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Adopting

IFRS in Oracle EBS

www.centroid.com
TABLE OF CONTENTS WHAT IS IFRS?
What is IFRS? 1 IFRS - International Financial Reporting Standards are a series of
accounting standards developed by the International Accounting
SEC Timeline for Adoption 2 Standards Board (IASB), that is becoming the global standard for the
preparation of public company financial statements.
What are the New Standards? 3-5
IFRS focuses on the standardization of financial reporting standards
IFRS and GAAP 6
across international borders. This standardized reporting practice
provides a uniform view of a corporations accounting statements.
US GAAP -vs- IFRS Similarities 7

As of 2011, approximately 120 countries currently require or permit


US GAAP -vs- IFRS Differences 8
IFRS reporting.
Convergence -vs- Compliance 9 - 10
The US Securities and Exchange Commission is weighing a five-year
IFRS and EBS R12 Examples 11 - 13 work plan that would lead to conversion of all US public companies
to IFRS. This is in response to global demand from regulators,
The Centroid IFRS Team 14 investors, businesses and auditors for a single set of accounting
standards.
The Centroid Advantage 15
While support for maintaining
US GAAP remains strong in
the US, it is clear that
multinational corporations
or corporations that simply
do business internationally
will need to begin preparing
for IFRS one way or another.
SEC TIMELINE FOR ADOPTION WHAT ARE THE NEW STANDARDS?
Financial Statement Preparation Standards
The first standard refers to statement preparation; this includes the
format, content and layout of financial statements. For organizations
that generate financial statements out of their GL today, their current
ERP solutions have powerful statement generation tools, dual
accounting representations using Subledger Accounting (SLA) and
Business Intelligence (BI) tools to meet the IFRS reporting challenge.

Standard Area Covered Products


A limited group of large US Firms are permitted to use
2009
IAS 01 Financial Statements Hyperion Financial
IFRS on an optional basis for fiscal periods ending on or
after December 15, 2009. IAS 27 Consolidate or Separate Management,

2011 IAS 28 Associates Oracle General Ledger


The SEC evaluates achievement of roadmap milestones IAS 31 Joint Ventures
and decides whether to adopt a mandatory approach. IAS 33 Interims

Possible effective date for convergence


2011 -13 IAS 34 EPS
IAS 07 Cash Flow Statements
IFRS 03 Business Combinations

Accelerated filers begin filing in IFRS standard


2014
Features include:
Consolidation features (GCS), line aggregation, adjustment capability,
XBRL publication, cube management, “slice and dice.”
Possible adoption start date
2015

Non-accelerated filers begin filing in IFRS standard


2016

Complete adoption
2018
WHAT ARE THE NEW STANDARDS? WHAT ARE THE NEW STANDARDS?
IFRS Consolidation Standards Detailed Transaction Standards
The next set of standards focuses on professional-level accounting The last set of standards often require detailed transaction data to
and consolidation practices where corporations handle specific be summarized and reported correctly, which means capturing this
situations; for example - merger and acquisition activity, foreign data in the subsystems. Oracle’s ERP solutions will provide specialized
currency translations, etc. and/or specific high-level transactions (e.g., industry products and subledger solutions for service consumers.
government grants, discontinued businesses, etc.). Organizations can Specific compliance and features are constructed with the IFRS
chose to use Oracle’s EPM solutions to facilitate modeling corporate Statement in mind.
adjustments before pushing them down to the ERP General Ledger.
Standard Area Covered Products
Also, all of Oracle’s ERP solutions contain many powerful general
accounting features in each of its General Ledgers. IAS 41 Agriculture Specialized industry
IAS 32 FI: Presentation products and
Standard Area Covered Products IAS 39 FI: Recognition, Measurement subledger solutions
IAS 10 Post Balance Sheet Hyperion Financial IFRS 07 Financial Instruments for service consumers
IAS 20 Government Grants Management, IFRS 04 Insurance Contracts
IAS 21 Foreign Currency Oracle General Specific compliance and features constructed with the IFRS statement.
IAS 29 Hyperinflation Ledger
IAS 36 Impairment Standard Area Covered Products
IAS 37 Provisions & Contingencies IAS 02 Inventories Specialized subledger
IAS 38 Intangibles IAS 11 Construction Projects solutions: Projects, Fixed
IAS 40 Investment Property IAS 16 PP&E Assets, CRM, Order
IFRS 01 First Time Adoption IAS 17 Leases Management and revenue
IFRS 05 Discontinued, Held for Sales IAS 18 Revenue recognition in AR,
IFRS 06 Mineral Resources IAS 19 Employee Benefits Procurement and AP,
IFRS 08 Operating Segments IAS 23 Borrowing Costs Inventory and Costing
Features include: Tracks data required by the specific statement, such as revenue
Flexfields, segments and other chart of accounts features, translation recognition in receivable, costing methods in inventory, etc.
(or remeasurement) multiple ledgers and accounting engines. Model
Corporate Adjustments.
IFRS AND GAAP US GAAP -VS- IFRS SIMILARITIES
There are quite a few similarities between IFRS and US GAAP
because the convergence project between IASB and FASB (the
US GAAP: 25,000 Pages IFRS: 2,500 Pages
standard setters responsible for IFRS and US GAAP respectively) has
been going on for a while (since 2003 actually).

Approach (some examples) IFRS US GAAP

Revenue Recognition  
Fair Market (e.g. AR or inventory valuation)  
Detailed Disclosure  
Segment Reporting  
Chart of Accounts Not Mandated  
Distinction Between Tax &
External Reporting  
For example, both IFRS and US GAAP have the same rules around
revenue recognition. German GAAP on the other hand does not
have revenue recognition; instead an organization would book sales
invoices directly.
US GAAP is rules-based, meaning that there are very specific
“If/Then” pronouncements. IFRS is principles-based, so there is
greater dependency on judgement. IFRS is also more vague in how
companies adopt or implement those standards.
US GAAP -VS- IFRS DIFFERENCES CONVERGENCE -VS- COMPLIANCE
There are 2 main approaches to IFRS adoption:
Approach (some examples) IFRS US GAAP
Fixed Assets Only Certain Convergence:
Fair Market Revaluation & Investments Fixed Assets
- Restructure existing applications so the primary ledgers reflect
Extraordinary Items None Rare (negative goodwill)
the standards set forth in IFRS.
Consolidation Control 2 Models

Joint Ventures Proportional OK Only Equity


US GAAP
Ledger Set
Research & Development Capitalized Expensed Reporting

Inventory No LIFO LIFO OK

1 Step, 2 Step,
Impairment
Reversible No Reversal IFRS Primary Ledger Secondary Ledger
Reporting
Some specific differences between the two standards include: IFRS Accounting US GAAP Accounting
- Fair Market Revaluation - Under IFRS, organizations must revalue
fixed assets. Under US GAAP, only certain assets like real estate
must be revalued. SLA SLA
- Extraordinary Items - Negative goodwill has gone away under IFRS.
- Consolidation - Only entities that are under your control should
be consolidated under IFRS. AP AR FA CST
- Research and Development - Development costs are placed in the
Balance Sheet under IFRS.
Subledgers
- Inventory - IFRS does not allow LIFO or “Last In First Out.” There
are particular tax advantages to LIFO, so that is why firms practice Transactions
it. But under IFRS, LIFO is not allowed because inventory in the
Balance Sheet is not quite reflective of actual cost.
CONVERGENCE -VS- COMPLIANCE IFRS AND EBS R12 EXAMPLES
Compliance:
Inventory - IAS 02
- Maintain current accounting practices per US GAAP guidelines IFRS - GAAP Differences E-Business Approach with R12
and then build a secondary ledger to reflect the standards set Inventory Costing SCM products like Oracle
forth in IFRS. US GAAP - Allowable costing methods Inventory handle Inventory,
include LIFO, FIFO and Average Cost Costing
- They do all the IFRS options
IFRS - LIFO not allowed
- Actual w/flavors: landed, period
Inventory Valuation actual, etc.
IFRS US GAAP - Inventory is valued at the - Standard w/flavors: process,
Ledger Set
Reporting lower of cost or market, and cannot BOM, semiconductors
be written up at a subsequent date - And variances to actual
IFRS - Inventory is valued at the - Rev dates & Inventory Aging
lower of cost or net realizable value: - Reconfigure LIFO to standard
if the net realizable value of an item or actual
US GAAP Primary Ledger Secondary Ledger - Use a second IO for dual costing
that has been written down
Reporting increases subsequently, then the
US GAAP Accounting IFRS Accounting write-down is reversed under IFRS

Asset Componentization - IAS 16


SLA SLA
IFRS - GAAP Differences E-Business Approach with R12
Assets
US GAAP - Component accounting
AP AR FA CST is permitted, usually assets are - Componentized assets with
depreciated as a whole different useful lives
- Parent Child features
IFRS - Component accounting is
Subledgers - Grouping features (restricted
required
revaluation support)
Transactions - API (to import the real estate
& assessor’s valuation)
- Asset revaluation
IFRS AND EBS R12 EXAMPLES IFRS AND EBS R12 EXAMPLES
Impairment - IAS 36 Operating Segments - IFRS 08
IFRS - GAAP Differences E-Business Approach with R12 IFRS - GAAP Differences E-Business Approach with R12
Impairment, specifically Fixed Assets Identifying Operating Segments General and Subledger
Assets - API to accumulate and contrast - Use our very flexible chart of
US GAAP - Segments are based on accounts design to track and
recoverable values
US GAAP actual Management Reporting. identify different operating
- API processes losses automatically
- Based on fair value (excludes intangible assets) segments
and executes all immediate and
- Non-reversible - Reporting features like FSG with BI
long-term accounting
IFRS - Operating segments are Publisher
IFRS - Automated comparison and
identified by Risk and reward.
- Based on the recoverable impairment accounting
(includes intangible assets)
amount (the higher of the - Automatically process the losses
asset’s value-in-use and fair - Automatically execute all the
value less costs to sell) immediate and long-term
- Reversible accounting Foreign Currency - IAS 21
IFRS - GAAP Differences E-Business Approach with R12
Intangible Assets - IAS 38 IFRS and GAAP determine General and Subledgers
IFRS - GAAP Differences E-Business Approach with R12 Functional Currency using - Reporting Currencies and
different emphasis Revaluation work together to
Development Costs GL and Project features deploy for
Capitalized Development provide both Remeasurement or
US GAAP - Development costs are US GAAP - Cash Flow Based
Translation
generally expensed as incurred - GL Cost Centers with Balance Sheet
- Chose the level of detail per your
accounts capture the costs IFRS - Factors based with more
IFRS - Development costs (directly business needs:
- Allocate to P&L when time to emphasis on pricing factors.
attributable expenditure) are - The Subledger Transaction
release
capitalized when certain criteria Level
OR Both FAS 52 and IAS 21 specify:
are met - Or the General Ledger Activity
- Project Accounting stores Projects - Remeasurement (Historic Rate
Level
on the Balance Sheet Conversion) from Accounting
- Or the General Ledger Balance
- Release to P&L via BOM & to Functional Currency
Level
inventory - And Translation (Current Rate
- Can also be done in HFM
- Integration with costing Conversion) from Functional
- Direct release to P&L via Project to Reporting Currency
Accounting
- Project Time & Costs features
THE CENTROID IFRS TEAM THE CENTROID ADVANTAGE
Centroid's Applications and Industry consultants are a focused team We provide the solutions you need for increased performance -
dedicated to working with our clients to help guide them on the path maximizing your investments - guaranteed.
to achieving IFRS compliance. We work with our clients to identify
the most optimal approach between GAAP to IFRS convergence, or We believe high performers push the envelope, outperforming their
complete IFRS Adoption. competition. As a high-performing organization, we take full
responsibility for our work and the potential risks involved. Quite
Using an established portfolio of common accounting and reporting simply, we always deliver on our promises.
changes for IFRS, we're able to establish a framework for transiting
in an expedient manner. Oracle E-Business Suite Release 12 enables As an experienced leader in Oracle consulting, we offer a broad
clients to take full advantage of Oracle R12's multiple ledger range of services that give you an array of industry experience and
functionality. With the introduction of Subledger Accounting (SLA) proven performance. From sophisticated customer management and
in R12, customers now have the ability to translate their ledgers into integrated supply chain solutions, to the transformation of your
an IFRS compliant set of accounting entries. business and internal functions, we have the expertise to get the job
done and get it right the first time.
We continually survey over 2,000 finance executives to gauge their
concerns/progress regarding IFRS. Our results along with industry We are focused on providing you with comprehensive solutions -
updates are reviewed on a quarterly basis on Centroid’s IFRS whatever your needs may be. From infrastructure optimization,
Webinar series. For more details on the IFRS survey and our Webinar technology deployments to application configuration and support, we
series, go to www.centroid.com or feel free to contact us. believe in using the best industry-honed talent to provide you with a
value-added solution.

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