The main technical obstacle to a transatlantic merger of legal firms is often that the UK firm will produce accounts on an accruals basis, whereas the majority of US firms account on a cash basis.
Under the cash basis, revenues are recognised only when cash is collected and costs are recognised only when they are paid. Accruals accounting recognises revenue when earned, which is often before the cash is collected.
Under accrual accounting, work in progress is recorded in the balance sheet the lower of cost and market value and a debtor is recognised when the revenue has been earned at the value of the selling price, net of provisions for bad debts.
