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IFRS Best Practices

IFRS will eventually become the public financial reporting standard for the United States. The only question that’s unanswered is when will the United states convert. When we do convert to IFRS, what best practices should we utilize? Here are ten best practices for your consideration. Comment to this post with other best practices you think we should employ.

My Top 10 Best Practices:

Tone at the Top: When converting to IFRS it is essential that employees know that the conversion effort has the support and backing of the executive management team. Conversion teams need sponsorship and support. When conversion teams know that management supports their efforts, they are more confident to carry out difficult conversion tasks. Management needs to support the time and resources needed to complete conversion activities.

Utilize a disciplined project management methodology: The most successful large projects utilize a disciplined project management approach. The conversion to IFRS is a very large effort that will involve and affect many areas within an organization. Conversion teams need to be held accountable for assigned tasks. Roadblocks and conversion issues need to be actively managed. A disciplined project management approach will provide the needed accountability.

Understand your conversion timeline: Pick a conversion date then stick to it and prepare for it. Having a firm conversion date will encourage employee “buy in”. With the conversion date in mind, establish accountability dates and milestones to encourage progress during your conversion project. Hold conversion teams accountable for acheiving results on a timely basis.

Identify the areas other than financial reporting that will be affected: The conversion to IFRS is more than an accounting exercise. When a company changes to IFRS it certainly impacts the financial reporting numbers and disclosures, but there is much more involved. Debt covenants and financial agreements (and other legal agreements) are impacted. There are new amounts to track, report and disclose leading to processes being impacted. Information systems must evolve to allow for new processes and new financial reporting needs. Human resources must be involved due to the need to manage contractors and consultants that assist in the conversion. Tax differences will change due to all the actual financial amounts changing. There is much to do in an IFRS conversion!

Be effective with training: Training must be appropriately timed and at the appropriate depth. Training that is too early will be forgotten before use. Providing in-depth training to non-financial employees is not cost effective. Remember your students’ needs as you deliver rightly timed training at the right topical depth.

Communication: Communicate early, but not too early. Employees and external stakeholders need to know what’s going on with your IFRS conversion. Be direct so that your message will be clearly understood. Make sure your messages are properly timed and appropriately comprehensive. Manage the expectations, especially for external stakeholders.

Learn from European experiences: The Europeans have been through the IFRS conversion process. We would be wise to learn lesson from their experiences. What worked for the Europeans and what didn’t? What did they wish they had done differently? What are they doing now to improve their financial reporting processes that would have been more effectively done during the conversion to IFRS.

Benefit from IFRS Conversion: There are many opportunities to benefit from the conversion to IFRS. When all business units across the globe speak the same accounting language, accounting operations can be consolidated into one global shared service center. Under IFRS financial reporting becomes more transparent. When accounting standards are international, policies and procedures can be rationalized globally. Processes and internal controls can be standardized because everyone speaks the same financial reporting language. Worldwide competitiveness is improved since competitors already use IFRS. The cost of raising capital is reduced and every capital market is accessable. Take advantage of IFRS conversion opportunities.

Perform an Impact Assessment: Performing an impact assessment today will identify how your company will be impacted by IFRS in the future. Because each company is unique, each IFRS conversion will need to be unique. Knowing how your company is impacted will facilitate development of your IFRS project plan, establishment of your IFRS conversion timeline and early identification of key employees to involve in the conversion effort. Understanding how your company will be affected will enable you to tailor your conversion to your company’s needs. You can perform your impact assessment yourself or involve the talent and expertise of firms like Jefferson Wells to perform the impact assessment for you.

What IFRS Best Practices will you utilize?

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