ifrs best practices. challenges and implementations
TRANSCRIPT
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Reidar Schopp
Consolidation Practice Manager
August 11, 2010
Get on the Road to Success with IFRS
presented by
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Agenda
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 FirmProvide a unique blend of specialty IT services
Leverage proven industry expertise in strategy,technology and enterprise performance management
Focus on middle and Global 2000 market
Founded in 1992Headquartered in Wakefield, MA
Publicly Traded (NASDAQ: EDGW)
Offices in AR, CT, FL, NH, NY, VA, CA, CO
+ 330 Employees, +260 Consultants
Represented 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: DeloitteStraight Talk Book No. 11
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Your finance people will end up working much more closely withothers in the organization to make judgments about accounting
based on the underlying economics of transactions
Putting Principles into Action
Source: DeloitteStraight 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)
InventoryLIFO 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 inIFRS 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
DatesUSA
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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 beginningadoption date
Jan 1, 2015: Possible beginning adoption date
2015 2018: Possible staggered adoption period
DatesUSA (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 bothCDN/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
IFRSThe Big Impacts
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1. The first step in the journey is to conduct an IFRS diagnostic to
assess the impactthat conversion will have on your business2. Fully understand how IFRS and Canadian/US GAAP differ.
Determine the level of effortrequired to address the differences
3. Evaluate the impacton accounting policy. Some areas ofaccounting 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. Preparemock financial statements & notes to see what data is missing
5. Identify resourceswithin your organization to assist in the IFRSeffort
IFRS ProjectsNext 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 areplanned, take time to align requirements with the likely impact of
IFRS8. Identify stakeholder groupsaffected by IFRS. Assess their current
level of understanding of whats ahead
9. Create a plan to address the training and communicationrequirements for each stakeholder group. Keep people informed
through the entire journey. Take time to celebrate success
10. Budgetfor IFRS changes!!!!
IFRS ProjectsNext Steps (cont)
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SAP BusinessObjects Planning & Consolidation (BPC)
Familiar and easy to use
Enables rapid adoption by leveraging nativeMicrosoft 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 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 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 IFRS
Analysis, audit trail and publishing of financial statements
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Companies transitioning to IFRS will inevitably find themselveshaving 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 acompany 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 packagesextending 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 its systems
Prepare mock up financial statements based on IFRS principles
Edgewaters 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 companys systems
5. Provide high level roadmap to be IFRS compliant
Edgewater IFRS Quick Start Kit
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Youll need plenty of runway. Youll have to
provide comparative financials during
conversionand 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: DeloitteStraight Talk Book No. 11
Closing Remarks
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Questions and Contact Information
Reidar SchoppConsolidation Practice Manager
[email protected] | 310 345-3764
Mike CookWest Coast Account Executive
[email protected] | 415 435-0344
Tony CareyEast Coast Account Executive
[email protected]| 203 563-9144