IFRS Implementation – Challenges to adoption
Considering the impact areas, IFRS convergence has considerable challenges. Especially for companies with multiple operations, multiple sites and multiple system. It is the internal complexities that companies have built over a period of time, that makes IFRS adoption difficult.
Traditional Architecture and financial reporting
Let’s consider the traditional architecture of financial reporting and the complexities that stand in the way of IFRS Implementation.
GL - Traditional Architecture
The traditional architecture revolves around sub-ledgers, ledger and extraction of reports. This architecture and more so, from IFRS perspective, creates the following hurdles.
- Difficulty in integrating structural changes (e.g. new acquisition, business unit, product, etc.)
- User confusion on where to go for final financial information
- Large/complex Chart-of-Accounts
- Inconsistent definitions and concatenated fields
- Large amount of redundancy between financial systems (e.g. sub-ledger, ledger, CPM, etc.)
- Data latency challenges
- High number and complexity of data extracts and loads between Financial systems
- Onerous maintenance requirements
- Elongated process cycle times (Close to Report, Analyze to React, Planning & Budgeting)
Architecture for IFRS Implementation and complex financial reporting:
To address complexities, including IFRS, companies will have to look for a modular approach to how financial information is stored and processed. Companies will have to put in place a process oriented architecture to address financial data aggregation, in order to enable complex reporting in a seamless manner.
GL-New Architecture
What is the basis of this architecture and what does it provide?
- Move from “Complex GL” to “Thin GL” with streamlined CoA
- Leverage Performance Management Applications to bring together GL, Sub Ledger and Project details.
- Ad-hoc and User defined reporting with more analytical / reporting power
- Streamlined process with increased flexibility and control
