The document outlines the implications of International Financial Reporting Standards (IFRS) on information technology and accounting processes. Key challenges include the need for significant changes in IT systems to accommodate IFRS, which affects various business operations alongside financial reporting. Successful implementation requires thorough planning, management support, and adaptation strategies to address dual reporting and improve operational efficiency.

1. IFRS Implications on ITACC 626 Section 2Presented by: Madeline Chiu

2. AgendaWhat is IFRS?Common issue with IFRS conversionIFRS implications on ITControl implications Impact on the accounting professionTakeaways

3. What is International Financial Reporting Standards (IFRS)?A set of global accounting standards developed by the International Accounting Standards Board to replace various local GAAP around the worldObjective is to increase comparability across global companiesCanadian public companies required to adopt IFRS by January 1, 2011

4. Issue with IFRS implementationMany companies do not recognize that IFRS implementation is beyond applying changes to accounting policiesIn addition to accounting, IFRS also impacts a company’s operations, IT systems, tax reporting systems, and internal reporting systems

5. IFRS Implications on IT The IT system is the backbone of financial reportingComplex changes must be made to the IT system to accommodate for the differences in data collection, calculation and note disclosureSurveys have revealed that approximately 50% of total cost of IFRS conversion are IT-related costsMany European companies admitted that the implications of IFRS on IT were rarely considered in the planning process

6. Manual Approach - SpreadsheetsInherent weakness of spreadsheets:Absence of internal control since the spreadsheets does not undergo the system development life cycle Usually created by accounting/ finance personnel Spreadsheets could easily become unmanageable Prone to human error

7. Successful implementation requires.... Planning is criticalIdentify accounting differences between IFRS and local GAAPAssess how accounting gaps affect the IT system and the respective business processOther consequences of the manual approachFailure to meet reporting deadlineProducing financial statements with material misstatementsNeeds top management supportEstablish a program management teamPrioritization

8. Factors affecting magnitude of IT impactIndustry company is inSize and complexity of entityIts approach to IFRS adoptionCurrent system capabilitiesNumber of systems usedExtent of integration between systems

9. IFRS Implications on ITDifferences between IFRS and local GAAP will affect one/more dimension of IT architecuture:Upstream systems – Financial sub-ledgers, financial instrument systems, product specific systems Data warehouse General ledger – Chart of accountsDownstream systems – Financial reporting system, management reporting system, tax reporting system

10. Reconfigure versus ReplaceConsiderations:Whether the legacy system has the capacity and processing power to handle the large volume of trafficAge of the current system Current capabilities and its flexibilities  Is there dual reporting capabilities?Ability to grow with the company

11. Control Implications of IFRSControl may be undermined due to volume of changes and the magnitude of changes to IT systems in relatively short timeframe Adequate internal control and change management in place to create a strong control environmentFormal process for approving accounting and/or IT system changes Formal training provided to all affected employees Proper segregation of dutiesDocumentation of changes made to IT system and business processes

12. Impact on the Accounting ProfessionAuditors required to assess whether financial statements are free of material misstatementNeed to perform testing of controls over IT system to determine reliability of financial informationInternal auditorsEnsure existence and effectiveness of internal control over the conversion process and financial reporting processReview IT and business process changesIdentify control deficiencies and provide recommendations

13. Current IssuesDual reporting requirements Many companies would be required to maintain two sets of books: IFRS and local GAAP IT system with dual reporting capabilities could help maintain two sets of books without duplicate effortExtensive Business Reporting Language (XBRL)Useful tool for companies transitioning to IFRSConvergence Assistant – allow companies to upload their trial balance, map company’s trial balance to a standard set of accounts, and create two sets of financial statements (IFRS and local GAAP)

14. Takeaways PlanPrioritizeCollaborateEnsure top management dedicationInvolve the right people and retain them Reflect back to SOX and Bill 198 implementationTry to integrate ongoing IT projects with IFRS conversionView IFRS adoption as an opportunity to improve operations and the financial reporting process

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