July 9th, 2010 | Posted by A year ago, Trintech issued a document discussing looming changes in financial reporting, including eXtensible Business Reporting Language (XBRL) and International Financial Reporting Standards, (IFRS). XBRL is now well underway, and most companies are outsourcing the tagging to printers while also looking at embedded technologies to streamline processes and cut costs. IFRS preparations, however, continue to wait on the back burners.
The Boards of the Financial Accounting Standards Board (FASB) in the United States and the International Accounting Standards Board (IASB) have developed a series of joint projects to help move US GAAP into alignment or “convergence” with IFRS. In a Memorandum of Understanding, issued in June of 2010, the Boards updated their progress on these various projects, which include topics such as financial instruments, leases and revenue recognition. The Boards update also noted that the changes resulting from these joint projects may have significant impact: in order to allow US companies adequate time to review respond to exposure drafts they will focus on issuing no more than four in a quarter. In a separate statement, Mary Shapiro, SEC chairman, stated that the changes in the timelines of the Boards will not change the 2011 date set for the SEC to determine whether IFRS will be adopted for US SEC reporting entities.
The Issues for Technology:
Most companies at this juncture have evaluated the impacts of IFRS or are in the process of doing so. It is unclear what the technological implications might be for solutions that will support what will certainly be a major shift in accounting practices during this convergence towards more principles-based standards. To date, accounting technology has worked with the algorithms needed to calculate and record transactions in accordance with US GAAP. More principles-based standards allow more expert discernment of scenarios and circumstances in the determination of how transactions will be recorded, which adds a new layer of complexity to the required calculations and the required documentation. Large companies often have five-year roadmaps laying out systems plans, and many businesses have started working towards a 2014 implementation date for their IFRS compliance solutions.
Where Trintech Reporting Software Fits:
The consultants and experts are preparing for the onset of IFRS – in whatever form it will eventually take. There is much helpful literature on how to tackle the issues. Trintech’s Financial GRC platform, Unity, offers an opportunity to support the process optimization which will be the end result of IFRS adoption within technology.
- Documentation and Policy Management: IFRS will require accountants to understand new policies and carefully document positions. Trintech’s platform schedules and delivers personnel the most recent documents, policies and associated templates required to perform tasks in a ubiquitous format called an action plan. Communication will need to be clear and current. Trintech enables a seamless process to keep personnel aligned in task execution, no matter where they might be located.
- Reporting Process Management: IFRS adds a new layer of expertise, review and work management to the reporting process. Companies that manage multiple reporting streams may need to have an IFRS team to manage the convergence to the new standards, and allow regulated and statutory managers to remain focused. The reporting process already has an unwieldy number of review layers and short, tight deadlines. Adding IFRS requirements may strain some reporting processes, resulting in errors or late filings. Trintech’s platform delivers a backbone of business process technology that can manage complex and layered workflow and hierarchies, giving reporting managers the confidence and efficiency they need to get financial documents prepared for release.
- Reporting Collaboration: Management requires executive-level views to IFRS financial statements. The documentation may be much more extensive, and management may require more ready access to literature and supporting memos. For some period there may be a transition, where management wants to see IFRS compared to existing US GAAP. Management will need confidence that numbers have been analyzed and verified, to ensure that they conform to the proper accounting standards. Trintech’s Financial Console presents financial information for IFRS, GAAP or any required reporting standard, in detailed and comparative views, including status tracking to indicate the progress of all required steps.
Conclusion:
Unfortunately there is no magic wand or fancy macro that can transform conversion to IFRS into a push-button exercise. Much work will have to be done by knowledgeable accountants to support the translations and positions taken. Trintech can support the processes by relieving the administrative burdens of managing tasks across the globe, presenting the issues, exceptions and status, and bringing confidence and efficiency to managing the complexities of a revised reporting process under IFRS. Trintech enables the production of a high quality, first draft of IFRS statements via templates to increases the quality and confidence in reported results.
