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A Strategic Approach to IFRS

August 14, 2009

Financial Reporting in the United States will be impacted by IFRS in the near term. This will occur through accounting standard convergence, impacts to international business transactions, the adoption of IFRS by counterparties and subsidiaries, the financial influence of IFRS on the consolidated results of multinational companies and ultimately the adoption of IFRS by the SEC. A transition from US GAAP to IFRS is like learning to speak a new language. Because such a transition has pervasive implications, most companies should be concerned with IFRS now.

Leading companies are beginning to employ the best practice of considering how IFRS may impact current decisions and transactions. As some companies consider long term contractual relationships, acquisitions, system implementations, tax planning and similar longer term arrangements, they are beginning to assess how the eventual adoption of IFRS may impact the outcome of their decisions. The eventual adoption of IFRS will impact many strategic and business issues and will require a significant amount of time and resources in the coming years. It is best to begin thinking how you should address IFRS today and in the future

Companies that begin to strategically address IFRS today, even in light of the today’s economic concerns and the possibility of a protracted IFRS adoption timeline, will be better positioned to take advantage of the benefits of moving to a single set of global financial reporting standards within their organizations. By moving to a single standard, companies will be able to migrate to a single global accounting platform, a single set of accounting policies and procedures, a consolidated global financial reporting office and similar efficiencies or cost savings initiatives.

 

A Strategic Approach to IFRS

Now is the time to develop a thoughtful, measured and strategic plan for maintaining IFRS awareness and strategically addressing IFRS transition considerations. If they have not done so, most companies should consider the following as they strategically address the IFRS impact on their organizations:

  • Perform an IFRS business impact assessment to identify business, accounting, tax, systems, controls, workforce-and investor related issues
  • Closely monitor US GAAP and IFRS convergence activities as well as IFRS regulatory actions
  • Begin to consider the impact of IFRS on today’s business decisions, contractual commitments and financial transactions
  • Control the timing and strategies used by non-US subsidiaries as they may be required to adopt IFRS earlier than the rest of the organization.
  • Incorporate IFRS strategies into long term plans to make sure that IFRS is considered as the US moves gradually toward adoption.
  • Consider some of the more complex transition issues that may involve significant time and effort to adopt. Plan now to address complex transition issues in a gradual and thoughtful way.
  • Be alert for smaller transitions and easy wins that can build momentum and confidence as you move toward IFRS

Gain a competitive advantage by developing strategic IFRS adoption plans today that can make the most of IFRS related changes tomorrow.

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