During the IFRS adoption, a company will make some simple and straightforward changes, such as adding a few extra accounts in its corporate financial systems so it can collect existing data in a different way. Other changes will be more challenging, requiring the company to change several business processes or, in some cases, redesign all or part of its financial system.
As companies may not know exactly what changes are needed until they get started, a period of volatility is inevitable. Even changes that appear easy and straightforward can produce major impacts on financial systems and processes. As companies have overcome the initial volatility and completed their first IFRS financial statements, the initial disruption is likely to subside.
Of course, the goal will be to minimise any disruption. To do so, the best approach is to view the IFRS adoption as a company would any major business transformation: it helps if the company understands not only the specific requirements, but also the related business activities that will be affected. No business transformation is easy, but the process is invariably smoother when the company establishes a disciplined approach, which considers people, budget, and the processes essential for success, beforehand. Here are some steps businesses can take to make the process as smooth as possible:
1. Analyse IFRS requirements to thoroughly understand those that apply to the company and, to the extent possible, how they apply.
2. Analyse current business processes and systems to identify the gaps in current operations.
3. Use this information to establish a realistic budget.
4. Establish a multidisciplinary team of employees to lead the IFRS transition.
5. Establish a clear road map of the steps the company will take.
6. Communicate the road map to key executive decision-makers and, as appropriate, to broader groups of employees.
7. Communicate the progress to executives and employees and, when it makes sense, to key external audiences such as investors, outside directors, partners, vendors, and key industry influencers.
Having a systematic approach towards IFRS adoption is the first step. Companies should also consider leveraging technology to aid their transtition. Find out how in the whitepaper “Adopting IFRS: A challenge for some. Well worth it for everyone.”