IFRS - Transformation Agenda for Saudi Corporates€¦ · · 2014-06-04IFRS - Transformation Agenda for Saudi Corporates 3rd Saudi-Pak Accountancy Symposium – Riyadh May 15, 2014
Post on 08-Apr-2018
227 Views
Preview:
Transcript
IFRS - Transformation Agenda for Saudi Corporates 3rd Saudi-Pak Accountancy Symposium – Riyadh May 15, 2014 Organized by ICAP KSA Chapter
www.pwc.com
PwC
Origin of IFRS
IASC (International Accounting Standard Committee)
IASB (International Accounting Standard Board)
• Introduced in 1973 • Issued the IAS’s (International Accounting
Standards)
• Introduced in April 2001 • Succeeded IASC • Introduced IFRSs( International Financial
Reporting Standards) • Introduced IFRIC (International Financial
Reporting Interpretation Committee)
IFRS is now widely applied around the world. Today over 140 countries either require or permit the use of IFRS for public company reporting
PwC
What are International Financial Reporting Standards (“IFRS”)?
IFRS is a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information to be disclosed in general purpose financial statements.
They comprise:
IAS’s (Standards issued prior to the formation of the IASB)
IFRS‘s (Standards issued post the formation of the IASB)
IFRIC’s (Interpretations)
SIC (Standing Interpretations Committee)
There are
28 IASs (part of them were superseded by IFRSs. Or withrawn)
14 IFRSs
16 IFRICs
13 SIC
Where do they come from?
The International Accounting Standards Board (“IASB”) establishes the standards through a consultative process
The IASB has 16 full time members
The IASB is the independent standard-setting body of the IFRS Foundation – a not for profit organisation
The IFRS Foundation is an independent, not-for-profit private sector organisation working in the public interest.
The Foundation is run by a board of Trustees
The IFRS Interpretations Committee has 14 members appointed by the Board of Trustees
International Financial Reporting Standards
PwC
SOCPA
5
• The Saudi Organisation for Certified Public Accountants (SOCPA) was established under Royal Decree No. M12 in 1991
• SOCPA’s responsibilities include development and approval of accounting and auditing standards . It operates
under the supervision of the Ministry of Commerce. • All banks and insurance companies are required to adopt IFRS (SAMA requirement),
• In 2013, SOCPA approved an IFRS convergence plan by which listed entities other than banks and
insurance companies would be required to report under SOCPA standards that will be IFRSs with some modifications – “ IFRS as adopted in Saudi Arabia”
• Listed entities are required to adopt in 2017; and • Remaining entities are required to adopt in 2018
• IFRS in Saudi Arabia will be similar to the standards issued by the IASB with possible modifications in three
respects:
• Adding more disclosure requirements • Removing optional treatments; and • Amending the requirements that contradict Shariah or local law, taking in consideration level of
technical and professional preparedness in the Kingdom • The IFRS transition is part of a project called “SOCPA project for transition to International
Accounting and Auditing Standards”
PwC
The Global Move to IFRS
6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
IASB Formed in
2001
Previously referred to as International Accounting Standards
(“IAS”)
EU announces adoption of
IFRS for listed entities
EU listed entities adopt
IFRS
First “IFRS” issued
19 Countries using IFRS
the reporting framework
KSA Adopts IFRS for
listed entities
KSA announces adoption of
IFRS
70 countries adopted IFRS
for listed companies
141 countries have adopted
IFRS for listed
companies Continued adoption of
IFRS expected
• Saudi Arabia is the only country of the G20 that has not adopted IFR
PwC
Why IFRS?
7
There are numerous reasons as to why countries (and businesses) are supporting the move to IFRS: • Access and movement of global capital:
• Investor confidence • Access to broader investment base • Better supplier / payment terms for businesses • Lower costs of capital • Improved liquidity in the market
• Regulatory
• Better comparability of financial reporting • Improved transparency
• Business
• Improves the skills of workforce • Standardises processes / procedures and policies across a group • Lowers costs
The support for IFRS adoption is broad:
• International Organization of Securities Commissions (IOSCO); • International Federation of Accountants (IFAC); • Securities and Exchange Commissions (SEC); • Basel Committee; • The World Bank; • International Monetary Fund (IMF); and • The European Commission /all support the adoption of IFRS
PwC
December 31, 2017
= Expected reporting date
Opening IFRS Balance Sheet
(1 January 2016)
= Transition Date
Use IFRS standards in force at the reporting date
Conversion timeline
IFRS
IFRS 1 limits full retrospective application
SOCPA
December 31, 2016
= Comparative period
8
IFRS adoption in Saudi Arabia
Dual reporting & reconciliations
PwC
Key considerations for conversion in Saudi Arabia
9
Listed entities; • First balance sheet needed as at 31 December 2015 – 18 months away.
Unlisted entities • First balance sheet needed as at 31 December 2016 – 30 months away. Issues arising: • Gap differences need to be identified quickly across the group – this is not a head office issue alone
• Data requirements
• Processes and system changes potentially required to capture the right data
• Resource requirements – recruitment and training solutions
• Reconciliation processes to ensure dual reporting can be accomplished in the transition year
Accordingly • The conversion require s immediate planning to assess how to manage the process and address the technical
complexities, the legal complexities, systems updates and training the employees.
• Companies need to quickly assess what additional assistance / resources are required to perform the conversion and to enable them to meet the deadline of 2017.
PwC
IFRS conversion – the key message
EVERY CONVERSION EXERCISE IS DIFFERENT
People Activities
Entities
Starting point
Systems
Data Geography
Centralisation
Management
Transactions
PwC
IFRS conversion
What are the challenges of a conversion?
Do I have the right people?
What activities I should be doing?
Where to start?
Will the conversion affect the systems I am using?
Can I generate all the required data?
Should the conversion start at the group level of subsidiaries level?
How to involve management in the decision making?
How to account for all transactions?
How should the conversion process be designed?
Design a comprehensive
approach
Design a flexible approach to involve
all parties at your entity
Ensure to address anticipated issues before it happens
Agree milestones
Have the right governance structure and decision making capabilities
PwC
The Conversion Approach
Project and change
management
Gap analysis and
roadmap
Conversion Embedding
People Processes
Systems Financial manage-ment and reporting
Policies
The PwC IFRS (or equivalent) conversion methodology typically follows a three-phase approach as illustrated opposite:
GAP Analysis and Roadmap: involves a detailed gap analysis, which produces a roadmap for successful conversion; Conversion: results in the production of the first IFRS financial statements; Embedding: ensures that systems, processes, policies and behaviours are adopted to report efficiently under IFRS (or equivalent) on an ongoing basis.
“Guiding you through the conversion”
12
PwC
Illustrative effort and impact of selected IFRS to SOCPA differences
13
IFRS adoption in Saudi Arabia
Implementation effort/complexity high
high
Fin
an
cia
l s
tate
me
nts
eff
ec
ts
Consolidation, JV’s &
associates Financial instruments
Business combination OCI
Disclosures
Derivatives and hedging
Investments
Fixed assets
Intangible assets
Borrowing costs
Leases
Zakat/ Taxes
Impairment
Inventory
Investment properties
Related parties
Employee benefits
PwC
Finance Systems Architecture and Data Flows
Fin
an
ce
& A
cco
un
ting
Lo
gic
al D
ata
Flo
w
Financial Applications - differences between business units / subsidiaries (Oracle, SAP, Microsoft)
Workflow
Master
Data
Management
P2P
Other
Financial Applications – Consolidation, Planning / Budgeting and Reporting
Management
Reports Planning /
Budgeitng Consolidation
Integration
Reporting Delivery
Web Reports Fin Reporting Bridge
Business
Intelligence
E-mail Standard Reports
Integration
Output Requirements
- External Applications XBRL filing / IFRS / SOCPA
Reporting Zakat / Tax Reporting
PO AP
GA
PO AP
AR CM
O2C
Projects
Financial
Reports
14
PwC
ERP and Policies Reconfiguration - Design considerations
Global CoA design
15
Reporting Currency (SAR)
Reporting Currency (SAR)
Sub-ledger accounting
Sub ledger Transactions
Sub ledger accounting
Co X (Primary Ledger)
IFRS GAAP
Co X (Secondary Ledger) SOCPA
AP AR FA Others
Co X (Legal Entity)
Accounting
Transaction
1. Utilize multiple accounting
representations and ledgers -
Transactions are still carried out only once
2. Optional secondary accounting
representation, based on adoption of
accounting policies and IFRS convergence
strategy
3. Allow
1. Dual reporting
2. Automated IFRS adjustments
(different accounting treatment for
same transaction)
3. Develop reconciliation reports
4. Audit trail of moving away from dual
reporting and reconciliation environment
to one converged reporting
PwC
Transaction Processing Record Transactions - The process of determining, creating, approving and posting transactions to the ledger
Perform Intercompany Accounting The process associated with intercompany invoicing, posting of transactions, settlement, dispute, reconciliation and query management
Manage Interfaces - Refers to the management of interfaces between the ledger and other systems (multiple ERP systems, legacy systems, sub-ledgers, etc.)
Record Transactions
Manage Interfaces
Perform Intercompany
Accounting
Close and Consolidation Reconcile Accounts - The process of establishing the reconciliation policy and approach, performing reconciliations, resolving issues and obtaining approval
Close Books and Consolidate – Refers to the monthly, quarterly, half yearly and / or annual process of booking period end entries, closing the ledger, consolidating financial result and producing the trial balance
Close Books & Consolidate
Reconcile Accounts
Analysis and Reporting Perform Statutory Reporting - The process of creating standard financial statements (balance sheet, income statement, cash flow etc) and supplementary reporting in accordance with relevant accounting principles.
Perform Regulatory Reporting - The process of creating statutory and / or regulatory reports and submitting to the appropriate authority
Perform Management Reporting - The management reporting process refers to the creation of reports designed for internal management use and decision support
Perform Statutory Reporting
Perform Management
Reporting
Perform Regulatory Reporting
Maintain Accounting Master Data
Maintain Accounting Master Data: Includes the chart of accounts / code block, cost center structure, profit center structure, legal entity structure, and various other dimensions / elements for accounting data
35
Reporting considerations and process summary
PwC
What questions should you be asking now? Considerations for management and audit committees
1. Planning Are you aware of what needs to be done?
2. Applying IFRS 1
3. Accounting policies
4. Stakeholders
5. Embedding IFRS
Have you considered the implications of the relevant exemptions?
Have you considered all the relevant options and new standards?
Are you managing stakeholders’ expectations?
How will the entity conduct business as usual?
18
PwC
IFRS – top 10 pitfall considerations
1. Understanding and analysing impact on financial performance
2. Commitment and involvement at all levels of the organization
3. Underestimation of the amount of work involved, scale and complexity of the conversion
4. Unprepared team to deal with the technical issues encountered.
5. Shareholder and analyst communication
6. Data availability and system requirements
7. Coordination with regulatory reporting requirements
8. Re-alignment of management information systems
9. Risk management
10. Uncompleted embedding of IFRS changes, resulting in spreadsheet accounting
19
PwC
Our experience says
• Do not delay the process – act now!
• Have the FD as the Project Sponsor
• Define clear project and governance structures
• Implementation plan should have clear milestones and timelines
• Educate stakeholders early in the process
• Align IFRS conversion with entity’s strategic objectives
• Financial reporting solutions should be sustainable
• Make sure your advisors do not do it too for you, but do it with you
• Understand where IFRS is going
20
PwC Slide 21
The information contained in this presentation is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved. Before taking any action, please ensure that you obtain advice specific to your circumstances from your usual PricewaterhouseCoopers client service team or your other tax advisers. The materials contained in this presentation were assembled in September 2013 and are based on the law enforceable and information available at that time. © PricewaterhouseCoopers, May 2014. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
top related