best practices for ifrs preparation and compliance

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Reidar SchoppConsolidation Practice [email protected]

August 11, 2010

Get on the Road to Success with IFRS

presented by

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AgendaAgenda

Introduction

Corporate Overview

What is IFRS, Why IFRS, and the Current State of IFRS – Dates and Impacts

Transitioning to IFRS and Using BPC to Support IFRS

How can Edgewater Help with IFRS

Closing Remarks and Questions

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Edgewater is a Technology Management Consulting Firm Provide a unique blend of specialty IT services Leverage proven industry expertise in strategy,

technology and enterprise performance managementFocus on middle and Global 2000 market

Founded in 1992Headquartered in Wakefield, MAPublicly Traded (NASDAQ: EDGW)Offices in AR, CT, FL, NH, NY, VA, CA, CO+ 330 Employees, +260 ConsultantsRepresented in over 33 states+1900 projects completed to date

Corporate Overview

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IFRS stands for International Financial Reporting Standards

IFRS is a global set of accounting standards developed by the International Accounting Standards Board (IASB) which is an independent accounting standards body, based in London, UK

IFRS is intended to be a more principles-based set of standards rather than the rules-based approach of the US

As companies compete globally, the movement toward IFRS is rapidly becoming one of the most important issues for companies to address today

What is IFRS?

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Economic globalization brings increased demand for high quality, internationally comparable financial information

Bring greater clarity and consistency to financial reporting in the global marketplace

Eventually, U.S. GAAP will go away, and IFRS will be the lone standard

Why IFRS?

Source: Deloitte – Straight Talk Book No. 11

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Your finance people will end up working much more closely with others in the organization to make judgments about accounting based on the underlying economics of transactions

Putting Principles into Action


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Major differences between US GAAP and IFRS: Property, plant and equipment (IAS 16) Revenues (IAS 18) Impairment of assets (IAS 36) Provisions (IAS 37)

Five other topics that might differ fundamentally: Presentation of financial statements (IAS 1) Related parties (IAS 24) Leases (IAS 17) Taxes (IAS 12) Inventory – LIFO not allowed under IFRS

Important/Significant Differences

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Source:http://www.iasb.org/About+Us/About+the+IASB/IFRSs+around+the+world.htm

By 2011-2012, every major

capital market will use IFRS

except the U.S.

U.S. to begin phasing in

IFRS over a three year

period starting in 2014 2015

The Current State of IFRS

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The US Securities and Exchange Commission (SEC) recently issued its proposed roadmap for conversion from US GAAP to IFRS Converging standards 2012 to 2014 Mandatory reporting under IFRS possibly beginning in 2015 Staggered adoption from 2015 to 2018

The SEC says it will decide in 2011 whether to hold to that schedule

One of the biggest lessons learned from European companies that converted to IFRS in 2005 was that they needed more than the two years time they were given

Dates – USA

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Feb 24, 2010: SEC issues statement in support of convergence and global accounting standards, inclusive of work plan.

Mid-2011: Target date for completion of ASB/IASB convergence agenda

2011: Proposed SEC decision on IFRS

2012 – 2014: Possible effective dates of converged standards, possible early adoption period

2013 – 2014: Earliest comparative information required, assuming 2015 beginning adoption date

Jan 1, 2015: Possible beginning adoption date

2015 – 2018: Possible staggered adoption period

Dates – USA (Cont.)

Price Waterhouse Coopers: IFRS Reporting

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49% of execs want early IFRS adoption Many U.S. companies with subsidiaries around the world are already using IFRS for

statutory reporting Many companies already using two sets of standards

Majority of executives want greater clarity from SEC

Generally the companies believe that the move to IFRS is going to happen

Companies with less of a "global footprint" may be less eager to make changes

59% said a potential move to IFRS in 2015 or 2016 would give their companies enough time to prepare for the change

15% said that it would not be enough time

25% said they would be unsure of the impact of a switch

KPMG LLP - US Survey - March 2010

2,500 executives polled in the US

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Upstream systems (sub-systems) Additional reporting requirements in areas such as taxes, financial

instruments and fixed assets General ledger

Changes to the chart of accounts. During transition, general ledger reporting will most likely need to accommodate ledgers for both CDN/US GAAP and IFRS

Reporting data warehouse Changes in data models, such as valuation systems and actuarial

models Downstream reporting (BPC / Consolidation systems)

Changes to the number of consolidated entities, mapping structures, rules and financial statement reporting formats

IFRS – The Big Impacts

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1. The first step in the journey is to conduct an IFRS diagnostic to assess the impact that conversion will have on your business

2. Fully understand how IFRS and Canadian/US GAAP differ. Determine the level of effort required to address the differences

3. Evaluate the impact on accounting policy. Some areas of accounting will require new policies due to clear differences in standards. In other areas, there may or may not be differences, depending on the choices you make

4. Inventory your current IFRS reporting requirements. Prepare mock financial statements & notes to see what data is missing

5. Identify resources within your organization to assist in the IFRS effort

IFRS Projects – Next Steps

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6. Assess the impact of IFRS on your technical infrastructure. Front-end systems, general ledgers, sub-ledgers and reporting applications may need to be evaluated

7. Identify the impact on current system projects. As new projects are planned, take time to align requirements with the likely impact of IFRS

8. Identify stakeholder groups affected by IFRS. Assess their current level of understanding of what’s ahead

9. Create a plan to address the training and communication requirements for each stakeholder group. Keep people informed through the entire journey. Take time to celebrate success

10. Budget for IFRS changes!!!!

IFRS Projects – Next Steps (cont)

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SAP BusinessObjects Planning & Consolidation (BPC)SAP BusinessObjects Planning & Consolidation (BPC)

Familiar and easy to use Enables rapid adoption by leveraging native

Microsoft Office tools (e.g. Excel) and web browsers accessing a central database

User owned and managed

Process-centric Configurable business process flows guide

users and drive process consistency

Unified Single, integrated application reduces

maintenance, improves data integrity, and simplifies deployment while enabling flexible planning & consolidation functions

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Fast implementation Pre-packaged content reduces implementation

times by up to 80%

Dynamic configuration enables easy customization to specific requirements

Complete, generic reference implementation

Rapid and trusted legal compliance Embedded expertise in meeting financial

regulations including best practice in financial consolidations and internal controls

Detailed process guidance for business users

Comprehensive scope IFRS/GAAP specific chart of accounts

Pre-configured IFRS/GAAP consolidation rules, controls, and calculations

Publishable financial statements

Starter kitsStarter kits

Faster legal compliance – reduce implementation times

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Business Process Flows Data collection

Preparing and running the consolidation

Reports and analysis

IFRS Data Input & Control CoA with most common BS and IS accounts

Input schedules for data entry or data import

Control reports for validation of collected data

Consolidation Processing Full, proportionate and equity method

Scope changes and rate variations

Extensive set of automatic business rules

SAP BPC Starter Kit for IFRSSAP BPC Starter Kit for IFRS

Data collection, control and data processing

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Analysis & Audit Trail Dynamically formatted accounting and analysis

reports leverage native drill down

Audit IDs for tracking data origin

IAS 1 Publishable Financial Statements Balance Sheet (current/non-current format)

Income Statement (by function)

Cash Flow Statement (generated automatically)

Statement of Changes in Equity

Segment information

XBRL Templates Excel templates pre-mapped with IFRS

taxonomy

SAP BPC Starter Kit for IFRSSAP BPC Starter Kit for IFRS

Analysis, audit trail and publishing of financial statements

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Companies transitioning to IFRS will inevitably find themselves having to capture data in new ways or gathering additional information. They may need to use new accounting definitions and valuations for certain balance sheet and income statement lines, obtain more comprehensive reporting from overseas operations, provide more detailed segment reporting, or comply with wider disclosure obligations

A change in accounting standards may not sound like a strategic change, but it does impact the way that the business is run, the way that success is measured, and the information and records that a company needs to maintain

The Transition to IFRS

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Our team is ready to provide an on-site evaluation to scope the work effort and answer questions

Our team consists of CA/CPA/CMA resources as well as BPC thought leaders

Will explain existing features, and coming features of the SAP product suite

Can provide all levels of support, including Senior Project Management and Accounting resources

Can provide Data Warehouse and DBA experts across most common ledger packages – extending our value beyond the BPC application

We are available to demonstrate the newest functionalities of SAP BPC and IFRS Starter Kit

How Can Edgewater Help

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Edgewater can assist you to… Review the new IFRS principles Determine the impact on your company and it’s systems Prepare mock up financial statements based on IFRS principles

Edgewater’s job is to… Help identify the changes in your systems -- upstream systems /

general ledger / reporting data warehouse / downstream reporting Come up with a plan to make those changes Make the changes, test and document them Manage the process and ensure a successful conversion to IFRS

When Does Edgewater Enter the Picture

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$10,000

Edgewater IFRS Quick Start Kit

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What you will get…

1. Review the new IFRS principles

2. Inventory your current IFRS reporting requirements

3. Evaluate the effectiveness of existing reporting solutions

4. Determine the impacts on your company’s systems

5. Provide high level roadmap to be IFRS compliant

Edgewater IFRS Quick Start Kit

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“You’ll need plenty of runway. You’ll have to provide comparative financials during

conversion—and deal with all the systems, process, and organizational issues

surrounding the transition. It will take time. And it will ultimately require your signature.”

Deloitte


Closing Remarks

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Questions and Contact Information

Reidar Schopp – Consolidation Practice Manager

[email protected] | 310 345-3764

Mike Cook – West Coast Account Executive


Tony Carey– East Coast Account Executive
