Under globalization scenario, business are crossed the boundaries of the country and the level of stakeholders are also spread across the world. So, the requirement of presenting the financial statement in common platform is an inevitable business requirement to satisfy all the stakeholders. The IFRSs are the standards which helps to prepare & present the financial statements under globally accepted by the various stakeholders. International Financials Reporting Standards (IFRSs) is the standards are globally accepted and commonly used to present the financial reports to various stake holders.
Presenting the financial under IFRSs required proper implementation of all the applicable standards from the transaction level to till reporting level.
1. Assessing the impact on business transactions: First time adoption of IFRSs will impact critically in your business transactions and financial reporting. The initial step is to assess the impact of the IFRSs standards on the business transactions, process, procedure, we have to list out the process and the procedure under current standards and the issues & challenges are to be faced while implementing the IFRSs. All the contracts related to business transactions either it may be related to your customer, vendor and any other third parties involving like bankers, government etc. need to assessed carefully and the impact on the same should be analysed in detail.
2. Gap analysis between current procedure and IFRSs: Once the impacts on the business and procedure identified, we need to prepare the gap analysis between current process and process required as per IFRSs implementation. This analysis will help to identify the critical areas on implementation plan. Example, current the valuation method which we follow to value any asset and liability which may not be suitable for complying the IFRSs standards, so that should be changed and adopted to present the financial statement under IFRSs.
3. List out the steps for implementation: Once analysis the gaps, we need to list out the steps to be followed for each accounting transactions and applicable standards. This will starts from amending the business contract, amending the valuation method, amending the process flow of the transactions and the training the people who are going to carry out the implementation in the business. Preparation of suitable business and accounting manual with training templates are also required for the effective implementation.
4. Updating the chart of accounts: Chart of accounts is the heart of financial & accounting function for any business, while implementing the IFRSs the chart of accounts also will get impact, some of the new ledgers required to be created, some ledgers may get amended or regrouping required etc. While implementing the IFRSs, the chart of accounts be analysed and the required updation and changes need to be made.
5. Listing the new disclosures requirements: Under IFRSs requires some of the disclosures which we may not be disclosed under present system and to be prepared fresh and first time. This requirement also to be checked and required while implementing the IFRSs to present the financials.
6. Ignoring the non-applicable provisions: As we state the IFRSs are prepared as global view, all the provisions and requirement may not apply for all the countries. Some of the tax and regulatory provisions will differ country to country, in case any provision is not applicable or irrelevant to our country or statue then we can ignore the same. However we need to comply the applicable provision fully to present the fair view under IFRSs.
7. Subsidiary & joint venture companies : In case the implementation happening at group level, then all the companies under the group whether its parent, subsidiary, joint venture, associate companies etc. has to be validated the applicable provision under IFRSs to avoid the issues during consolidation of accounts.
8. Taxation effect: Taxation is the vital effect under any GAAP systems, the applicable tax laws will differ place to place hence the taxation effect on implementation of IFRSs need to be studied and addressed by the qualified tax professional during
9. Effect on adoption of IFRSs in financials: Changing one GAAP to another GAAP will impact the financials critically, the impact may be positive or adverse the same should be analysed and clear reconciliation report to be prepared and presented for each item in the financials with clear reason for the change.
10. Multinational function: Generally companies having operations in different countries majorly willing to adopt the IFRSs standards. Several countries having the converged version of IFRSs. While implementing the IFRSs in the business & accounting having multiple country operation, the each country applicable laws and procedures need to be critically valued by the implementing team before the implementation processs.