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Preparing for IFRS
What is IFRS?
International Financial Reporting Standards (IFRS) are a set of standards which impact the way that companies create financial statements. These standards are utilized in several places throughout the world as well as by US companies with foreign subsidiaries. Several countries already do dual reporting and expect to convert exclusively to IFRS by 2011. Although there is no certain date for U.S. companies to adopt IFRS, it is planned to start the dual reporting period by 2011 in order to fully adopt the new standards by 2014.
How can Acumatica Help?
Acumatica was designed with all of the necessary features to support the transition from US GAAP to IFRS. Acumatica's advanced financial features include the ability to maintain multiple ledgers, perform translations, and make adjusting journal entries.
- Dual-Reporting. Acumatica supports the ability to maintain multiple reporting ledgers. Daily transactions can be entered into a primary ledger in accordance with US GAAP while a separate reporting ledger can be setup for IFRS. If you prefer, your daily transactions could be kept in IFRS while maintaining your reporting ledger in US GAAP.
- Translations. At the end of a financial period, you can use the Acumatica translation features to import all of the transactions from your main ledger into your reporting ledger according to rules that you specify. During this process, you can automatically assign values to different accounts and sub-accounts. These policies can be changed as new accounting rules are phased in.
- Allocations. Acumatica allocation rules can automatically distribute account values over multiple accounts and sub-accounts based on percentages, quantities, statistical data, or proportional to amounts in other accounts.
- Flexible Reporting. Acumatica includes a web-based financial report writer as well as desktop reporting tools so you can easily modify existing reports and create new ones. These reports can be labeled and made available through the Acumatica menus.
The Process
We have polled several clients and US companies with worldwide subsidiaries to learn how they are making the transition. All reported a similar process where they maintain two ledgers. A daily transaction ledger is maintained using one set of accounting rules. At the end of a financial period, the company performs a translation to the transitional set of rules. Most companies report that the transition to bring their IFRS subsidiaries into US GAAP takes only 3 to 4 journal entries that they post into their reporting ledger.
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