Thursday, April 1, 2010

International Financial Reporting Standards (IFRS)

Now entire business world they have one hot discussion on their business transactional and reporting system; that is IFRS. What is IFRS? What is the impact of IFRS on our business?
International Organization of Securities Commissions has recommended that the world’s regulators permit companies to prepare financial statements based on IFRS for cross-border offerings and listings.
IFRS: IFRS means International Financial Reporting Standards. IFRS will be one of the most significant enterprise-wide change initiatives facing finance over the next few years. This is varying from US GAAP and mostly similar to USGAAP. The entire world they want to make it as single system/standards. IFRS will impact different businesses, business activities in different ways. It is important to find how IFRS will impact the organization’s transactional plan. As per IFRS standards more flexibility is required on transaction in reporting approach.
The new financial reporting model is more complex and less understandable. Many companies will not only need to continue using local GAAP in their reporting for tax purposes, but they will also need to prepare financial statements based on IFRS.
The concept of multi-GAAP reporting is not only a transition issue but also an continuing part of doing business.
ERP: Oracle E-Business Suite supports the IFRS. (from R12, R12.1.1…..)
ERP systems have ability to provide reports in both IFRS and USGAAP will be required until complete global shift to IFRS for statutory and tax reporting.
Companies are taking steps to gain, how well their current systems can support IFRS.
IFRS is already adopted in many countries and remaining countries they want to adopt in near future.
International Accounting Standards Board (IASB) has accepted IFRS standards.
(IFRS) International Financial Reporting Standards issued following 2001.
IFRS means balance classification/balance explanation.
In the present US GAAP reporting system it has some complains like:
Revenue Recognition, Translation, Revaluation, Inventory transactions, detailed reporting, consolidation etc…
All these complains has mapping with Oracle E-business Suite (R12)
Revenue reorganization is mapping with OM & AR Revenue reorganization, AP – AR netting etc…
We can maintain different cost procedures on Inventory transactions like Standard Cost & Average Cost.
Two major processes of Translation and Revaluation have objection with both IFRS and USGAAP.
For detailed reporting purpose we have to prepare chart of accounts in detailed manner.
In R12 Oracle is providing SLA-Sub ledger accounting feature to get detailed reports at sub-ledger level, for simple audit & statutory reporting.
IFRS transition impacts mainly:
Consolidation/ reporting:
· Confirming adjustments,
· Detailed exposure requirements.
General Ledger:
· Transition periods
· Adjusting periods
· Chart of accounts preparation for detailed accounting
Sub-ledgers:
· Track new accounting requirements.

Options to overlap these impacts:
· Using Oracle Hyperion EPM applications to get flexible and apparent consolidation system, management reporting.
· Separate IFRS chart of Accounts from local GAAP Chart of Accounts with adjusting company segment for IFRS. This option requires the configuration of accounting rules in SLA to reflect the duality of accounting treatments for certain classes of transactions. SLA allows organizations to define two sets of business rules for certain transactions, adjustment entries for IFRS need not be created separately.

· In Oracle Assets secondary ledger is required where the componentized child assets can be depreciated separately as per IFRS.

KPMG in India today announced the launch of its IFRS Institute in India (IFRS Institute). The IFRS Institute is designed to assist various stakeholders in the planned convergence from Indian Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS).

https://www.in.kpmg.com/IFRSInstitute

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