Spring 2010 issue of Horizons

PEOPLE • What resources are available to dedicate to this project? • Will more resources be required on a full-time basis? • Assignment of a steering committee and project management team • Identification of technical experts • What employee training will be required?

PEOPLE

PROCESSES • Documentation of accounting policies • How will changes affect SOX compliance and documentation? • Are consolidation changes required? • Will front-end applications procedures and/or journal entry processes need to be changed to handle capture of data? • What opportunities are available for process improvement during adoption? TECHNOLOGY • New financial statements may require re-mapping of current chart of accounts. • Is there a need for new data capture? • Is existing chart of accounts sufficient for capturing new data? • Are current systems capable of handling new calculations, procedures and reporting requirements? • If new technologies are needed, how will selection, implementation, migration and testing be handled? • What modifications/reconfigurations are required of existing systems? changing the underlying processes and controls, it will put a greater strain on this process and will require more time to gather the necessary data, making it a less efficient approach. The switch to IFRS also will affect an organization’s tax planning and reporting; therefore, organizations must plan for these changes. One major effect on a company’s tax planning is the disallowance of the LIFO inventory method under IFRS. IFRS states that an organization following IFRS may not use LIFO when accounting for inventory. This change affects tax planning due to the fact that the Internal Revenue Service allows a company to use the LIFO method for tax purposes if the company uses LIFO for its financial reporting. Since

STRATEGIC OBJECTIVES

PROCESS

TECHNOLOGY

Internal controls must be reevaluated given the subjective nature of IFRS and assessed against SOX compliance. In addition, the financial reporting process will be greatly impacted. Each of the financial statements are presented differently under IFRS than U.S.- based GAAP, and additional disclosures must be noted under IFRS. If the underlying processes and controls are re-engineered and reevaluated first, then changes to the financial reporting process will be easier to implement, as the data needed to prepare the financial statements should come from the underlying processes.

If an organization takes a top-down approach, e.g., it starts with the financial reporting process without

11 u spring 2010 issue