Your CFO is already buzzing about the coming move toward International Financial Reporting Standards (IFRS). Are you?
If not, you should be. IFRS is a global set of accounting standards that will add to the transparency of information for investors, make it easier to understand financial statements and help companies make efficient investment decisions. It will undoubtedly have a far-reaching effect on the IT department and its systems.
The U.S. Securities and Exchange Commission (SEC) expects to decide whether to adopt IFRS in 2011. Yet in its IFRS road map, the conversion won't take effect until 2014. So what's the hurry? While conversion seems far off, the SEC is proposing to require U.S. companies to provide three years of financial reporting in the year of IFRS adoption. So a U.S. company with an IFRS reporting date of December 31, 2014, must provide financial statements for 2012, 2013 and 2014.
To Read more on this topic, see SEC plans to require interactive data filing.
To meet this goal, CIOs must plan now for changes in applications, reports, data and IT infrastructure that will be necessary for conversion from U.S. Generally Accepted Accounting Principals (GAAP) to IFRS, including the ability to support parallel accounting and multiple ledgers.
As a first step, CIOs can start mitigating the impact of the conversion by carefully considering how to consolidate existing or planned initiatives with IFRS. Companies already in the midst of or considering business or technology transformation projects such as financial services transformations, ERP implementations or additional upgrades (for reasons other than IFRS adoption) could benefit significantly by consolidating these undertakings with an IFRS initiative.
IT management must be at the table during project planning to bring the necessary insight into technology requirements and capabilities, as well as implications of IT decisions. The costs of IFRS adoption will depend on these choices. IT can also bring vital project management discipline and valuable recommendations, while heading off ideas that are not feasible or practical from an IT perspective.
The proposed changeover to IFRS presents IT and the CIO with the opportunity for greater visibility and enterprisewide collaboration. But it's up to you as CIO to seize the opportunity to get ahead of this change.
Chris Feenstra is a principal in the Information Technology Advisory Services group at Ernst & Young.
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