THE IT DEPARTMENTS OF MANY CANADIAN BUSINESSES WILL BE AFFECTED BY THE INTRODUCTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS), and CIOs should start early in preparing for their adoption, according to professional services firm Ernst & Young.
To date, more than 100 countries have adopted IFRS, including Canada, where it will come into effect in 2011. Since IFRS will likely increase the amount of data collection and change both the level of disclosure in financial reporting and the manner in which financial information is reported, IT systems used to collect and report financial data may need modification in order to meet the new reporting requirements, said the company.
The age, flexibility and upgrade path of the current IT systems will be key factors in determining whether the existing systems can be enhanced or must be replaced.
In Europe, where IFRS was adopted three years ago, the impact on IT systems and business processes was often not considered until late in the project, resulting in manual workarounds and heavy reliance on spreadsheets, noted Ernst & Young. There’s an expectation that the need for IT system changes will be greater for companies operating in industries where the differences between Canadian GAAP and IFRS are more significant (e.g. Financial Services, Utilities, Mining and Oil and Gas).
For companies already planning to replace or upgrade their existing financial systems, Ernst & Young recommended that the new IFRS requirements be included in the system selection process and form part of the design phase.
Experience from early adopters in other parts of the world shows IFRS conversion is not simply about swapping one set of accounting rules for another, the company said. It’s a major change management project that can reach into all corners of a business. The best advice regarding the timing of the conversion project is to start as early as possible. – David Carey