IFRS Accounting - Where Do You Start?

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Your answer depends upon the number of layers you want to affect in your system.

The first step in analyzing your software systems is to determine the source of transactions and at what point you want to be able to diverge reporting between GAAP and IFRS (International Financial Reporting Standards).  Consider a system diagram:

How many layers do you want to affect?

Three layers are considered for determining where you want to start to diverge IFRS from GAAP in Microsoft Dynamics® GP:

  1. Consolidated Reporting
  2. General Ledger level
  3. Sub-ledger transaction level

Selection of the layer where you want to differentiate GAAP from IFRS determines the methods from which you choose to deploy IFRS. The levels are enabled by the various methods.

First we’ll discuss the optional layers from which to deploy divergent IFRS and GAAP statements then we’ll discuss the available methods.

Consolidated Reporting Level

Reporting from the very top level, during deployment of consolidated reports, is the most frequent option selected by companies. Only high-level transactions are created. For companies just starting with IFRS, this is an easy method with which to begin. Companies with less complex requirements may continue with this level of reporting during their two-year transition period.

Because most companies considering IFRS will eventually switch from GAAP to IFRS, the initial concern is the difference between the two methods which must be reported for two years. While the Consolidated Reporting Level is in use, the company may be deploying a more permanent solution capable of continuing to report by IFRS.

This level of reporting may be enabled by external worksheets or via consolidated reporting of multiple company databases.

General Ledger Level

The General Ledger Level of deployment implies transactional-based entries. This level can be utilized with a duplicate database, parallel set of accounts, account attributes with segment differentiation, account transaction attributes, classification of account transactions, or a hybrid approach.

This level of reporting implies greater complexity and may be regarded as a step towards full deployment of IFRS.

 Sub-ledger Transaction Level

Systems capable of sub-ledger transaction level of deployment of IFRS and GAAP are generally more complex systems known as Tier 1 ERP systems. The companies may already be deploying multiple databases, multiple corporations may be slated for conversion to IFRS, the parent company may need to stagger deployment of IFRS throughout multiple international organizations, or a need may exist to continue to report by both IFRS and GAAP beyond the requisite two-year transition period.

Sub-ledgers capable of generating both IFRS and GAAP transactions could likely be generating revenue and expense deferrals; contract, project, or job cost accounting; or fixed asset accounting.

Companies with Tier 2 ERP systems may initiate the use of third-party modules or customizations. Or, as I will propose later on, creative use of existing modules.

Next blog we’ll answer the question, “IFRS in Dynamics GP – How do You Duplicate Your Database?”

©2010, Computeration, Inc.

Coming soon…our free IFRS white paper. Reserve your copy of  If IFRS is on Your Horizon, What are Your Choices? now.

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By Gloria Braunschweig, The IFRS Implementation Expert for Dynamics GP, with Computeration, a Pacific Northwest Microsoft Dynamics GP Partner.

Computeration specializes in ways to enhance your company’s solutions with Microsoft Dynamics GP in Idaho, Oregon, and Southwest Washington, with clients around the world, Computeration makes your implementation successful by offering experienced project management, data integration, training, and consulting services.

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