The AICPA has published a white paper to provide awareness to the potential impact to an organization’s financial systems when completing an IFRS conversion project.
System Benefits of Conversion
The paper states that key benefits include opportunities to improve/ streamline business functions and processes, globally integrate the financial IT systems, and achieve consolidation/ reporting efficiency. On the other hand, there are risks associated when a company decides to convert to IFRS. Some of these risks are excessive resource spending, improper data management or migration, incomplete revisions of policies and procedures, future changes that standard setters may issue, and more.
Potential System Impacts of an IFRS Conversion
As a company prepares to convert to IFRS, the impact to information technology (IT) and financial systems should be taken into consideration during the planning phase. Representatives from the company’s IT department should be involved throughout the planning process to evaluate how the proposed accounting changes will impact the financial systems (transactional or reporting). The impact to IT and financial systems can vary depending on a company’s existing structure and environment. This may include its IT and financial systems capability/integration, industry complexity, company size, relevance of business process/transaction, internal control structure, mergers & acquisitions process, and other attributes.
If a company’s IT and financial systems are substantially integrated globally, then the degree of impact or modifications may be lower (although this is not always the case). The extent of changes may be primarily some sub-ledger configuration changes and more extensively in the general ledger and consolidation system. However, if a company has frequently acquired entities (each with unique financial systems) and has not yet integrated the acquired company systems within the organization’s infrastructure, then the degree of system impact may be quite large at the sub-ledger level as well as the internal reporting level.
XBRL and IFRS
Extensibility of XBRL taxonomies and the possibility to support additional reports that share the same underlying data are represented by XBRL taxonomies, either publicly available or developed internally. This provides opportunities for businesses to build on this standards-based data integration, reconciliation and convergence approach to support other key processes like internal reporting — business intelligence, tax compliance, management reporting — or internal auditing and controls. Another key consideration in this respect is that the implementation of this approach does not require the replacement of the existing systems; rather, it complements them by providing incremental functionalities that would otherwise require a substantial investment in the corporate IT environment.
Have a look at the white paper here.