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The Impact of IFRS Transition on Information Systems

April 9, 2009

The impact of a transition to IFRS on information systems should not be underestimated. How your systems will be impacted depends on the extent of system utilization, the complexity of your information architecture, your strategy in the use of systems and the number and complexity of applications involved. The change in accounting treatment from US GAAP to IFRS may require new data elements, a change in calculations and changes in the depth and format of reporting. Systems may also need to be reconfigured or remapped to address the accounting standard changes.

The change to IFRS also offers many potential advantages. Companies with a global footprint will have the opportunity to standardize on one accounting language across all of their geographic regions. There may also be an opportunity to consolidate system platforms using uniform processes and applications across the globe. Companies will have the unique opportunity to start with a clean sheet of paper and design their systems architecture in a way that would be most advantageous to their economic future (or at least take steps to move toward the ideal architecture). Systemized processes and internal controls could be redesigned and automated to a greater degree than they were in the past resulting in productivity and profitability increases. Companies could also gain strategic advantages over competitors through redesign and increased utilization of information systems.

All of this change is not inexpensive. While there could be significant future advantages, the cost of transition could be great as well. Changes in hardware and software can be very costly and need to be heavily managed throughout the transition to IFRS. Europe and Canada experienced shortages in information technology professionals as the IFRS transition date approached. This too could add to the burden companies may face in managing the accounting standard change. Companies should begin to plan and act now to minimize the cost of modifying systems. In addition, strategic decisions should be made early to limit unnecessary costs.

Are you developing your technology strategy for transitioning to IFRS?

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