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EY IFRSComments

However his experience leads starkie to say that the

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Unformatted text preview: as conservatively, but rightly, estimated. Companies need to allow a full two years to accomplish all the steps necessary to introduce an entirely new accounting framework,” said Starkie. However, his experience leads Starkie to say that, “The biggest risk with an IFRS conversion is a lack of adequate support within the organization. Ensuring that everybody from management to the board of directors and the audit committee is continuously involved in the process is key.” His greatest initial challenge was getting senior management and the audit committee to buy in to the concept and understand that IFRS adoption was not just a technical accounting exercise but that it could — and probably would — affect the way BP structured and reported transactions, compensated its people, configured its internal reporting and IT systems and, most importantly, communicated with the capital markets. So how did Starkie and his team meet this challenge? Their first step was to establish a project steering committee with representation from all departments having a stake in the conversion — including the operating businesses, IT, investor relations and the external auditors. Starkie explained, “The first thing the steering committee had to do was to understand the effect conversion would have on the group, through a comprehensive impact assessment. The impact assessment allowed every department to articulate clearly to the BP executives, board and audit committee what needed to be done to prepare the 2005 Annual Report and Accounts and the quarterly reporting during 2005 in accordance with IFRS.” Based on the results of this impact assessment, BP established various work streams to encompass all aspects of the conversion in a structured way. Starkie acknowledges that the impact assessment was key to convincing everybody in the organization — including the chief executive officer — that the conversion to IFRS would be far more than just a technical accounting exercise and could potentially have an impact on, among other things, BP’s debt covenants, tax planning, IT systems, the determination of performance related pay and market communication. He noted also that the conversion required a complete rewrite of BP’s policies and procedures manual, which was of itself a very significant exercise. BoardMatters Quarterly April 2008 As with any conversion process, BP made investments in its IT systems to facilitate reporting under IFRS. Starkie stressed the importance of this aspect of the conversion, “Because changes to IT systems can obviously be disruptive to the operations of a company, identifying these areas of IT improvement early was fundamental to the success of BP’s conversion.” Throughout the conversion process, the audit committee played an important risk management role. An active participant throughout the process, the audit committee received IFRS training and was kept informed of the effect that IFRS would have on BP’s financial statements. “The committ...
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