IFRS transition is a business issue that touches all corners of the organisation from board involvement at the CEO/CFO level down to the business process layers. It is not an IT-driven initiative, as the interpretations of the legislation can be complex. However, technology involvement must not be dismissed.
Technically, IFRS replaces local GAAP and restructures disclosure requirements with the need for visibility and consistency, thus strengthens auditing guidelines. Management and financial accounting applications must have inherent flexibility and underlying architecture capable of supporting the transition to IFRS.
Therefore, IFRS implementation software should have the capabilities that aid the following four major compliance categories:
1. Reporting and disclosure: Companies should be able to compile data from multiple sources accurately and quickly to produce financial reports that comply with IFRS. They should also be able to produce a consistent global view of financial information by leveraging complementary systems and, where possible, reducing or eliminating unnecessary internal accounting transactions.
2. Assets and inventories: With the right financial management system, businesses can automatically capture, calculate, and produce reports for assets and inventory, using either the FIFO or average weighted cost methods. Companies can also identify impairment situations, systematically apply depreciation measures to impute impairment as well as distinguish between tangible and intangible assets.
3. Foreign currency management: Businesses should be able to produce monthly reports that incorporate how daily currency rates impact transactions. The right accounting solutions would support multiple currencies and can help companies overcome challenges inherent in doing business in hyperinflationary economies.
4. Revenue recognition: With the right IFRS accounting software, businesses can track prices during the sales process so revenue can be reported at fair value. They can also track and monitor construction projects and government grants in compliance with IFRS.
IFRS adoption is not just another legal obligation companies have to accept. With the right approach and accounting software, companies can reap great benefits from IFRS. Find out more in the whitepaper “Adopting IFRS: A challenge for some. Well worth it for everyone.”