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Features in Oracle E-Business Suite for International Financial Reporting Standards

Presenter Name Presenter Title Oracle Corporation

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

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Conclusions

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

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Conclusions

IFRS: Around the world already

A common standard seems inevitable

Impact of GAAP Convergence & IFRS Take-up

Proposed Implementation Timeline from FASB & the SEC

2009: 2008 Roadmap To be reviewed By December 09

You are here

2011: Convergence US GAAP and IFRS both plan to adopt converged and new Revenue Recognition, Lease Accounting and Financial Statement standards

2014: IFRS Large accelerated filers begin filing in IFRS

2016: IFRS Nonaccelerated filers begin filing in IFRS

2009

2010
2011:

2011

2012

2013

2014

2015
2015: IFRS Accelerated filers to begin filing in IFRS

2016

2012: Convergence US GAAP Filers file with SEC using new the new common Revenue Recognition, Lease Accounting & Financial Statement standards

SEC evaluates achievement of roadmap milestones and decides whether to adopt a mandatory approach for IFRS

Sources: SEC Announcement, Aug 2008; FASB and IFRS published projects

Much is the Same But There are Differences

US GAAP is always more specific, plus:

Similarities
Approach
(Some Examples) Revenue Recognition Fair Market (e.g. AR or Inventory Valuation) Detailed Disclosure

Differences US GAAP
Approach
(Some Examples) Fair Market Revaluation Extraordinary Items Consolidation Joint Ventures Development Fixed Assets Leasing Inventory Impairment Fixed Assets & Investments None Control Proportional OK Capitalized Components Financing No LIFO 1 Step, Reversible

IFRS

IFRS

US GAAP
Only Certain Fixed Assets Rare 2 Models Only Equity Expensed Unitary Cap vs. Op LIFO OK 2 Step, No Reversal

Segment Reporting

Chart of Accounts Not Mandated

Distinction Between Tax and External Reporting

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

<Insert Picture Here>

Conclusions

Dimensions to an IFRS Plan

Data Capture: Procurement Topside Detailed SEC Filing: Converge Adopt Re-Configure Supply by Chain location by process

IFRS

Accounting Changes

EPM, ERP & GRC Process

Business Customer & Model Master Data Changes Management

Country Compliance: Human USA Capital 30 non IFRS 60 IFRS

Dimensions to an IFRS Plan

Data Capture Procurement Topside Detailed SEC Filing Converge Adopt Re-Configure Supply by Chain location by process

IFRS
EPM ERP & GRC Process
Business Customer & Model Master Data Changes Management

Accounting Changes

Country Compliance: Human USA Capital 30 non IFRS 60 IFRS

Your Convergence & IFRS Action Plan

Achieve early mover Advantage
Stage 3 Record Transactions in both GAAPS Determine impact on accounting in subsystems Configure accounting rules and set up ledgers Process and report using dual accounting Stage 4 Transform Your Business & Win with IFRS Determine changes to business model Transform operations using IFRS results Report IFRS results, increase shareholder value

Stage 1 Study Impact & Determine Strategy

Stage 2 Enable Top End Reports

Perform Preliminary Study

Collect GAAP financial results

Assess Impact

Adjust and consolidate under GAAP & IFRS

Determine Strategy

Report, reconcile and audit results

All Stages: Apply Policy and Control Management

Milestone 1 Completed Preliminary Study Milestone 2 IFRS Reports Produced Milestone 3 Transactions Recorded in Multiple GAAPs Milestone 4 Business Model Optimized

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

<Insert Picture Here>

Conclusions

GAAP-IFRS Convergence, 2011:

Revenue Recognition - Not yet finalized as a standard

Joint FASB-IASB project impacting ERP Systems Currently undergoing development & General Acceptance
Replaces Revenue Recognition with Performance Obligation? Proposing 2 Revenue Lines on Income Statement?

Now
US GAAP:

Public GA Process

US GAAP 2011/2
Converged: Performance Obligation?

IFRS 2014 No further change?

Converged: Performance Obligation?

Revenue Recognition

Detailed Guidance VSOE, etc. IFRS: General Guidance IAS 18

We are monitoring, will wait for final standards

GAAP-IFRS Convergence, 2011:

Lease Accounting - Not yet finalized as a standard

Joint FASB-IASB project impacting ERP Systems Currently undergoing development & General Acceptance
Operating Leases to go away?

Now
US GAAP:

Public GA Process

US GAAP 2011/2
Converged: Gross up the Balance Sheet?

IFRS 2014 No further change?

Converged: Gross up the Balance Sheet?

Lease Accounting

Detailed Guidance Cap. Vs. Operating IFRS: General Guidance IAS 17

We are monitoring, will wait for final standards

GAAP-IFRS Convergence, 2011:

Financial Statements - Not yet finalized as a standard

Joint FASB-IASB project impacting ERP Systems Currently undergoing development & General Acceptance
Moving the page break between the income statement and equity

Now
US GAAP:

Public GA Process

US GAAP 2011/2
Converged: No or some expenses reported in equity?

IFRS 2014 No further change?

Converged: No or some expenses reported in equity?

Lease Accounting

Certain expenses reported in equity IFRS: Different expenses reported in equity

We are monitoring, will wait for final standards

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

<Insert Picture Here>

Conclusions

Oracles History with the IASB

International Accounting Standards Board

Monitoring IFRS standards since 2000 Active member of IASB IT Company Discussion Group
Attend the Standards Advisory Council (SAC) meeting three times a year Provide input on practicality Get a heads up on features needed

National domain experts monitor Local GAAP

Customers Using IFRS in ERP

E-Business Suite

Emirates Airlines (since 2001) Hilton Hotels PLC Michelin Reuters (since 2002) Societe National De Chemin De Fer Francais Westpac
AXA International Carrefour European Bank of Investment John Lewis PLC Societe Generale Chevron Juken New Zealand Ltd LaFarge Pernod Ricard

Supporting IFRS since Release 10.7

PeopleSoft

Supporting IFRS since Release 8.4

JD Edwards

Supporting IFRS since Release Xe for E1 and Release A7.3 for World

Customers Using IFRS in ERP

E-Business Suite

Emirates Airlines (since 2001) Hilton Hotels PLC Michelin Reuters (since 2002) Societe National De Chemin De Fer Francais Westpac
AXA International Carrefour European Bank of Investment John Lewis PLC Societe Generale Chevron Juken New Zealand Ltd LaFarge Pernod Ricard

Supporting IFRS since Release 10.7

PeopleSoft

Supporting IFRS since Release 8.4

JD Edwards

Supporting IFRS since Release Xe for E1 and Release A7.3 for World

Oracle Enables Key Stages in IFRS Action Plan

Stage 1 Study Impact & Determine Strategy

Stage 2 Enable Top End Reports

Stage 3 Record Transactions in both GAAPS

Stage 4 Transform Your Business & Win with IFRS

Oracle Enterprise Performance Management Oracle ERP Financials Other ERP Financials
Custom, Legacy, Competitor

Oracle Industry Specific Applications

Oracle Governance, Risk, & Compliance Suite

All Stages: Apply Policy and Control Management

ERP Products Designed for IFRS

E-Business Suite

IAS/IFRS SUPPORT SINCE 2000 Thousands of customers overseas reporting under IFRS IAS 2 IAS 16 IAS 18 IAS 21 More Inventory Property, Plant Revenue Rec. Currency Segments, etc. Inventory, Costing FA, ALM OM, AR, BI, CA Multibook, MRC,GL Flex / ChartFields

SPECIFIC IFRS FEATURES Specific functionality developed for IFRS Asset Componentization
Parent & Child Assets Child Depreciation rates differ

Impairment Processing Impairment identification

Unplanned depreciation

DUAL GAAP ACCOUNTING Ledger Set:

GAAP

IFRS MIGRATION PATH Multiple Ledgers or Multi-GAAP

US Principles Expanded COA Calendar USD

Differences Expanded COA Calendar USD

Approaching IFRS Compliance in ERP

Example: IAS 21, Foreign Currency

IAS 21 Summary (Converged with FAS 52)

Two routes from local accounting to shareholder currency: remeasurement @ historic rates, translation @ current rates Depending on the companys circumstances and IAS 21 tests

Product Support
R12 Reporting Currencies and Revaluation together designed to do both IAS 21 and FAS 52 Remeasurement and Translation The company chooses, at each overseas location: Transaction Level, if they need to manage the detail in home currency GL Activity Level, if they populate a fat GL or analytic cube GL Balance level, for a traditional statement oriented approach HFM also includes IAS 21 and FAS 52 capability

That is: 8 IFRS Compliant options at each location

There are many ways to comply with IFRS in all product areas

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

<Insert Picture Here>

Conclusions

1: IFRS Sub-ledger Data Capture in EBS

IFRS Standards that require transaction level data tracking either in generic ERP or in Industry Specific products

Relevant IAS & IFRS Principles

IAS 02 Inventories IAS 11 Construction Projects IAS 16 PP&E IAS 17 Leases IAS 18 Revenue IAS 19 Employee Benefits IAS 23 Borrowing Costs IAS 41 Agriculture IAS 32 & 39, IFRS 07 & 09 Financial Instruments IFRS 04 Insurance Contracts

Product Support
Standard Features in EBS

GL & Subledgers
Specific features in sub ledgers and industry offerings
Inventory Receivables

Assets
Projects, HCM, et cetera

General support through the data model and with features like Subledger Accounting

Inventories
IAS 02

Key IFRS-GAAP Differences Inventory Costing U.S. GAAP - Allowable costing methods include LIFO, FIFO and Average Cost IFRS - LIFO not allowed

E-Business Suite Approach SCM products like Oracle Inventory handle Inventory, Costing They do all the IFRS options Actual with flavors: landed, period actual, etc. Standard with flavors: process, BOM, semiconductors

Inventory Valuation U.S. GAAP - Inventory is valued at the lower of cost or market, and cannot be written up at a subsequent date IFRS - Inventory is valued at the lower of cost or net realizable value; if the net realizable value of an item that has been written down increases subsequently, then the write-down is reversed under IFRS

And variances to actual

Rev dates & Inventory Aging Reconfigure LIFO to standard or actual

Use a second IO for dual costing

Copyright (c) 2007, Oracle and/or its affiliates. All rights reserved.

24

Asset Componentization
IAS 16

Key IFRS-GAAP Differences

U.S. GAAP - Component accounting is permitted; usually assets are depreciated as a whole IFRS - Component accounting is required

E-Business Suite Approach

Assets Componentized assets with different useful lives
Parent Child features Grouping Features

API to import the real estate & assessors valuations Asset revaluation

Copyright (c) 2007, Oracle and/or its affiliates. All rights reserved.

25

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

<Insert Picture Here>

Conclusions

2: Corporate Accounting for IFRS in EBS

Specifies the handling of major transactions & situations: work done by CPAs in General Ledger or in Consolidation products

Relevant IAS & IFRS Principles

IAS 10 IAS 20 IAS 21 IAS 29 IAS 36 IAS 37 IAS 38 IAS 40 IFRS 01 IFRS 05 IFRS 06 IFRS 08 Post balance sheet Government Grants Foreign Currency Hyperinflation Impairment Provisions, Contingent Intangibles Investment Property First Time Adoption Discontd, For Sale Mineral resources Operating segments

Product Support
In EPM
Model corporate adjustments

Standard Features in EBS

GL & Subledgers
Flexfields, segments and other chart of accounts features Reporting Currencies & Revaluation for translation or remeasurement Multiple Ledgers

Centralized Accounting Engine (SLA)

Intangible Assets
IAS 38

Key IFRS-GAAP Differences

Development Costs
U.S. GAAP - Development costs are generally expensed as incurred IFRS - Development costs (directly attributable expenditure) are capitalized when certain criteria are met

E-Business Suite Approach

GL and Projects features deploy for Capitalized Development
GL Cost Centers with Balance Sheet accounts capture the costs Allocate to P&L when time to release or Project Accounting stores Projects on the Balance Sheet Release to P&L via BOM & inventory
Integration with costing

Direct release to P&L via Project Accounting Project Time & Costs features
Copyright (c) 2007, Oracle and/or its affiliates. All rights reserved.

28

Operating Segments
IFRS 08

Key IFRS-GAAP Differences Identifying Operating Segments US GAAP Segments are based on actual Management Reporting. Excludes intangible assets IFRS Operating segments are identified by Risk and Reward. Includes intangible assets

E-Business Suite Approach General and Sub Ledger Use our very flexible chart of accounts design to tracks and identify different operating segments Reporting features like FSG with BI Publisher

Copyright (c) 2007, Oracle and/or its affiliates. All rights reserved.

29

Impairment
IAS 36 Key IFRS-GAAP Differences
Impairment, specifically Fixed Assets U.S. GAAP

E-Business Suite Approach

Assets API to accumulate and contrast recoverable values API processes losses automatically and executes all immediate and long-term accounting Automated comparison & impairment accounting: Automatically process the losses Automatically execute all the immediate and long-term accounting

Based on fair value non-reversible Based on the recoverable amount (the higher of the asset's value-in-use and fair value less costs to sell) Reversible

IFRS

Copyright (c) 2007, Oracle and/or its affiliates. All rights reserved.

30

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

<Insert Picture Here>

Conclusions

3: IFRS Financial Statement Preparation in EBS

Defines whats included on Financial Statements, and how they should be presented; work done by CPAs in EPM or GL

Relevant IAS & IFRS Principles

IAS 01 Financial statements IAS 27 Consolidate / Separate IAS 28 Associates IAS 31 Joint Ventures IAS 33 Interims IAS 34 EPS IAS 07 Cash Flow Statements IFRS 01 First Time Adoption IFRS 03 Business Combintns SEC IFRS Regulations under discussion

Product Support
In EPM
Hyperion Financial Management E-Business Suite OFA

Standard Features EBS

GL & Subledgers
E-Business Suite General Ledger
Consolidation features like GCS

Reporting features like FSG with BI Publisher

Multiple Ledgers & Ledger Sets

Foreign Currency
IAS 21

Key GAAPIFRS Differences IFRS and GAAP Determine Functional Currency using different emphasis

E-Business Suite Approach General and Sub Ledgers Reporting Currencies and Revaluation work together to provide both Remeasurement or Translation Chose the level of detail per your business needs:
Subledger Transaction Level General Ledger Activity Level

US GAAP Cash Flow Based

IFRS Factors based with more emphasis on pricing factors.

Both FAS 52 and IAS 21 specify:
Remeasurement (Historic Rate Conversion) from Accounting to Functional Currency, and Translation (Current Rate Conversion) from Functional to Reporting Currency.

General Ledger Balance Level

Can also be done in HFM

Copyright (c) 2007, Oracle and/or its affiliates. All rights reserved.

33

Financial Statements - Dual GAAP Reporting

IFRS 01 Adoption, Proposed SEC Regulations

2012 Convergence: Rev. Rec., Leases Financial Statements 2011 2012

IFRS primary GAAP IFRS adoption year (annual 10K) Preparing 2 years comparatives (8Qs: US GAAP?) for 2015 reporting US GAAP for Q1, Q2, Q3 2013 2014 IFRS for all 2015

Dual Reporting period Base Reporting per US GAAP

January 1, 2015 January 1, 2013 Transition date Opening balance sheet

Legend US GAAP

Adoption date Go live

Switch from US GAAP to IFRS

December 31, 2016 1st annual IFRS Financial Statements

IFRS

Companies are still US GAAP structured businesses until cut-over day, but must value the results using IFRS principles in preparation for the two year comparatives they must file with their first IFRS statements. After the cut-over, they will optimize to the IFRS principles

Amended from 2008 PricewaterhouseCoopers LLP

Approaching Dual GAAP Reporting

IAS 01 Financial Statements, IAS 27 Consolidate or Separate, IFRS 01, Adoption

Depends on the customers circumstances vis--vis IFRS & US GAAP

Top Down approach in EPM Products Bottom Up approach in ERP Products

EPM Solutions
Ask if the legacy supports the IFRS functionality in Hyperion Specific IFRS Dimensionality, IFRS rules engine, etc. See our EPM show!

ERP Solutions
EBS: SLA, Ledgers, Multiple Ledgers, Ledger Sets PeopleSoft: Book Code, Multiple Ledgers, Multi-Book JDE: Multiple Ledger Types

Dual Reporting System Strategies

Typical Considerations IFRS facilitates WW system stratification Structured for GAAP, not IFRS Valuation different in IFRS Many IFRS:US GAAP differences Limited IFRS:US GAAP differences GL for National or Regulatory compliance
= Companies migrating

Your IFRS Situation System Choices

HFM Only
Non sub-ledger

System Choices:
From Top-down through Multi-GAAP ledgers and subledger reconfiguration, to the possibility of a do-over

GL & Adjusting
easy reconciliation

New GL
Major difference

1 GL Only
minor differences

2 Distinct GLs
over 50% different

Re-implement
New ballgame

Release 11i Dual Reporting example

Release 11 : Balancing Segment

Balancing Segment Value example: 99

Semi-Automatic Adjustment Adjustment from general ledger balances Recurring and Reversing Adjustment

Other R11 Multiple Compliance Tools

AX, the Accounting Engine MRC Ledgers at FX rate = 1 GCS Ledgers

All other segments

Ledger Total

Release 12 Dual Reporting : Whats different to 11i

Release 12: Subledger Accounting, Multiple Ledgers, Ledger Sets
Ledger Set:
Primary
GAAP
Primary Ledger Account Development Expense Employee Payables Balance Debit Credit 500,000 1,500 (100,000) 1,500 US GAAP 501,500 (101,500)

Adjusting

US Principles Expanded COA Calendar USD

Differences Expanded COA Calendar USD

Adjusting Ledger Capitalized Development Development Expense Ledger Set Development Expense Employee Payables Capitalized Deveopment

500,000 (500,000)

1,500 1,500

Adjustment 501,500 (501,500) IFRS (101,500) 501,500

(100,000) 500,000

1,500 1,500

1,500 1,500 -

Accounting
Dr Cr

Subledger Accounting

Can choose to use: A (full) Secondary Ledger

Complete alternative accounting

or

An Adjusting Ledger, (or Segment)

Automatic business reconciliation Fewer adjusting entries Easier feed to Hyperion

Operating Unit

Release 12 Dual Reporting Example

Release 12 : Adjusting Ledger in a Ledger Set

Ledger Set
Ledger 1 = Base Ledger 2 = Adjusting

Adjusting Ledger

Automatic Adjustment From subledger data SLA Driven Adjustments

Base Ledger Total

Ledger Set Total

Endgame: Adopting IFRS, walking away from GAAP

A Function of your Dual Reporting Choices

1. Many subsidiaries will retain GL and subsystems in compliance with either Hyperion
Statutory requirements (foreign subsidiaries) Regulatory legislation (utilities, financial services, etc.)

2. Some will find that their existing GL is quite appropriate, but that they have a few subsystem ERP GL MultiGAAP Features areas that will require adjustment 3. Others will require that they need to do something more substantial, for example restructuring their ERP business, up to the point of reimplementing Subledgers

Endgame: Adopting IFRS, walking away from GAAP

An IFRS Migration Path

Dual Reporting Period

Ledger Set:
Primary
GAAP

IFRS from now on Period

Switch from US GAAP to IFRS

Adjusting Differences Expanded COA Calendar USD

US Principles Expanded COA Calendar USD

You are an IFRS company with US GAAP history

Ledger Set : Primary IFRS Principles Expanded COA Calendar USD
GAAP

You are a US GAAP company with IFRS comparatives

Optional: Adjusting drop when Differences no longer Expanded COA needed Calendar USD

Update Primary ledger with TB from Adjusting ledger so it ties to IFRS Complete subsystem configuration adjustments

Agenda

IFRS Update Planning to Adopt IFRS IFRS GAAP Convergence in 2011 Deep Dive into EBS and IFRS
1. Subledger Data Capture 2. IFRS Accounting 3. IFRS Financial Reporting

<Insert Picture Here>

Conclusions

Summary : EBS is designed for IFRS

Thousand of EMEA & APAC Customers using EBS for IFRS today, since 2005 IFRS Compliance built into our Strategic practice Many regular external reporting features are IFRS configurable and you may need to reconfigure Special IFRS features are in the products Migrations process fits your situation
Can do on Release 11, automated transactions in Release 12 Configurations for easy, typical, & difficult reporting cases

EBS is ready for IFRS now. So are HFM and GRC.

Transform Your Business with IFRS

Going Beyond Compliance

IFRS Change
IFRS OK for SEC and for 60+ countries statutories IFRS book leases as liabilities

Potential for Business Transformation

Improve dramatically your reporting process, consistency, and management vision Consider instance, ledger, data consolidation Consider shared service accounting & reporting centers Consider buying that fleet of planes you use Evolve your leasing revenue business to an equipment sales business

Capitalize R&D Move those 2009 Development expenses to the Balance Sheet recognize in P&L, matched to Revenue, in 20102011

Impact on US Companies
The Value of Starting Early

Growing awareness of complex requirements

Cumulative Reporting Requirements
Companies are required to retrospectively apply IFRS to all periods presented as if they had always been in effect.

drives preference for early planning and assessment

Within what timeframe would your company adopt IFRS if given a choice?
More than 7 years 2% Within 7 years 8% Dont Know 9%

Multi-GAAP During Transition

During the transition period from US GAAP to IFRS, firms must continue to report in US GAAP and any local statutories, as well as begin tracking IFRS equivalents.

Within 3 years 55%

Within 5 years 26%

Source: Deloitte, 2007

Potential Impact on Bottom Line

A study comparing of the impact of IFRS adoption in the UK reveals that net income generally rose by 39% while equity declined by 23%. UK GAAP is considered close to US GAAP in most areas.

No one anticipated how big it was going to be. Every company was too late and too slow in preparing even the good ones.
Ken Wild, Global IFRS Leader, Deloitte

Sources: European Financial Reporting Research Group; Deloitte Touche Tomatsu

Key Takeaways

Start Early

Use the benefit of a realistic implementation timeline dont wait for the pressure of mandatory deadlines IFRS resources are scarce start planning and education sooner rather than later

Report using IFRS principles with Oracle EPM

Leverage Technology

Push changes into general accounting with Oracle ERP Financials Document and test IFRS controls with Oracle GRC

Optimize Your Business

Consider how to optimize your business and gain competitive advantage through IFRS Align your business model with the new capital market model

To Learn More

Oracle IFRS page (White Papers, News, Events)

IFRS Page on Oracle.com:

http://www.oracle.com/applications/ifrs/index.html

Oracle EBS IFRS Whitepaper

Oracle E-Business Suite IFRS Whitepaper:

http://www.oracle.com/applications/financials/preparing-us-companies-forthe-transition-to-ifrs-white-paper.pdf

Oracle Financials Product Marketing Blog

Oracle Financials Product Marketing Blog:

http://www.blogs.oracle.com/FinancialsMkting/