Smooth Transition: Preparing for International Financial Reporting Standards (IFRS)

Smooth Transition:
Preparing for IFRS
by Lane Leskela
Executive BriefAn Introduction to
International Financial
Reporting Standards
International Financial Reporting Standards (IFRS) are The SEC proposes that 2014 be the first year for US-the collection of reporting standards developed by the registered companies to file their financial statements in International Accounting Standards Board (IASB). The IASB an IFRS format. On this timetable, the current requirement is committed to developing "a single set of high quality, for companies subject to SEC regulations in the US is to understandable and enforceable accounting standards to prepare opening balances plus the two most recent years help participants in the world's capital markets and other of comparative statements, meaning that 2012 is the first users make economic decisions." year for which IFRS-formatted statements would need to be produced. IFRS reporting is now required or permitted in nearly 100 countries, including the European Union and most of Asia For companies that only operate in the US and have neither Pacific. India, Japan, and Brazil plan to adopt or converge overseas subsidiaries nor a need to raise capital or debt with IFRS over the next three years. in overseas markets, a more gradual approach to IFRS transition is under consideration. However, with multiple In the US, the Financial Accounting Standards Board large economies and trading partners at various stages in (FASB) is working with the IASB to align US Generally the IFRS adoption process, domestic companies should Accepted Accounting Principles (GAAP) with IFRS reporting begin to assess their business requirements over the standards. The goal for both organizations is a single next five years relative to IFRS deadlines. US firms should set of global standards for financial reporting of public develop a timeline for internal adoption of IFRS accounting companies listed anywhere in the world. The US Securities standards and the presentation of IFRS statements.and Exchange Commission (SEC) has eliminated IFRS/US GAAP reconciliation requirements for foreign-owned filers, and published a preliminary timeline for US companies to adopt IFRS.
Executive BriefSmooth Transition: Preparing for IFRS
2IFRS reporting encapsulates a principles-based framework, Early planning and adherence to best practices will provide as opposed to the rules-based standards of US GAAP. Many a distinct advantage to all firms in the process of IFRS US-based companies are comfortable with the financial transition. Conversion benefits range from streamlined certainty of a rules-based accounting system. Companies financial close, reconciliation, and reporting, to improved familiar with US GAAP should not be distracted by the financial compliance in multiple markets. IFRS promotes debates about which system is inherently more or less the alignment of business objectives and financial complex or utilitarian. The fact remains that accounting reporting processes across a global enterprise. We'll turn standards conversion and dual reporting programs in the now to the business and systems processes involved in a US are well underway. GAAP-based financial discipline must smooth transition to IFRS. continue, as sound financial judgment and experience will be called upon to translate financial treatments in GAAP to their equivalents under IFRS.
Enterprise resource planning (ERP) technology will be a key enabler in the transition to IFRS, and for the financial consolidation and reporting process in particular. Companies should focus on the technology areas supporting IFRS transition: financial consolidation and reporting systems, the general ledger (GL), subledgers, and financial data entry systems. There are nearly 200 differences between IFRS and US GAAP accounting systems. However, most companies will find they will need to focus on somewhere between 10 and 40 differences in their own reporting requirements. These differences can be easily and cost-effectively compared, tested, and reconciled in a comprehensive ERP system. Epicor, a company dedicated to providing integrated enterpris... [download for more]