At PwC, we have a proven track record in assisting companies to successfully complete the transition to new accounting standards. Our conversion specialists bring technical, training, stakeholder communications and change management knowledge to the project - reflecting the complexity of the task at hand.
To assist in implementing the change, we have developed a simple but effective IFRS conversion methodology that enables us to work collaboratively with companies throughout the transition period. There are three phases to an effective conversion process:
Phase 1 - Perform a preliminary study
Phase 2 - Initial conversion
Phase 3 - Embedding
Phase 1 - Perform a preliminary study
- This prudent first step puts your company in control by:
- Providing management with a high level of understanding of the impact of IFRS will have on key numbers and ratios
- Highlighting key accounting issues and any potential 'surprises' that should be addressed early.
- Allowing management to develop a project management plan. The preliminary study will outline the operational issues, systems improvements and resource requirements necessary for the IFRS conversion. A preliminary study allows companies to make an informed decision about how to proceed with IFRS conversion
Phase 2 - Initial conversion
- Project set-up. Setting up a specific project team is a necessary step to take so that the business functions can be appraised of what actions are being taken yet the operations can continue to be run effectively while the transition project is managed to a successful conclusion
- Component evaluation and issues resolution. Each impact - business or financial - identified during the preliminary study stage should be considered and appropriate changes to processes, procedures or structures developed and implemented.
- Initial accounts conversion. Having evaluated each of the IFRS conversion issues and developed and implemented appropriate responses management should produce initial IFRS financial statements, management accounts and other financial information so the business can see itself in the new IFRS context for the first time. This first set of IFRS financial information will allow management to identify any additional changes to practices, structures or systems that may be necessary in advance of adopting IFRS for external financial reporting to stakeholders.
Phase 3 - Embedding
This phase enables the business to finalise the changes in a smooth transition to a new way of operating, using the new IFRS language comfortably and authoritatively. In this phase you will continue to fine-tune the conversion, update and train relevant staff and continue investor and other stakeholder communication initiatives.
Process, People and Systems
Each phase above has three streams: processes, people and systems. During each phase, new IFRS policies will lead to new procedures, potential reorganisation, new or enhanced systems and a need for knowledge transfer to achieve new skills.
The best way to tackle each phase of the project is to think in terms of three streams running simultaneously. The priority of each stream will gradually shift as progress is made. These streams are:
1. Changing the numbers
This stream addresses accounting and finance issues by enabling management to:
- Identify the key issues and differences compared to Irish GAAP
- Identify the need for adjustments and additional disclosures, and provide appropriate explanation
- Amend or produce new accounting policies and manuals, and produce the first IFRS financial statements
- Consider how the viability of certain products and services may be affected, and if reported business performance changes, thus enabling business managers to take appropriate action
2. Changing people and processes
This stream addresses the organisational, behavioural and procedural changes by enabling management to:
- Consider the implications of the change to IFRS for corporate governance and the structure of the organisation
- Deliver the transfer of knowledge at both the executive and operational levels
- Change the reporting and business processes and procedures, as necessary to achieve the required new way of working
3. Changing information systems
This stream addresses the need to change or replace existing systems by enabling management to:
- Identify current data gaps and systems deficiencies
- Develop a detailed systems strategy to support new processes and procedures, thus enabling an informed capital investment decision to be made
- Implement a phased introduction of new systems to ensure that all staff are fully equipped for their new responsibilities, and that the business can run smoothly at each stage
For assistance in assessing the impact that IFRS conversion will have on your business, or help in developing a conversion plan please contact John McDonnell by telephone on 01 7048559 or by Email
