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So how does IFRS impact my technology?
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So how does IFRS impact my technology?
On our last blogs we chatted about who IFRS would impact in your organization and how you can start to get ahead of the herd in rolling out the new standards. Today we’ll look at how your technology systems are likely to be impacted.
There are two basic approaches to implementing IFRS in an SAP environment. You can’t simply convert from GAAP to IFRS as a cut over due to the need for duel reporting means that for a couple of years you’ll need to report both standards. So the approaches come down to:
• Enter topside adjustments at the end of each period to translate your current GAAP books into an IFRS standard. This is typically performed in your consolidation system
• Develop and run a parallel ledger that captures and translates transactions into both GAAP and IFRS
In the first case this means having a consolidation system that can handle the topside entries and reporting multiple reporting standards. This could easily mean upgrading your existing solution or implementing a new one, especially if you are on an old package or custom built solution. With SAP Business Planning and Consolidation (BPC) now available in its Netweaver version, there is no reason that the way to approach this isn’t ‘Why not BPC?’ right?
The challenges with this approach are that it requires manual steps and is prone to error, as many European organizations have found out to their cost.
A more robust way to approach the problem is to create a parallel ledger for IFRS postings and reclassify transactions as they are posted to reflect both GAAP in one ledger and IFRS in another. This could be achieved in the older special ledger functionality or in the new GL. However, if you build the solution in Special Ledger it would be thrown away and you would have to reimplement when you move to the newest versions of SAP’s Enterprise Core Component (ECC).
How are you planning on implementing IFRS?
Ian Wright Deloitte Prinicipal is a Principal with Deloitte's SAP practice and leader of Deloitte's SAP Finance Transformation practice. This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication. As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.
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- IFRS
2009-08-31 12:56:39 greg misiorek Business Card [Reply]
Hi Ian,
Interesting start of the IFRS discussion. Seems like SAP has chosen the third way of implementing IFRS without going to either a new or special ledger, but rather by going through the flexible ledger which seems to have existed before ECC 6.0 and doesn't require any additional instance like an SEM system would. From the more technical point of view I would rather see the IFRS project getting hitched with other technology initiatives, like Unicode for example. Similar to IFRS, Unicode seems to be the prevalent global standard allowing a seamless processing of non-ASCII characters. I also like the XBRL component of IFRS which has made a limited progress since 2000, but will eventually have to become more acceptable, with or without IFRS. Adding few more technical reasons for the conversion/migration may tilt the project into the funded status, too.
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