IFRS – Taking Lemons and Making Lemonade!

Posted by Kelley LearcloseAuthor: Kelley Lear Name: Kelley Lear
Email: kelley.lear@redmoonsolutions.com
Site: http://blog.redmoonsolutions.com
About: Kelley is a member of the executive leadership team and leads our sales and marketing efforts at Red Moon Solutions. Kelley’s extensive experience in project management, product management, and consulting with Fortune 500 and Global 1000 clients is extremely important in this role.See Authors Posts (127) on Jul 27, 2011 | 0 comments

I was just reading a recent eBook out on Accounting Today that presented some interesting thoughts from on IFRS.  The title of the eBook is “Understanding and Meeting the Demands of a Complex Global Economy – International Financial Reporting Standards (IFRS) and More” presented by Accounting Today.  The eBook is broken down into “articles” which are essentially mini white papers.   The various authors also share some great industry survey results you may want to check out.  In addition, the eBook covers the following topics:

• Companies Brace for New Accounting Standards
• A Changing Financial Reporting Landscape:  The Journey to Global Standards
• KPMG Foresees Tax Compliance Problems for Financial Industry
• Finance and IT:  Value Comes with Harmony

In addition to the typical areas for concern presented with IFRS convergence such as  converged leasing standards, revenue recognition, and financial instruments standards, the authors hit on a couple of points that I have been talking to corporate tax professionals about on a regular basis.  Thought I’d share those with you today…perhaps in an attempt to make it a proper summer theme, and where I typically like to spend my energy on the positive and  proactive, and take the lemons we sometimes get shoved down our throats and make some cool refreshing lemonade!

The first thought is that due to the ongoing nature of these discussions, and with the SEC still not outlining a definitive timeframe across all industries of when IFRS reporting might be incorporated in U.S. financial reporting, we have had a good bit of time here to get educated on the key issues around convergence standards and how those might truly affect how we obtain data, calculate and book data and report on it.  This being the case, the CFO arm (finance and accounting) and tax for the most part have been planning, projecting and already making changes.  This is all fantastic!  In our world often times we find it fairly luxurious to get one or two years heads up on major changes coming our way in terms of financial reporting, tax accounting and compliance.  Typically, turn-around times can be brutal.  As we all know, major changes take data changes, systems (technology) changes, and process and people changes.  One thing we need to remember however, in our overall IFRS convergence and adoption plans,  is that we also need to look at things such as tax effects of these changes, as well as other administrative and operational effects.  These can include such things as vendor contracts, other contracts that might require changes, debt covenants, risk management, and internal controls.  Also, one of the authors in the eBook, also brings up that staff inside and outside of finance and accounting will need extensive education and training to prepare for full adoption.  With that training will come significant process changes.  In addition, that Corporate Boards and Audit Committees need to understand the repercussions and changes… goes without saying.

The second key thought is that we all know we have been overwhelmed by ever changing regulatory and statutory environments; however, for once perhaps,  IFRS will not end up being such an “onerous burden” for finance and tax professionals out there.  This could be looked at as a fantastic opportunity to plan for and implement changes across systems and processes to improve overall workflow efficiency and effectiveness, transparency and controls.  At a recent TEI Regional Meeting as well as at the Annual IPT conference in San Antonio, Texas 2011, we spoke to corporate tax professionals about tax technology and process automation projects, and how folks go about getting budgets to align with those needs.  Some of these large corporate participants shared their successes in being able to leverage major changes such as IFRS to evaluate ERP system re-implementations and changes, data warehouse projects, business analytics solutions, tax and accounting portals, and even third party fixed asset management solutions.  They are able to put together much more compelling business cases when IFRS was at the source of the requested project.   Tax sensitizing your general ledger, a project which often gets left on the cutting room floor when the budget scoping scissors are so carelessly wielded, might just get new life.  Also, don’t forget that projects that will allow you to automate and track your positions, decisions, and analysis will become extremely valuable as convergence moves forward.  As GAAP and IFRS books are run in parallel and decisions are made, documenting and being able to have those decisions at your fingertips will be essential.  Good luck my friends, and make this new challenge a positive opportunity for change!