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ACC 626
Rachelle Kou
Need comparatives – typical conversion takes 2-3 years to plan and implement
Avoid cost overruns – IT involvement represents 50% - 70% of overall project cost
European experience – underestimated IT impact - conversion is not simply an accounting issue!
Establish IT Steering Committee and project plan
Tone at the top! ◦ Instill a sense of urgency for the project
Keep Board of Directors and Audit Committee informed of project plan and progress
Key: project management and competent IT personnel
Knowledge transfer between IT and accounting departments
Involve internal auditors ◦ Project risk management
◦ Internal Controls over Financial Reporting (ICFR)
◦ Disclosure controls
◦ Change management
Add data fields for financial reporting systems:◦ IFRS requires more detailed disclosures◦ Accounting policy changes, E.g. % of completion method
Amend key inputs into internal reporting systems:◦ Budgeting & forecasting, performance
management, incentive-based compensation
Reconfigure existing IT systems:◦ Calculate or process data on a different basis◦ E.g. Separate general borrowing costs from those related
to qualifying assets
ACCOUNTING CHANGES IMPACT ON IT SYSTEMS
Revenue recognition:• Must use % of completion
method
• Calculate work progress - Need new data fields to capture
cost incurred to date, overall budgeted costs etc.
PPE:• Different calculation for cost base •Componentization
• Require additional measurement area within the accounting system to record significant asset
components and depreciation
Investment Properties: • Choice of FV methods• Challenges for parallel reporting:
- Local: Amortized cost, separate land and building
- IFRS: FV, measure as one unit
• Need separate approach in ERP system
• Restructure PPE accounts to separate out investment properties
5 dimensions:
Source: “Technology Implications of IFRS adoption for U.S.Companies”, Deloitte Consulting 2008
Asset Management – modify for changes in PPE accounting◦ (a) Need additional depreciation area
◦ (b) Alternative: Duplicate all fixes assets master
records that have measurement differences
(a) (b)
Inventory & Purchases◦ Prohibited LIFO
◦ Lower of cost and NRV
Asset Valuation◦ Impairment testing & reversals of impairment
losses
◦ Cash-generating units
Linkage to upstream systems:◦ Modify GL design and Chart of Accounts◦ Analyze reconciliation process between sub-ledgers
and GL◦ Change calculation engines for revenue recognition
and expense allocation method
Linkage to downstream reporting systems:◦ Change mapping tables for generating F/S◦ Update mappings to internal reporting systems
Multinational companies need to modify GL structure to ensure compliance with multi financial reporting format
Standardize financial data for more extensive disclosure requirements
Create/modify data governance function and metadata repositories to reflect revised data models
Increased need for data storage and retention
Revise external reporting templates
Consolidation systems ◦ Amend extraction process in include missing data
for consolidating entities
Additional CPU and memory requirements ◦ Avoid untimely reporting!
Change existing EDI or web interfaces to 3rd
party IT systems
1. Tweak existing system:
Manual adjustments to change GAAP numbers to IFRS numbers
2. Modify existing system
Common account approach
Duplicate ledger approach
3. Implement whole new financial reporting system
1. Conversion at group level
Top-level adjustments at consolidation stage
2. Conversion at subsidiary level
Adjustments at each subsidiary
3. Conversion at source
Modify source system at each subsidiary
Sustainable solution
Test all proposed system changes
Parallel dry run of processes and controls◦ Involve end users!
Monitor internal controls over financial reporting (ICFR) to ensure compliance with SOX-44 (US) and NI 529-09 (Canada)
General application environment◦ Business process controls and automated
transaction controls
◦ ICFR – verify accuracy and reliability of new data
◦ Review spreadsheets and other end-used applications
◦ Ensure integration with core financing systems
Documentation of internal controls◦ Increased use of judgment and textual description
◦ E.g. Identify asset components, lease classification
Identify required changes to IT systems
Modify or entirely replace systems
Update internal controls
Continuously monitor and test changes
Project management team
PLAN EARLY!