EY IFRSComments

As us gaap evolved so did companies processes and

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Unformatted text preview: ed reporting controls. Companies should also consider the benefits of a change to IFRS when reengineering their financial reporting processes. Possible benefits can be gained by remapping the chart of accounts and using system attributes to drive financial reporting. As US GAAP evolved, so did companies’ processes and data collection activities. Adopting IFRS gives companies an opportunity to take a clean look at these processes and possibly simplify them. Because IFRS may be used in multiple locations and across countries, it has also been a driver for companies that wish to centralize their financial reporting functions in order to create efficiencies. The degree to which such efficiencies could be realized depends on the number of entities that can or do use IFRS in their local statutory filings. Continued on page 4 BoardMatters Quarterly April 2008 3 Continued from page 3 (or a derivative of IFRS) to report in statutory filings. Ensuring that an entity’s subsidiaries are interpreting IFRS on a consistent basis is an important control objective. Change to the business Many companies have ongoing “finance transformation” projects aimed at improving the efficiency and effectiveness of their financial reporting functions. In planning for such projects, companies should consider the effects of a possible move to IFRS in order to avoid the need for costly subsequent revisions to the project. Selecting accounting policies that are out of step with others in its industry may make the company’s results difficult to analyze in relation to its competitors. Common areas of concern are revenue recognition rules and capitalization of intangible assets such as research and development — areas where diversity of accounting interpretation may exist. Global peers and competitors Comparability of financial information among peers and competitors is also an important consideration in the adoption of IFRS. Accordingly, management should assess the interpretation and election of accounting principles under IFRS by its global, domestic and industry peers and competitors. Although not all companies within the same industry will select identical policies, management’s analysis would not be complete without this assessment. Other Finally, even those companies taking a “wait-and-see” approach regarding IFRS may be affected by significant ongoing US GAAP to IFRS convergence efforts. First, the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB)— in the name of convergence — are working closely on almost every major project that will affect US registrants in the foreseeable future, from revenue recognition to income taxes. Anticipating the effects of future US GAAP developments is no longer isolated to monitoring the FASB’s activities in Norwalk, Connecticut. Instead, US GAAP preparers should also be monitoring what happens at the IASB in London. For US companies, there may be a “first mover” advantage in converting to IFRS, because such companies may potentially influence the interpretation of IFRS in the US. In addition, there are c...
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This note was uploaded on 11/21/2009 for the course ACC acc 310 taught by Professor Mlot during the Fall '09 term at N.C. State.

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