Financial Instruments’ Disclosure in Compliance with IFRS ...
Best Practices for IFRS Preparation and Compliance
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Transcript of Best Practices for IFRS Preparation and Compliance
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Reidar SchoppConsolidation Practice [email protected]
August 11, 2010
Get on the Road to Success with IFRS
presented by
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AgendaAgenda
Introduction
Corporate Overview
What is IFRS, Why IFRS, and the Current State of IFRS – Dates and Impacts
Transitioning to IFRS and Using BPC to Support IFRS
How can Edgewater Help with IFRS
Closing Remarks and Questions
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Edgewater is a Technology Management Consulting Firm Provide a unique blend of specialty IT services Leverage proven industry expertise in strategy,
technology and enterprise performance managementFocus on middle and Global 2000 market
Founded in 1992Headquartered in Wakefield, MAPublicly Traded (NASDAQ: EDGW)Offices in AR, CT, FL, NH, NY, VA, CA, CO+ 330 Employees, +260 ConsultantsRepresented in over 33 states+1900 projects completed to date
Corporate Overview
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IFRS stands for International Financial Reporting Standards
IFRS is a global set of accounting standards developed by the International Accounting Standards Board (IASB) which is an independent accounting standards body, based in London, UK
IFRS is intended to be a more principles-based set of standards rather than the rules-based approach of the US
As companies compete globally, the movement toward IFRS is rapidly becoming one of the most important issues for companies to address today
What is IFRS?
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Economic globalization brings increased demand for high quality, internationally comparable financial information
Bring greater clarity and consistency to financial reporting in the global marketplace
Eventually, U.S. GAAP will go away, and IFRS will be the lone standard
Why IFRS?
Source: Deloitte – Straight Talk Book No. 11
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Your finance people will end up working much more closely with others in the organization to make judgments about accounting based on the underlying economics of transactions
Putting Principles into Action
Source: Deloitte – Straight Talk Book No. 11
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Major differences between US GAAP and IFRS: Property, plant and equipment (IAS 16) Revenues (IAS 18) Impairment of assets (IAS 36) Provisions (IAS 37)
Five other topics that might differ fundamentally: Presentation of financial statements (IAS 1) Related parties (IAS 24) Leases (IAS 17) Taxes (IAS 12) Inventory – LIFO not allowed under IFRS
Important/Significant Differences
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Source:http://www.iasb.org/About+Us/About+the+IASB/IFRSs+around+the+world.htm
By 2011-2012, every major
capital market will use IFRS
except the U.S.
U.S. to begin phasing in
IFRS over a three year
period starting in 2014 2015
The Current State of IFRS
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The US Securities and Exchange Commission (SEC) recently issued its proposed roadmap for conversion from US GAAP to IFRS Converging standards 2012 to 2014 Mandatory reporting under IFRS possibly beginning in 2015 Staggered adoption from 2015 to 2018
The SEC says it will decide in 2011 whether to hold to that schedule
One of the biggest lessons learned from European companies that converted to IFRS in 2005 was that they needed more than the two years time they were given
Dates – USA
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Feb 24, 2010: SEC issues statement in support of convergence and global accounting standards, inclusive of work plan.
Mid-2011: Target date for completion of ASB/IASB convergence agenda
2011: Proposed SEC decision on IFRS
2012 – 2014: Possible effective dates of converged standards, possible early adoption period
2013 – 2014: Earliest comparative information required, assuming 2015 beginning adoption date
Jan 1, 2015: Possible beginning adoption date
2015 – 2018: Possible staggered adoption period
Dates – USA (Cont.)
Price Waterhouse Coopers: IFRS Reporting
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49% of execs want early IFRS adoption Many U.S. companies with subsidiaries around the world are already using IFRS for
statutory reporting Many companies already using two sets of standards
Majority of executives want greater clarity from SEC
Generally the companies believe that the move to IFRS is going to happen
Companies with less of a "global footprint" may be less eager to make changes
59% said a potential move to IFRS in 2015 or 2016 would give their companies enough time to prepare for the change
15% said that it would not be enough time
25% said they would be unsure of the impact of a switch
KPMG LLP - US Survey - March 2010
2,500 executives polled in the US
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Upstream systems (sub-systems) Additional reporting requirements in areas such as taxes, financial
instruments and fixed assets General ledger
Changes to the chart of accounts. During transition, general ledger reporting will most likely need to accommodate ledgers for both CDN/US GAAP and IFRS
Reporting data warehouse Changes in data models, such as valuation systems and actuarial
models Downstream reporting (BPC / Consolidation systems)
Changes to the number of consolidated entities, mapping structures, rules and financial statement reporting formats
IFRS – The Big Impacts
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1. The first step in the journey is to conduct an IFRS diagnostic to assess the impact that conversion will have on your business
2. Fully understand how IFRS and Canadian/US GAAP differ. Determine the level of effort required to address the differences
3. Evaluate the impact on accounting policy. Some areas of accounting will require new policies due to clear differences in standards. In other areas, there may or may not be differences, depending on the choices you make
4. Inventory your current IFRS reporting requirements. Prepare mock financial statements & notes to see what data is missing
5. Identify resources within your organization to assist in the IFRS effort
IFRS Projects – Next Steps
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6. Assess the impact of IFRS on your technical infrastructure. Front-end systems, general ledgers, sub-ledgers and reporting applications may need to be evaluated
7. Identify the impact on current system projects. As new projects are planned, take time to align requirements with the likely impact of IFRS
8. Identify stakeholder groups affected by IFRS. Assess their current level of understanding of what’s ahead
9. Create a plan to address the training and communication requirements for each stakeholder group. Keep people informed through the entire journey. Take time to celebrate success
10. Budget for IFRS changes!!!!
IFRS Projects – Next Steps (cont)
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SAP BusinessObjects Planning & Consolidation (BPC)SAP BusinessObjects Planning & Consolidation (BPC)
Familiar and easy to use Enables rapid adoption by leveraging native
Microsoft Office tools (e.g. Excel) and web browsers accessing a central database
User owned and managed
Process-centric Configurable business process flows guide
users and drive process consistency
Unified Single, integrated application reduces
maintenance, improves data integrity, and simplifies deployment while enabling flexible planning & consolidation functions
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Fast implementation Pre-packaged content reduces implementation
times by up to 80%
Dynamic configuration enables easy customization to specific requirements
Complete, generic reference implementation
Rapid and trusted legal compliance Embedded expertise in meeting financial
regulations including best practice in financial consolidations and internal controls
Detailed process guidance for business users
Comprehensive scope IFRS/GAAP specific chart of accounts
Pre-configured IFRS/GAAP consolidation rules, controls, and calculations
Publishable financial statements
Starter kitsStarter kits
Faster legal compliance – reduce implementation times
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Business Process Flows Data collection
Preparing and running the consolidation
Reports and analysis
IFRS Data Input & Control CoA with most common BS and IS accounts
Input schedules for data entry or data import
Control reports for validation of collected data
Consolidation Processing Full, proportionate and equity method
Scope changes and rate variations
Extensive set of automatic business rules
SAP BPC Starter Kit for IFRSSAP BPC Starter Kit for IFRS
Data collection, control and data processing
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Analysis & Audit Trail Dynamically formatted accounting and analysis
reports leverage native drill down
Audit IDs for tracking data origin
IAS 1 Publishable Financial Statements Balance Sheet (current/non-current format)
Income Statement (by function)
Cash Flow Statement (generated automatically)
Statement of Changes in Equity
Segment information
XBRL Templates Excel templates pre-mapped with IFRS
taxonomy
SAP BPC Starter Kit for IFRSSAP BPC Starter Kit for IFRS
Analysis, audit trail and publishing of financial statements
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Companies transitioning to IFRS will inevitably find themselves having to capture data in new ways or gathering additional information. They may need to use new accounting definitions and valuations for certain balance sheet and income statement lines, obtain more comprehensive reporting from overseas operations, provide more detailed segment reporting, or comply with wider disclosure obligations
A change in accounting standards may not sound like a strategic change, but it does impact the way that the business is run, the way that success is measured, and the information and records that a company needs to maintain
The Transition to IFRS
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Our team is ready to provide an on-site evaluation to scope the work effort and answer questions
Our team consists of CA/CPA/CMA resources as well as BPC thought leaders
Will explain existing features, and coming features of the SAP product suite
Can provide all levels of support, including Senior Project Management and Accounting resources
Can provide Data Warehouse and DBA experts across most common ledger packages – extending our value beyond the BPC application
We are available to demonstrate the newest functionalities of SAP BPC and IFRS Starter Kit
How Can Edgewater Help
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Edgewater can assist you to… Review the new IFRS principles Determine the impact on your company and it’s systems Prepare mock up financial statements based on IFRS principles
Edgewater’s job is to… Help identify the changes in your systems -- upstream systems /
general ledger / reporting data warehouse / downstream reporting Come up with a plan to make those changes Make the changes, test and document them Manage the process and ensure a successful conversion to IFRS
When Does Edgewater Enter the Picture
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$10,000
Edgewater IFRS Quick Start Kit
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What you will get…
1. Review the new IFRS principles
2. Inventory your current IFRS reporting requirements
3. Evaluate the effectiveness of existing reporting solutions
4. Determine the impacts on your company’s systems
5. Provide high level roadmap to be IFRS compliant
Edgewater IFRS Quick Start Kit
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“You’ll need plenty of runway. You’ll have to provide comparative financials during
conversion—and deal with all the systems, process, and organizational issues
surrounding the transition. It will take time. And it will ultimately require your signature.”
Deloitte
Source: Deloitte – Straight Talk Book No. 11
Closing Remarks
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Questions and Contact Information
Reidar Schopp – Consolidation Practice Manager
[email protected] | 310 345-3764
Mike Cook – West Coast Account Executive
[email protected] | 415 435-0344
Tony Carey– East Coast Account Executive
[email protected] | 203 563-9144