Planning for IFRS: Where is your tax function?

The conversion to IFRS will be a complex, time-consuming effort. It is critical that an organization's tax function is thoroughly involved in the company's overall conversion process from beginning to end. Organizations should include tax resources in both the planning and implementation phases to ensure that tax considerations are properly addressed. The development of a tailored IFRS-Tax action plan will facilitate the identification of potential opportunities and roadblocks, as well as provide a strategic path forward to manage the conversion process within the organization's global tax function.

Below is an illustrative action plan that your organization’s tax function can use to assess the steps necessary to implement IFRS within the company’s specific timeline.

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Phase 1: Preliminary impact assessment

  • Assess the level of IFRS knowledge and experience within the company's global tax function and develop a strategy for IFRS training
  • Develop a Phase 1 work plan
  • Execute the Phase 1 preliminary impact assessment and prepare a "summary of findings" report
  • Develop a Phase 2 implementation plan

Performing a phase 1 preliminary impact assessment of your company’s global tax function allows your organization to assess the impact of an IFRS conversion on the company’s tax accounting and financial reporting, tax compliance, and overall global tax planning strategy, as well as the level of effort that will be required to implement IFRS within your global tax function. 

The objective of this phase is to gather sufficient information about the potential impact on your tax reporting, compliance, and planning functions, as well as to establish an informed path forward for conversion to IFRS. The focus of this phase is a high-level assessment of the potential tax-related implications of the comprehensive conversion and embedding of IFRS within the organization.

Phase 2: Initial conversion to IFRS

  • Compile an inventory of all pretax accounting policy changes resulting from the conversion to IFRS
  • Perform the initial financial statement conversion to IFRS
  • Analyze the impact of pretax accounting policy changes on tax accounting methods
  • Prepare detailed calculations and documentation for all tax planning issues impacted by IFRS
  • Analyze the necessary modifications to tax systems, processes, and internal controls

During phase 2, the focus shifts to the detailed conversion to IFRS. Phase 2 represents the initial conversion to IFRS, including the development of shell IFRS financial statements and in-depth assessments, documentation, and calculations for all items impacted within the global tax function.

Phase 3: Integration of IFRS

  • Embed IFRS in the global tax function's systems, processes, and internal controls
  • Develop a plan to manage IFRS in the global tax function on an ongoing basis

Incorporating IFRS changes into the day-to-day operations, processes, and systems of your business (known as "embedding") is critical for a successful conversion. The objective of this phase is to ensure a smooth transition to IFRS so that your company can use the new IFRS language on a sustainable basis in future years.

IFRS: A tax perspective on implementation: IFRS-Tax action plan