Introduction to Multilingual Retrieval Augmented Generation (RAG)
Utilizing HFM to Handle the Requirements of IFRS
1. Utilizing HFM to Handle the
Requirements of IFRS
Chris Barbieri
Edgewater Ranzal
2. About Edgewater Ranzal
One of the Largest Hyperion
Practices in the U.S.
Oracle / Hyperion Platinum
Partner - Highest Status
15 Years
700+ clients Vertical Expertise with High-
1000+ projects Profile Clients from Coast to
Coast
Sound Project Methodology
Insures Project Success
“One Stop Shop” for ALL EPM
Implementation needs
3. Our Services
Business
Consolidation Planning
Intelligence
Data Project
Infrastructure
Services Management
4. What is IFRS?
● Stands for International Financial Reporting Standards
● A global set of accounting standards developed by the
International Accounting Standards Board (IASB)
● An independent accounting standards body, based in London
● Intended to be a more principles-based set of standards rather
than the rules-based approach of U.S. GAAP
● Principles based: telling your child to be home at a reasonable hour
● Rules based: telling her to be home at 11 p.m. and then providing for the 15
contingencies that might justify a different time
● IFRS and US GAAP differ conceptually on a number of points.
● As companies compete globally, the movement toward IFRS is
rapidly becoming one of the most important issues for companies
to address today.
5. Why IFRS?
• Economic globalization brings increased demand for high
quality, internationally comparable financial information.
• Facilitate global capital flows
• Bring greater clarity and consistency to financial reporting in the
global marketplace.
• Provide greater transparency and comparability of financial
information across countries.
6. IFRS vs. U.S. GAAP
About 2,000 pages of principles versus 2,000 documents of rules
Source: Deloitte – Straight Talk Book No. 11
7. Important / Significant Differences
● The way pre-operating and pre-opening costs are reported.
● The fact that IFRS prohibits the use of LIFO for inventory
valuation.
● Borrowing costs
● Fair value
● Revenue recognition
● Extraordinary items
Source: CAMagazine.com – The Road to IFRS
9. IFRS Statement No. 1 requires companies to include a number of
reconciliations in their first financial statements presented under
IFRS, as follows:
A reconciliation of the company’s equity previously reported under
GAAP as of its transition date to its equity restated under IFRS at
that date;
A reconciliation of the company’s equity as of the entity’s most
recent annual financial statements under GAAP to its equity
restated under IFRS at that date; and
A reconciliation of its last published US GAAP total comprehensive
income with its restated IFRS comprehensive income for the
same period.
For all three of the reconciliations required, companies must
distinguish between GAAP differences and correction of errors.
10. Among Others: IAS/IFRS US GAAP
Fair Market -Revaluation FA & Investments Only certain FI
Cash Flow Indirect (Favored) Direct/Indirect
Consolidation Control 2 models
Joint Ventures Proportional ok Only Equity
Pensions 15 differences
R&D: “Development” Dev. Capitalized Dev. Expensed
Inventory No LIFO LIFO OK
Impairment 1 Step, reversible 2 Step, no reversal
Interest rate sensitive
11. How are the Statements Changing?
Statement of Comprehensive
Income Statement
Income
Balance Sheet Statement of Financial Position
Statement of Retained
Statement of Changes in Equity
Earnings
Statement of Cash Flows Statement of Cash Flow
Proposed Changes by FASB & IASB
14. • Approximately 100 countries already require, allow or are in the
process of converging their national accounting standards with
IFRS.
• Japan, the United States and Canada have active programs
designed to achieve convergence with IFRS.
• China’s Accounting Standards Committee has announced that
convergence is a fundamental goal of its standard-setting program.
• The Institute of Chartered Accountants of India has taken up the
issue of convergence of Indian accounting standards with IFRS.
• The EU gave global convergence a kick-start when the EU
mandated that EU companies with securities listed on an EU
exchange prepare their consolidated accounts for all fiscal years
beginning on or after Jan. 1, 2005, under IFRS. (>7,000 companies)
16. Dates – U.S.
Source: PWC – Mapping the Change
● The US Securities and Exchange Commission (SEC) recently
issued its proposed roadmap for conversion from US GAAP to
IFRS.
● Mandatory reporting under IFRS beginning in 2014, 2015 or 2016,
depending on the size of the issuer, and provides for early
adoption in 2009 by a small number of very large companies that
meet certain criteria.
● With compliance beginning in 2014. The SEC says it will
decide in 2011 whether to hold to that schedule.
● One of the biggest lessons learned from European companies
that converted to IFRS in 2005 was that they needed more
than the two years time they were given.
17. Early Conversion to IFRS has Appeal
● Simplified reporting
● Reduced operating costs
● Greater transparency and comparability for investors
● Improved access to capital
● Plus some companies see their competitors already
embracing IFRS. That’s why momentum toward IFRS
adoption has been steadily building, even before it’s
required.
18. To Adopt or not to Adopt?
That is not the Question
● IFRS is being driven by the globalization of capital markets.
Not just by government policy.
● “Every business will have a different outlook on IFRS, but no
matter what your approach, know this: The full transition will
take a well planned effort, requiring leadership and vision. For
many companies, it will take at least three years.”
Deloitte
19. The amount of estimated spend on IFRS varies widely within each category of
company size, with some companies in the same size category expecting to
spend far more than their peers.
0.800%
$180.0
0.731%
$160.9M
0.700% $160.0
USD Spent in Millions on IFRS Conversion
USD Spent in Millions on IFRS Conversion
0.600% $140.0
$131.9M
$120.0
0.500%
$100.0
0.400%
$80.0
0.298%
0.300%
$60.0
0.200% $48.5M
0.200%
0.141% $40.0
0.103% $27.1M
$23.2M
0.100%
$20.0
0.000% $0.0
$1 Billion to $5 Billion to $10 Billion to $20 Billion to $50 Billion US $1 Billion to $5 Billion to $10 Billion to $20 Billion to $50 Billion US
$4.9 Billion US $9.9 Billion US $19.9 Billion US $49.9 Billion US or more $4.9 Billion US $9.9 Billion US $19.9 Billion US $49.9 Billion US or more
Company Revenues Company Revenues
Source: Accenture 2008 IFRS Survey 20
Source: Accenture 2008 IFRS Survey
20. Stage 3 Stage 4
Stage 1 Stage 2
Record Transform Your
Study Impact & Enable Top End
Transactions Business & Win
Determine Strategy Reports
in both GAAPS with IFRS
Determine impact
Perform Collect GAAP Determine changes
on accounting in
Preliminary Study Financial Results to business model
subsystems
Adjust and Configure Transform
Assess Impact Consolidate Under accounting rules operations using
GAAP & IFRS and set up ledgers IFRS results
Report, Reconcile Process and report Report IFRS
Determine Strategy using dual results, increase
and Audit Results
accounting shareholder value
All Stages: Apply Policy and Control Management
Milestone 1 Milestone 2 Milestone 3 Milestone 4
Completed Preliminary IFRS Reports Produced Transactions Recorded Business Model
Study in Multiple GAAPs Optimized
21. IFRS – The Big Impacts
• Upstream systems
• Additional reporting requirements in areas
such as taxes, financial instruments, and
fixed assets.
• General ledger
• Changes to the chart of accounts. During
transition, general ledger reporting will likely
need to accommodate ledgers for both U.S.
GAAP and IFRS.
• Reporting data warehouse
• Changes in data models, such as valuation
systems and actuarial models.
• Downstream reporting
• Changes to the number of consolidated
entities, mapping structures, and financial
statement reporting formats.
22. Next Steps
• IFRS Gap Analysis - The first step in the journey is to conduct an
IFRS diagnostic to assess the impact conversion will have on your
business.
• Get clear about how IFRS and U.S. GAAP differ. Determine the
level of effort required to address the differences.
• Evaluate the impact on accounting policy. Some areas of
accounting will require new policies due to clear differences in
standards. In other areas, there may or may not be differences,
depending on the choices you make.
• Inventory your current IFRS reporting requirements and locations.
• Identify resources within your organization to assist in the IFRS
effort.
23. Next Steps (cont’d)
• Assess the impact of IFRS on your technical infrastructure.
Front-end systems, general ledgers, sub-ledgers, and reporting
applications may need to be evaluated.
• Identify the impact on current system projects. As new projects
are planned, take time to align requirements with the likely
impact of IFRS
• Identify stakeholder groups affected by IFRS. Assess their
current level of understanding of what’s ahead.
• Create a plan to address the training and communication
requirements for each stakeholder group. Keep people
informed through the entire journey. Take time to celebrate
success.
24. HFM is Well Suited for IFRS
Centralized data – one version of the truth
Accessed via the web for global operations
Supports multiple accounting standards built on single set of inputs
Provides validations and controls over the process
Big win for SarbOx!
Accommodates multiple data sources
With visibility back to source data
Journals module and data audit provide full audit trail
Supports financial and non-financial metrics
Multiple charts of accounts
Provides for alternate organizational structures
Easily handle complex currency translation & consolidation rules
Flexibility in writing business rules without need for programmers
Twelve smart dimensions to handle high dimensional requirements
Segment Reporting
Cash flow
Management reporting and statutory
25. Why HFM to Handle IFRS? (cont’d)
• Out of the box intercompany elimination functionality
• Dynamic reporting / Smartview
• “Slice and dice” information facilitates the segmental reporting
requirements in IFRS
• Robust controls and audit trails that help with Sarbanes-Oxley
compliance
• Custom dimensions and flexible reporting facilitate GAAP “bridge”
reporting
28. Bridge Reports
Multi-GAAP reporting compares results and quantifies the differences.
HFM has been
used for multi-
GAAP reporting
for years.
KPI’s can be
executed on any
piece of data
Source: Oracle
30. Impact on HFM applications
Data
● Some source data will be reclassified in the ledger, such as
labor components of Cost of Goods
● Direct method for cash flow
Metadata
● Some accounts will be moved around
Rules
● Reconsider consolidations
Reports
● A bit of work here
● Greater focus on footnotes
Supporting processes
● Burden on the close cycles for first year or two
● Budgets and forecasts will be impacted too
31. Application Design Considerations
• Based on your specific IFRS requirements, how will this impact
your HFM apps?
• Preferred Approach - Use a custom dimension
• Like a data type – start off with GAAP and adjust it to IFRS
• Other options to consider are:
• Create a new application
• would include new accounts, new rules, new reports…
• Use a new set of accounts
• most of the base would be the same
• may need more detailed accounts in some areas
• new parent accounts would be required
• Use new entities – depends on consolidation complexity
32. More System Considerations
• New Financial Reports
• New formats plus bridging statements
• Adjust your XBRL reporting – new taxonomies
• Disclosure Management product
• Adjust your FDM apps
• Know the impact of your decision on your application
• The choice to build this in you customs, accounts or entities
may depend more on the application you have.
• Chris Barbieri, Ranzal has some great metrics to help guide
your decision.
33. Dimension Average Record Comments
Volume ed High
Accounts 2,132 14,409
Entities 1,165 22,882
Currencies 16 233 use only 1 currency 30%
Custom1 388 19,410 use Custom 1 96%
Custom2 153 15,188 use Custom 2 86%
Custom3 61 26,816 use Custom 3 86%
Custom4 39 11,389 use Custom 4 62%
Scenarios 11 78
Entity hierarchies 3 24 the equivalent of Organizations in Hyperion Enterprise
ICP Accounts with Plug 41 1,223 use automated intercompany matching 56%
Accounts with Line Item Detail 36 1,667 16% use this, but only 10% have more than 1 account
flagged
Consolidation Rules - - use consolidation rules 28%
Consolidation methods 5 10 use methods 14%
OrgByPeriod use organization by period 9%
ICP Members 86 1,407 track intercompany activity 81%
Entities flagged for Parent Adjs 143 7,698 Allow [Parent Adj] or [Contribution Adj] journals30%
Scenarios using Process Mgmt 5 53 use process management46%
35. Closing Remark
“You’ll need plenty of runway. You’ll have to provide comparative
financials during conversion—and deal with all the systems,
process, and organizational issues surrounding the transition. It
will take time. And it will ultimately require your signature.”
Deloitte
Source: Deloitte – Straight Talk Book No. 11
37. More Information on IFRS
Source On the Web
American Institute of CPAs www.aicpa.org
Financial Accounting Standards Board www.fasb.org
International Accounting Standards www.iasb.org
Board
International Federation of Accountants www.ifac.org
International Financial Reporting www.ifrs.com
Standards Resources
International Organization of Securities www.iosco.org
Commissions
Securities and Exchange Commission www.sec.gov
SEC roadmap www.sec.gov/spotlight/ifrsroadmap.htm
Wikipedia en.wikipedia.org/wiki/IFRS
38. Presentations
Calculation Manager: The New and Improved Application to Create Hyperion Planning
Business Rules – Monday, 11:15 am, Room 102C
Security and Auditing in HFM – Tuesday, 4:30pm, 101B
Best Practices for Using DRM with EPMA – Wednesday, 8:30am, 103A
Getting Started with Calc Manager for HFM – Wednesday, 8:30am, 101B
Advanced Topics in Calc Manager for HFM – Wednesday, 9:45am, 101B
Maximizing the Value of an EPM Investment with ERPi, FDM & EPMA – Wednesday,
11:15am, 101B
Taking your FDM application to the next level with Advanced Scripting – Friday,
8:30am, 101B
IFRS reporting within Hyperion Financial Management – Thursday, 10:30am, 101B