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Get on the Road to Success with IFRS

presented by

Reidar Schopp
Consolidation Practice Manager
rschopp@edgewater.com
August 11, 2010

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

Corporate Overview

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 management
Focus on middle and Global 2000 market

Founded in 1992
Headquartered 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

What is IFRS?
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

Why IFRS?
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

Source: Deloitte Straight Talk Book No. 11

Putting Principles into Action

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

Source: Deloitte Straight Talk Book No. 11

Important/Significant Differences
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

The Current State of IFRS

U.S. to begin
phasing in
IFRS over a
three year
period starting
in 2014 2015

By 2011-2012,
every major
capital market
will use IFRS
except the
U.S.

Source:http://www.iasb.org/About+Us/About+the+IASB/IFRSs+around+the+world.htm

Dates USA
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 (Cont.)

Price Waterhouse Coopers: IFRS Reporting

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

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KPMG LLP - US Survey - March 2010


49% of execs want early IFRS adoption

2,500 executives polled in the US

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
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IFRS The Big Impacts


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

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IFRS Projects Next Steps


1.
2.

The first step in the journey is to conduct an IFRS diagnostic to


assess the impact that conversion will have on your business
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

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IFRS Projects Next Steps (cont)

6.

7.

Assess the impact of IFRS on your technical infrastructure. Frontend systems, general ledgers, sub-ledgers and reporting applications
may need to be evaluated
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 whats 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!!!!

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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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Starter kits
Faster legal compliance reduce implementation times
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


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SAP BPC Starter Kit for IFRS


Data collection, control and data processing
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

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SAP BPC Starter Kit for IFRS


Analysis, audit trail and publishing of financial statements
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

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The Transition to IFRS

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

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How Can Edgewater Help


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

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When Does Edgewater Enter the Picture


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

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Edgewater IFRS Quick Start Kit

$10,000
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Edgewater IFRS Quick Start Kit

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

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Closing Remarks

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: Deloitte Straight Talk Book No. 11

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Questions and Contact Information

Reidar Schopp Consolidation Practice Manager


rschopp@edgewater.com | 310 345-3764
Mike Cook West Coast Account Executive
mcook@edgewater.com | 415 435-0344

Tony Carey East Coast Account Executive


tcarey@edgewater.com | 203 563-9144

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