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Summary SEC statement on convergence and global standards Overview of the SEC (“the Commission”) statement
− Reviews Commission’s IFRS activities to date− Summarizes public feedback on the IFRS roadmap− Outlines an approach going forward
Includes a “Work Plan” setting forth specific areas and factors for consideration before potentially transitioning to IFRS
Withdraws the initial proposal on early use; although does not rule out an ability to early adopt in the future
Execution of the Work Plan, combined with the completion of the convergence efforts, could position the Commission to make an informed decision on an IFRS mandate in 2011
Future SEC rulemaking would be required to implement– likely effective in 2015
On February 24, 2010, the SEC issued a statement expressing its continued support for the development of a single set of high-quality globally accepted accounting standards and recognized IFRS as being best positioned to serve that role.
Planning to help ensure a cost effective implementation
− Answering key stakeholder questions regarding impact (e.g., earnings)− Determining high-effort and long lead-time items− Developing resource estimates and a plan of attack by area− Preparing for and accomplishing statutory conversions, as required
Monitoring the statutory reporting environment
Evaluating the impact on in-process ERP implementations and upgrades
Considering long-term benefit opportunities
− Simplification and streamlining of statutory reporting
− Simplified internal controllership processes—platform for finance transformation in selected areas
− Identification of impact on in-flight system modifications
− Tax planning opportunities
Based on our experience and knowledge, many companies are doing the following:
Many companies are performing or planning an IFRS impact analysis in light of IFRS developments and ongoing convergence efforts
Design, build, and test changes to ERP and other systems
Deploy systems
Evaluate dependencies on other Company Initiatives
Obtain IFRS tax
assessment
Assess process and control
impactsRedesign processes and controls
Assess organization
impacts
Prepare IFRS compliant financial statements
Identify Impacts on other internal and external stakeholders
IFRS conversion by Country
Implement organizational changes
Conduct user training
Assist business units in adopting IFRS
Assist Company to run U.S. GAAP and IFRS in parallel Identify and address reporting gaps
Identify/address process and control gaps
Identify and address system gaps
Identify and address org and people gapsDevelop user training
Identify other initiatives
Ongoing program management, change management, and communication
Obtain IFRS Tech Acctg assessment
Identify tax implications of global IFRS policies
Set Conv. Sequence
Evaluate tax alternatives
Determine hand-offs
Align with operating model
Develop communication plan/infrastructure
Transition
phases
High-level IFRS conversion roadmap
The following high-level IFRS conversion roadmap illustrates a potential IFRS adoption timeline and would need to be tailored to a company's unique facts and circumstances. Note that the expected date of IFRS adoption is based on the February 24, 2010 SEC Statement in Support of Convergence and Global Accounting Standards.
Consider areas of overlap with an IFRS conversion throughout the implementation processEvaluate the interdependencies in the assessment phase.
Common areas of focus Suggested activities as part of assessment
Chart of accounts (COA) structure • Understand what additional COA may be required under IFRS
• Understand if there is certain COA detail that might ultimately facilitate or simplify disclosures requirements under IFRS
• Map the IFRS sub ledger impacts to system functionality
• Facilitate COA rationalization effort is consistent with dual reporting approach
New entities potentially requiring consolidation
• Assess existing legal entity structure and COA under IFRS
• Consider legal entity structure changes for entities that could potentially be consolidated under IFRS
Dual reporting strategy • Develop a dual reporting strategy which comprehends the system
• Create journal entry methods/templates to accommodate new requirements
Ledger interfaces • Understand that the differences in the accounting treatment between current accounting standards and IFRS will likely drive changes to general ledger design
• Facilitate that the system legal entity structure and account structure can accommodate IFRS reporting
Timeline/roadmap for implementation
• Mapping/integration of systems and IFRS Roadmaps
Our experience with IFRS implementations has provided valuable insights
Issue Prioritization is Critical - Frequently a handful of issues will drive the vast majority of the work
Clearly Defined and Communicated System Requirements - Gaps typically exist between accounting conclusions and information finance technology needs
Effective Communication, Training and Change Management - Typically under-scoped, leading to ad-hoc questions and concerns
Granular Implementation Planning - Implementation roadmaps often are not sufficiently detailed to be actionable to identify key resource requirements and interdependencies
Disciplined Project Management Coordinated with Other Functional Initiatives - Downstream process and system analyses are frequently dependent on accounting policy selection
Consider U.S. GAAP Convergence as Well as IFRS - IFRS is driving significant changes to U.S. GAAP, in some cases on a more accelerated timeline
This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this presentation.