IFRS Transition

The current US accounting and reporting standards, in place for over 100 years, are falling short of meeting the information needs of today’s global economy. The International Accounting Standards Board created International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) in order to promote comparable financial statements for international companies. Today, global publicly traded companies need to adhere to IFRS while maintaining compliance with local tax, dividend, and other regulations – requiring at least two sets of financial statements.

Global Capital Markets depend on the new accounting standards.

And because capital markets, operating internationally, demand consistent financial reports for investment decisions, even non-listed companies are required to issue IFRS-compliant financial statements. This is the big reason for the push for IFRS/GAAP convergence. In fact, the SEC has recently announced plans to require all SEC registered companies to adopt IFRS as the US accounting standard by 2014.

From SPV’’s perspective, GRC depends on strict adherence to accounting standards as the framework in which transparency in financial reporting takes place. More then reporting rules, IFRS changes the valuation of business transactions which will require significant changes to accounting policies, processes and systems. While some ERP systems, SAP for example, support multiple sets of books based on different accounting standards, the transition to IFRS requires a great deal of planning, involvement with BOD, external auditors, stakeholders and accounting professionals for implementation.

New standard

The U.S. accounting system is based on detailed rules, while the international system expects companies to follow broad principles. The systems also differ on certain specific points.  Some examples:

	U.S. GAAP	International stanards (IFRS)
R&D costs	Generally counted as an expense when they occur	Spread out over time when project goes into development
Real estate	Value of real-estate assets can't be revised upward	Companies can revalue certain assets to fair value
Oil, gas, insurance	Has industry-specific standards	Few industry-specific standards
Off-balance- sheet rules	Putting related company off balance sheet depends on several factors including a calculation that tries to measure control	Generally more difficult to put off balance sheet. Key factor: Whether the parent exercises effective control.

Financial accounting and reporting systems will evolve to where both internal (ie. senior and operational management) and external (Board of Directors and Investors) stakeholder information requirements can, and will, be met sufficiently;

Training requirements for staff and management will need to be redefined, upon appreciating the skills and knowledge bases needed to generate and report new accounting information;

Accounting policy choices will be made with a clearer understanding of the impact on key performance measurements and indicators, while ensuring alignment with industry peers and;

Improved communication to relevant stakeholders should promote greater accountability and transparency

SPV Americas has the expertise to help your organization understand and meet the new reporting requirements and accounting challenges. Our goal is to help our clients to adopt and communicate, with confidence and authority, all relevant changes and enhancements to systems, controls, processes and staff by way of a smooth transition to the new accounting standards.