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IFRS Posing Significant Challenges To Organizations Worldwide

by Glen Shapiro, LawAndTax-News.com, New York

27 August 2008

IFRS conversion has posed a significant challenge to those organizations that have undertaken it in almost 100 countries worldwide, according to a new report by business advisors KPMG.

According to KPMG, many companies have found that while their conversion initially appeared to be an accounting challenge, it quickly evolved into a multifaceted business initiative involving systems and processes, people and change management, and other business considerations.

KPMG has recently released a whitepaper which focuses on the effects that International Financial Reporting Standards (IFRS) will have on an organization's information systems and the many considerations inherent in IFRS adoption.

The report points out that IT implications of conversion to IFRS can be especially challenging because of the number of differing information systems within an organization and the lack of IT professionals with the ability to interpret and translate the IFRS requirements into IT changes and solve the technical issues involved in IFRS conversion. When approached from a perspective that is wider than only the accounting-driven aspects, the IFRS conversion effort can provide opportunities for achieving synergies with other IT projects, KPMG said.

Key IT Considerations of IFRS Conversion in the whitepaper include:

  • IFRS is accounting-driven but it will drive major changes to IT systems as well as business processes and personnel.
  • Experience indicates that IT costs are generally over 50 percent of the cost of IFRS conversion.
  • Organizations benefit when they identify and integrate the efforts of the IT team early in the IFRS conversion process.
  • IT efforts will comprise a mix of short- and long-term projects within the organization's overall IFRS initiative.
  • The IFRS conversion effort provides opportunities for achieving synergies with other IT projects and strategic initiative.
  • IFRS IT is not industry-specific; it will affect companies in all industries.

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