Trend # 6 – Convergence to IFRS
Convergence to International Financial Reporting Standard (IFRS) is the coming together of all financial reporting into a common global language, and would help standardization across the globe. This is like the ISO for accounting and financial reporting. Here is an excerpt of US SEC
“The Commission has long expressed its support for a single set of high-quality global accounting standards as an important means of enhancing … comparability,” the proposal states. “We believe that IFRS has the potential to best provide the common platform on which companies can report and investors can compare financial information.”
SEC new official position on U.S. SEC clarifies its position around IFRS adoption
Now its not going to be easy for all the companies in almost all countries of the world to converge into a common standard in a year or so. Also some of the countries such as US have still not clearly mandated the year for moving into IFRS though they have indicated significant interest. But countries such as Canada, Korea, India etc have already signed up to get sooner to IFRS.
Roadmap in short
US – Large accelerated filers by 2014, Other Accelerated filers by 2015 and other by 2016
Canada – From 2011 for all public companies, optional for private companies
Japan – Mandatory adoption by 2016
India – Convergence based on Networth across 2011, 2013 and 2014
South Korea – Starting 2011
Adaption to IFRS is going to be quiet active over the next decade, as companies in each country in the globe start adapting to IFRS. Many countries have announced roadmaps to IFRS, where there is a phased approach to adaption of the same
While IFRS is more of an accounting problem, technology migration/adaption to support IFRS is going to be significant. IFRS Adoption In Consolidated Statements – Part 1 are keen to help the whole exercise with more efficiency. SAP has introduced a Business Process Expert community for IFRS to help all involved to understand the implications of IFRS from a technology standpoint.
Below highlight few challenges across regulatory, organizational, process and technology perspectives.
|IFRS||Convergence mandated by many countries Major confusion on convergence vs. adoption||Resistance to change due to lack of training Finance perceived as owner of moving to IFRS whereas it needs to be beyond that||Different process/accounting rules across many countries||Disparate systems that do not have easy way of managing the change Lot of manual process to meet the reporting and adjustment needs|
The technology solutions that are going to be very active for enable IFRS would be the New GL functionality in SAP ERP (ECC 6.0), Financial Consolidations functionality in SAP BusinessObjects Planning and Consolidation (BPC), Financial Reporting and Analysis through SAP Business Objects Xcelsius and Crystal and Financial Forecating functionality in BPC products.
ePM is going to be a key part of the IFRS convergence.