international accounting matters?

Katrina - 00:08:00: I think I'm going to give a little bit more of a general answer here than one specific project. And I take a lot of pride in putting myself into really uncomfortable situations that I am not familiar with, whether that is from a personal aspect of going abroad and then going abroad again or starting my own business, which I kind of just jumped in off the deep end. And all of that has combined to make me a lot more self-confident in terms of my technical abilities and being able to sell myself now as an independent consultant and kind of the work and the testimonials that are behind that. But also from a personal perspective, having moved around, as I just mentioned, I've gone through, I think I've counted something like seven or eight different visa processes now between moving countries, moving back, changing jobs, etc. And those are very stressful situations because there's pieces of the puzzle that you don't always have control over or you're worried that, oh, I don't have the right document. And so just being able to kind of like ride those waves. And like, things are going to work out the way that they're supposed to work out and not getting overly stressed in those types of situations, I think has helped me massively working for myself. And even from a technical accounting perspective, having had exposure to so many different jurisdictions, the different accounting standards throughout Europe and the Middle East at this point has really made me comfortable that, look, I'm not going to be an expert in every single statutory standard that exists that I might have exposure to it, was like a starting point for a European company that's going into the U.S., but because I've seen it so many times, I know that I'm going to be faster and be able to absorb that more quickly than most people who have just been operating in one country their entire life. And so being able to just pick that up and have appropriate discussions and ask questions to the company to really understand, get to the bottom of what they're doing in whatever country they're operating in, I feel like that has helped me massively just being exposed to so many different countries.

Megan - 00:09:57: And speaking of accounting standards, you've worked extensively with both U.S. GAAP and IFRS. So can you highlight some of the most critical differences between these accounting standards that TFOs have to understand before embarking on a conversion project?

Katrina - 00:10:14: Sure. So this is interesting because this is probably the number one question that I get asked when I'm talking to people like you. And I pivoted in a direction because I like to have the question asked to show that maybe that's not the right question that you should be asking. And what I mean by that is it's less important for me to sit here and name off a couple of different differences. It's more important for you to just understand holistically the process that you need to go through to be able to evaluate those differences specific to your company. Because it doesn't really do a whole lot of good for me to go through and say, oh, per share options, there might be a difference in how you would recognize whether it's a liability or equity, for example, because that is a little bit too general. And I feel like that might give people maybe a false sense of understanding that they know what the differences are, but to just go through and comb through a big four. Or differences, PDF, for example, that's not really going to get you the level of detail that you really need in your own business to be able to assess those differences. So that's where I'm very hesitant to just give generic differences guidance and just more explore the process for how you go through and identify those differences, which I think is also relevant to a lot more people because the majority of the work that I see actually isn't differences between going from IFRS to US GAAP. I've done that. I've done that. I've done that. But it's more going from a local accounting standard, whether that's in the UK, Austria, the Netherlands, et cetera, to US GAAP. And so that's a completely different, obviously, set of differences that you're dealing with at that point and very specific to those jurisdictions. So it's just being able to apply the same process wherever in the world you are. So I know I didn't answer your question directly, but I hope that gives a little bit of a flavor for how you would need to take steps to think about that.

Megan - 00:12:09: Yeah, it definitely does. And what are the benefits of working with a small boutique consulting firm such as yourself versus one of the bigger advisory firms?

Katrina - 00:12:20: Yeah. So my clients really span the gamut of size. So I work with anywhere from series B company that's raised maybe 20 to 15 million through to a subsidiary of a Fortune 100 company that's worth $4 billion in Austria. And the same process applies to all of it. It's really a matter of being able to figure out what your team needs to be responsible for going forward after I leave, because I know that I'm only there for a short window of time during that conversion process. And this is where I've seen being in big four, that there tends to be a gap in knowledge transfer that usually it's a swarm of people coming in, picking up the entire project, doing everything in the background and then putting it back on your desk. And sometimes that's needed. And if I'm having a conversation with a company where I truly feel like they need a team of like 10 people to get through that, I'm going to refer them somewhere else. I'm not going to like fall asleep, but I can get through all of that on my own. However, especially when you're talking more towards the smaller company, series B scale up, maybe pre-IPO stage, they don't necessarily need that much support and the house doesn't necessarily have the budget for that. And so I've, working with those types of companies, I've developed a very step-by-step approach to say, these are all the steps that you take to go through an accounting conversion. We're going to focus on the first step right now. And within that step, there's some sub-steps there. These are the things that I think that you could do in-house first, and I'll educate you on them and you can provide me with these templates. And then I'll come in and layer in my US GAAP expertise to give you what the suggested policies and the differences, et cetera, should be. And so taking that very piecemeal approach, as opposed to just quoting hundreds of thousands of dollars for the overall project. Gives a lot more visibility to the company for exactly how that process works. And then being able to pick and choose the puzzle pieces for like where they truly want to have the external expertise and the budget to pay for that versus taking some of that in-house, which of course not only saves them money, but then they're also more involved shoulder to shoulder working with me through that conversion so that they understand it better when the conversion is over, how to keep up with that on a day-to-day basis.

Megan - 00:14:40: And what are some of the most common challenges that you've encountered during the implementation of conversion projects and how do you typically address these challenges?

Katrina - 00:14:50: That's a good question. I would think that the biggest challenge actually comes right at the beginning when I'm first having a discussion with a company to get onboarded, because a lot of times they're coming to me and they recognize that they need to do a conversion project, but they haven't really thought out how they would need to get through an audit of that conversion after the fact. And so I obviously educate them on the process to go through the conversion itself, but also what I've seen in the past for what auditors want to see in terms of the documentation, whether that's a matrix of this is my current gap, this is my new gap, what are the differences, significant memos, et cetera. But every auditor is going to potentially look at or test this slightly differently. And so I'm very proactive to say, like, you need to reach out to your auditors, have a conversation with them before we finalize the scope, because I don't want to, like I said, accounting is as much an art as a science. So I've seen a lot of things in the work that I've done, both independently and with PwC, but I just want to avoid you getting into a situation where I've said you need to do A, B, and C, and the auditors come back and say you need to do X, Y, and Z. And so just having that alignment beforehand, I think, is the biggest challenge to make sure that the company has enough in scope in terms of their project to be able to get through an audit successfully. So I've had to do a lot of education around that and potentially go back and forth on the scope a little longer than I would like to allow them to have those conversations with their auditors.

Megan - 00:16:18: And switching gears a bit, but preparing for an IPO is a complex process. What specific accounting considerations need to be made for European companies who are looking to go public in the U.S.?

Katrina - 00:16:32: So I actually have a whole guide on this, which we can discuss at the end, which I'm happy to share with your listeners. The first question that I will ask, in a European company that's talking about going into the U.S. Is, first of all, do you know what it means to be a foreign private issuer and do you qualify? Because a lot of times companies say, hey, we're doing a U.S. IPO. We need to convert to U.S. GAAP. But that's not necessarily the case if they meet those qualifications. And this is very much a legal determination. So there's only so much kind of guidance that I can give as to whether they meet that or not. But that makes a very big difference in terms of how often you need to report and whether or not you need to use U.S. GAAP or you're allowed to use IFRS. So that's already potentially saving them a lot of trouble down the road if they evaluate that. But even just more generally than maybe a company going to do an IPO is if you're getting ready for an audit of some sort or you think you might have to do a conversion in the future for some reason, whether that's to bring in investors and IPO or otherwise fundraise. Just have as much documentation as you possibly can put together around your current accounting policies, because that makes my job a lot easier when I'm coming in to do those conversion projects or helping you get ready for an IPO. If you already have what you're currently doing laid out, it saves a lot of time, money, stress to just be able to really pick up a detailed picture of what the company is doing and then be able to apply the top up that needs to happen for them to go to the U.S.

Megan - 00:18:02: And are there technologies out there that can help to streamline an accounting conversion process or is it pretty manual?

Katrina - 00:18:11: It's pretty manual. I have dabbled in my fair share of new tech in the past two years working for myself, just trying to learn ways that I can do things more efficiently. But I don't really think that there's anything out there, whether it's AI or otherwise. That really does a sufficient job in this area. So I'm mostly working still on Google Sheets, for example, to go through and just document the current accounting policies and what the suggested US GAAP policies would be and giving them a matrix for that, or even just other memos in Word. I guess on the memo side of things, potentially I could templatize that, which I have already done actually in the IPO guide. And you could probably stick that into ChatGPT with some company specifics and get a pretty decent memo out the back end of that. But that's not something that I've really experimented with. I'm a little bit hesitant to put any of my client information into those types of engines at the moment.

Megan - 00:19:11: And how do cultural and regulatory differences between the U.S. and European markets influence accounting conversion process? And how do you navigate these nuances?

Katrina - 00:19:22: Yeah, I think I mentioned this a little bit earlier, just around the fact that In Europe, every country has its own statutory gap. So there's a lot of different accounting standards to potentially keep up with. I'm more concerned with keeping up with the U.S. Accounting standards because locally, it's not as important kind of what the law says as much as what the company is actually doing. And sometimes those things don't line up. So it's more important to really just have those discovery calls and walkthroughs with the company to get a sense for what they're actually doing. And it doesn't necessarily mean that I have to be fluent in each of those accounting standards. It's more just being fluent and understanding how to peel back the layers and really identify what's actually happening there. So from that perspective, I am a little bit shielded from some of those regulatory differences because I am not going from one regulatory standard to another per se. I'm going from what the company is currently doing to what they need to be doing, which is a slightly different thing to talk about. On the cultural side of things, even before I started working for myself, I think the biggest kind of cultural challenges that I had were building a European finance team when I was in private equity. Because I was building that and hiring people locally in Luxembourg and Germany. But my bosses, when we were reporting up from a quarterly and annual accounting perspective, were all in Toronto. And so I obviously understood the work styles of North Americans and how they like to work. But I also have enough time in Europe that I can understand and empathize with Europeans and how they want to work. And those don't always align. And that's something that I was struggling with in terms of figuring out how to align that. And in the end, I ended up shouldering a lot of that stress from understanding that my bosses wanted it a certain way, but not necessarily pushing that down to the team all the time. So that's something that I am pretty conscious. I still know that I'm working on the local European side and they're potentially going through an audit with U.S. Auditors and just helping them to understand locally in Europe what it means to go through a U.S. Audit. It's not even just about the increase in the testing and procedures, et cetera. It's more that they are looking through things with maybe more of a fine-tooth comb. So I think that kind of also a lot of just the way that. The technical accounting works out is also a bit of a reflection of like the more general cultural working differences between those countries, if that makes sense.

Megan - 00:22:03: And you mentioned working alongside your clients, but what role does training and change management play in successful accounting conversions? Sometimes these are the hardest pieces to get right. So how do you ensure that the finance team is well equipped to handle these new standards after you're gone?

Katrina - 00:22:22: That's a great question. So I have recently changed the way that I'm marketing my accounting conversion projects. Sometimes because I've had companies come to me where they've just asked for a US GAAP training. And when I peel that back a little bit more, it's actually obvious that they're not just looking for the training. They actually need to do a full conversion, but they don't necessarily always know that. But it's just interesting. That's what's top of mind for them, obviously, because they're thinking more about the day-to-day than that one-time project. And so I've actually started putting this into my accounting conversion projects that as part of the first phase to go through and assess what the differences are. On the back end of that, I'll have a one-day workshop with them to actually walk through all of those differences, potentially ask some more questions. If I don't have enough information from the discovery that I gathered for exactly what they're doing now to dig into those differences a little bit deeper. And at the same time, you can use it as a working session to pull up the subledgers and the supporting files. For how they're doing their current disclosures and say, okay, these are the differences. How do we need to change what your files and your calculations look like so that you can figure out what your conversion ledger adjustments need to be? And so being able to do that type of workshop and really just have an intensive session, I think really helps the team to feel like they're empowered to understand what's going on in the background. And how they're actually the ones that are up there manipulating the supporting files real time. So how they'll be able to. And I think that's really important. I think that helps them a lot in terms of the knowledge transfer. But even just for me personally and how I'm trying to expand my business model and keep in touch with clients after they go through that conversion and they don't necessarily need as much support anymore. Would be serving as more of like a fractional chief accounting officer for them. So I could continue to be involved after that conversion. If they still feel like they need some help getting through US GAAP, whether that's just their normal quarterly reporting or what have you. Or maybe they signed a new contract or they're going through some sort of transaction and they really need a new memo put together, for example, for a topic that they hadn't touched before. I'm still potentially involved with them even post acquisition and post getting them through an audit. And I see that as a valuable offering and kind of a gap in the market currently because it's very hard in Europe to find people who even have good IFRS experience, nevermind US GAAP experience. There seems to be a real shortage at the moment. I actually got an alert from like LinkedIn jobs the other day because I have a search saved for companies that are looking for jobs with European GAAP experience in Europe. And it was something like 650 jobs were posted in the last 24 hours. But I think probably less than 1% of those people are going to be filled with qualified US GAAP experts because it's so hard to find them out here, basically my position, but in house. And so. When I had these conversations with companies that are really struggling with this, whether this is a US CFO that is building up offices in Europe and trying to understand how are they're going to recruit here. Even a European company that I've worked with who wants to bring in US GAAP expertise going forward after they finish the conversion. What I'll generally tell them is put it in the job description. Go ahead. Whether or not you're actually going to be able to find somebody that has that expertise might be difficult. But what you can do. Is just find somebody who's very, very good and skilled technically under local GAAP or potentially even IFRS. And then I can spend some time to onboard them and get them up to speed on what's going on in the US GAAP conversion ledger. And if they're technically good in one standard, they're going to be technically good in another as well. So that's the more important metric than that. They've actually had US GAAP experience because that will be very hard to find in Europe. And I actually had a client who. Hired somebody who said he had a lot of US GAAP experience. But when he tried to put template financial statements together, it was like written in another language. So that proved very difficult. So that's kind of my piece of advice there.

Megan - 00:26:35: Yeah, I know we have like a talent crisis here in the US as far as accounting goes. Do you find that that's the same in Europe, that they're short on accountants in general, let alone accountants who have specific expertise?

Katrina - 00:26:49: Definitely. Yeah. And I think that there's a lot of people like myself that have come from other countries as well, which is great to be able to get more of an international exposure. But there's still, I mean, specific to U.S. GAAP, definitely a gap in the marketplace. I'm pun intended for that. I was chatting with a German CFO recently, and she said something interesting that there's a specialized certificate that you get here for doing tax prep work called the Steuerberater. And it's basically like a CPA, but just to taxes. And she's a little bit more involved in local market than I am. But apparently that's a more prestigious route to go when you go through accounting than just doing like an audit type background. Sure. And so maybe that could be what's driving people. More away from the general technical accounting and more into tax. But again, this is just conversations that I've had. I can't really support that.

Megan - 00:27:45: And I'm curious, do you ever see companies trying to do these conversion projects on their own? Or does it always require like a third party to step in and help?

Katrina - 00:27:58: I have seen them try to do it on their own. And this is normally where I'm coming in as part of my outreach and targeting and business development to identify those companies that I think may be going through an accounting conversion because I can see when companies have raised funds with US investors or getting acquired by a US company. And so I'll normally reach out and say, hey, are you in the process of this? And sometimes they do say we're handling it in-house. And that's where I think that there's a real just education needed around what it means to actually go through that full accounting conversion and then have the documents on the back end to go through an audit. And I have the impression that companies, when they're saying that, they've really just maybe read through a big four PDF guide and looked at their financial statements and kind of eyeballed like, hey, let's look at revenue because it's important. And we know that leases need to go on the balance sheet and that's the extent of it, but that's not really going through a full complete exercise. To look at all of your chart of accounts, your primary line items and your financial statements and what policies you're applying to them. So this is something that I'm trying to spread the word that you need to go through this full assessment to make sure that you've done the conversion completely. Otherwise you're still to some extent combining apples and oranges into one set of financial statements and calling it a day. Other companies that I've talked to have tried to get support from their auditors, which technically isn't a problem if you're a private company, but of course, as soon as you're talking about anything going into the US and potentially getting acquired by a public company or going public yourself, those audit and independence requirements become a lot stricter. So even if it's technically allowed for your auditors to help you with that now, I would still try to avoid it because how are they auditing their own conversion work, even if it's not disallowable for SEC or otherwise. But I actually did a poll on this recently to ask companies when you're going through a transaction and you know you need, accounting advisory support, how are you getting that support? And over 50% of the people who responded told me that they just asked their auditors for a referral, which I thought was really interesting and has made me try to figure out how I get my foot in the door and really educate people. Because if you are being audited by a big firm, they're probably just going to send you to another big firm. And a lot of people that I've talked to also aren't super happy with their auditors. So I'm not sure why they would want a similar approach for, whoever they're getting referred to. So that kind of goes back to what I was saying before around like the differences in approach for working with those types of firms and how you're even finding those firms initially to work with. That's just something to find as well.

Megan - 00:30:36: I'm sure they just probably have nobody else to ask.

Katrina - 00:30:39: Right. Yeah.

Megan - 00:30:40: And looking ahead, what trends do you foresee in the realm of cross-border accounting between the U.S. And Europe? And how should CFOs and financial leaders prepare for these evolving dynamics?

Katrina - 00:30:53: I think this kind of goes back to what I talked about before. I think that especially in the post-COVID world where everybody is doing things remotely and on Zoom, we are right now, it's so much easier to have a global workforce and to do things globally and have investors in other countries, for example. I mean, the work that I'm doing, I don't even think that my business model would really work if it wasn't for COVID and people all being on Zoom because they're just more comfortable working with me, even though I'm not in their same time zone than five, 10 years ago. So what I've seen out of that is that there's really been a lot of growth in companies that are expanding across borders, trying to go into the US or US companies trying to come out here because it is a lot easier and tech enables that. But the problem is that growth in terms of what the business is doing is having a hard time keeping up with the talent that's required, which is what I mentioned before, that it's still very hard to find good people with international exposure here in Germany and throughout Europe. And so I see that the one needs to potentially catch up with the other. But also, I think that allowing companies access to fractional people like myself also helps to fill those gaps. And I think that as more people start to go fractional, that that also helps to enable the global growth because you don't necessarily have to all to rely only on your full-time employees to get you where you want to go.

Megan - 00:32:20: Katrina, thank you so much for being my guest today.

Katrina - 00:32:23: Thanks for having me. It was great chat.

Megan - 00:32:25: Yeah, you mentioned material that listeners can refer to. Where can they find that?

Katrina - 00:32:31: Sure. So I have a notion guide that's all about European companies going into the US, whether you're looking to get acquired, you're potentially doing an IPO or just get more information on going through an accounting conversion. So you can access that guide at www.theinternationalaccountant.com. And you can basically have all the information you need there and going through an accounting conversion is only one small piece of that puzzle to expand globally. But I also have a pretty broad network of people doing similar cross-border things, whether that's tax, legal, IT, etc. So I'm also happy to connect with you through that guide and make some referrals wherever you need it.

Megan - 00:33:10: Thank you for sharing that. And thank you for sharing your time with us today.

Katrina - 00:33:14: Thanks, Megan. I appreciate it.

Megan - 00:33:16: Yeah, I wish you all the best. And to our listeners, please tune in next week. And until then, take care.