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Posts Tagged ‘generally accepted accounting principles’

IFRS conversions . . . Planning your jump.

September 3rd, 2008 Comments off

Now that the SEC has just moved the U.S. one step closer towards IFRS conversion, have you really started considering the staffing needs that it will take to develop your new reporting platforms? Likely the biggest issue at this point is the available guidance on making the actual conversion. Approximate statistics reflect approximately 25,000 pages of GAAP/FASB related documentation while there is only 1/10th of that currently available for IFRS. Not to mention the small amount of knowledge resources that are available to assist corporations in this effort. This is an area that will see huge growth in the coming years. Keep in mind, with this being a summarization of info, that this is not intended to be a detailed oultine of all that should be considered.

In consideration to the conversion, there are 38 key areas (IAS and IFRS) that have been documented in the form of released statements covering their respective areas. While our conversion was a very time-consuming effort, we had a very good reporting foundation to work from and had already transitioned to a new reporting software that would accommodate our IFRS initiatives. Previous to our conversion, we had implemented Hyperion HFM for all our reporting and consolidation needs. It should be noted that not all software platforms are currently capable of supporting IFRS reporting needs. We also had to start bridging the gaps of what we were not reporting in North America, which would be required under IFRS. It was necessary to go through each of the standards and bridge the differences.

As you get down into the statements that have been released, they are as basic as IAS 1, which outlines the presentatation of financial statements. However, once you start moving into some of the other areas, the new reporting could be a bit more problematic. Under IAS 2, which relates to the reporting of inventories, there is no LIFO reporting allowed, whereas it is in the U.S.. Fortunately, this was not an issue, but for some it clearly will be. Not too mention the impact to the financial results when the change is made. For our company, IAS 18, which dealt with Revenue Recognition, was another key area. Unlike GAAP, where there is extensive guidance in this area, there is little with IFRS at the current time. For a company that dealt with large projects as well as deferred revenues related to Service contracts, this was an area we could not be loose in our applications. We defaulted to GAAP guidance in this area with the assumption that eventually IFRS would become more stringent, which still has not happened….

There will be further discussions on each one of the areas covered under IFRS and a summary of differing points between the two formats. Some of the more notable areas we’ll be looking at will be:
IAS 8 Changes in Accounting Methods
IAS 18 Revenue Recognition
IAS 14 Segment Reporting
IAS 36 Impairment
IFRS 3 Business Combinations
IFRS 5 Discontinued Operations

This is a large subject to tackle but it will be an interesting path.
Thanks for reading . . . .
Jeffrey Ishmael

IFRS – potential rollout after 12/15/09

August 27th, 2008 Comments off

As expected, the SEC announced a preliminary overview of the roadmap that would be put into place for the transition of financial reporting to IFRS. Overall, the Commission expects that there will be a full transition by 2014, but that there will be further details released with respect to the milestones needed achieve the goal.

Specifics of the information released this morning outlined the ability of certain companies to be able to begin reporting under IFRS after December 15, 2009. Companies that are considered to be in the Top-20 for their industry will be allowed to begin reporting after this date. There are approximately 110 companies in 34 industries that would be able to begin reporting after this date. This is probably a bit quicker than some might have anticipated, since this is only 16-months out.

Although the milestones have yet to be released, the Commission has tentatively scheduled a review of these milestones in 2011 to gauge the progress and determine if they will open up the ability to report under IFRS to a larger population of companies. There are also proposals for companies to provide reconciliations between prior GAAP reporting and the revised reporting under IFRS. The proposal calls for a 3-year reconciliation. This should be more than just a proposal at this point but an absolute requirement for investors to see the “walk” between the two reporting structures.

Even for a later date of 2011, this is not a very large window for governing bodies and schools to organize appropriate curriculum to cover the topic. The Commission requested that the AICPA and States add questions to existing exams for IFRS. Rather than add questions to the exam it would seem that there should be the introduction of a new module (?) that would cover IFRS. I still have a hard time believing that we are potentially looking at a 100% conversion to IFRS with no carry forward of GAAP. Not with the energies that have been expended over the last decade on new regulations, and prosecution of those regulations.

Time will tell. Thanks for reading . . . .