In our view, companies are best served when they take an integrated approach to build an IFRS framework. Toward that end, they need a fully integrated solution ideal for supporting the IFRS adoption. A key element is the ability of enterprise applications to work in conjunction with financial management ones to meet a wide range of accounting requirements and processes mandated by the International Financial Reporting Standards.
Adopting IFRS alongside VAS requires technical, strategic, and operational changes. There also will be an unavoidable impact on information technology (IT) systems, as companies change the way they manage and report on numerous business activities. Hence, companies should employ a methodical approach when building the IFRS framework.
In the last post, three out of five criteria to assess business performance in relation to the corporate planning, budgeting and forecasting process were discussed. The last two, pointed out by Aberdeen Group in its 2011 study, are technology and performance management.
Vietnam’s Ministry of Finance has been working to converge IFRS accounting and VAS accounting, with a goal of eliminating most, if not all, of the key differences by the time the Government allows or mandates the use of the International Financial Reporting Standards. Progress has been made, but significant differences remain in inventory costing, impairment write downs, contingencies management, debt covenant management, and revenue recognition.
Effective planning, budgeting and forecasting processes are indicative of good business performance. A study conducted by Aberdeen Group in 2011 identifies five key performance criteria that distinguish the best-in-class (top performing) from industry average and laggard companies.
The International Financial Reporting Standards establish 34 new accounting policies that in general affect how companies value their assets and report on their business performance. The regulation creates new, higher standards for transparency in business operations by requiring more detailed presentation of balance sheets and cash flow.
Uncertain economic conditions have resulted in more informal and ad-hoc planning, budgeting and forecasting processes than before the financial crisis. According to data from a study by Aberdeen Group in 2011, although 65% of the surveyed companies have a formal planning and budgeting process, the figure is less than the 76% recorded back in 2008.
The International Financial Reporting Standards are the result of work begun in the early 1970s by the International Accounting Standards Committee (IASC). The slow evolution of IFRS adoption was accelerated in 2002 when the European Union Parliament designated IFRS as the accounting standard for publicly traded European Union companies beginning on January 1, 2005.
A report published by Aberdeen Group in 2011 has identified the leading challenges for companies in terms of financial planning, budgeting and forecasting. Over the study’s three-year period (2009-2011), Aberdeen Group found that the leading pressures include:
2012 has been a tough year for many businesses. Managers have to struggle to make sure their organisations survive and stay strong through these difficult times. As a result, costs and budgets have become the most important factors to consider when making an investment decision. A strong budget can help managers know when they have a steady stream of cash flow and make better decisions based on that budget information. Here are a few tips for managers to weather the tough times: