For more than a decade, finance executives have been hearing about the difficulties that would land in their laps once the SEC set the date on which U.S. firms would have to stop using GAAP (generally accepted accounting principles) and start using the “globally harmonized” accounting regime known as International Financial Reporting Standards (IFRS). Understandably, many tuned out the forecasts of woe, concluding that they’d deal with the challenge only when absolutely forced to do so. That time is getting closer—2015—and finance pros well-versed in management technology are jumping on this now.
Curtis Neumann, a senior finance executive at a major corporation, writes a blog in his spare time on such issues. In a recent post, he argued persuasively that corporate controllers think now about how IFRS will impact processes and systems that enable enterprise resource planning, general ledger accounting systems, financial reporting, etc.
“IFRS is going to have a very profound impact on financial reporting, similar in scale to the impacts of SOX. IFRS is principle based, where GAAP is a rules based approach. The potential for accelerated revenue recognition and elimination of off-balance sheet accounting for leases changes the way accounting entries are made to ERP systems,” says Mr. Nuemann. He also thinks the average cost of adoption for the typical large corporation will cost in the neighborhood of $30 million and take several years to get right. To read more of his outlook, click here.