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Staying Ahead of the IFRS Curve

Staying Ahead of the IFRS Curve. Paul Ingold January 19 th , 2010. Agenda. <Insert Picture Here>. IFRS Overview Oracle and IFRS Summary Q & A. 2. Global Momentum Towards IFRS. Countries that require or permit IFRSs.

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Staying Ahead of the IFRS Curve

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  1. Staying Ahead of the IFRS Curve Paul Ingold January 19th, 2010

  2. Agenda <Insert Picture Here> • IFRS Overview • Oracle and IFRS • Summary • Q & A 2

  3. Global Momentum Towards IFRS • Countries that require or permit IFRSs • Countries seeking convergence with the IASB or pursuing adoption of IFRSs Source: IASB, Dec 2007 3

  4. Expected Benefits from IFRS Convergence A single standard for global business It’s Not About Accounting; It’s About Capital Markets 4

  5. Impact on US CompaniesProposed implementation timeline from the SEC 2009: Limited group of large US firms are permitted to use IFRS on an optional basis for fiscal periods ending on or after Dec 15, 2009 2014: Large accelerated filers begin filing in IFRS 2016: Non-accelerated filers begin filing in IFRS 2011: SEC evaluates achievement of roadmap milestones and decides whether to adopt a mandatory approach for IFRS 2015: Accelerated filers to begin filing in IFRS Source: SEC Announcement, Aug 2008 5

  6. Multi-GAAP During Transition During the transition period from US GAAP to IFRS, firms must continue to report in US GAAP and any local statutories, as well as begin tracking IFRS equivalents. Potential Impact on Bottom Line A study comparing of the impact of IFRS adoption in the UK reveals that net income generally rose by 39% while equity declined by 23%. UK GAAP is considered close to US GAAP in most areas. Impact on US CompaniesThe value of starting early Growing awareness of complex requirements… …drives preference for early planning and assessment Within what timeframe would your company adopt IFRS if given a choice? Cumulative Reporting Requirements Don’t Know 9% More than 7 years2% Companies are required to retrospectively apply IFRS to all periods presented as if they had always been in effect. Within 7 years 8% Within 3 years55% Within 5 years26% Source: Deloitte, 2007 “ No one anticipated how big it was going to be. Every company was too late and too slow in preparing – even the good ones.” Ken Wild, Global IFRS Leader, Deloitte Sources: European Financial Reporting Research Group; Deloitte Touche Tomatsu 6

  7. Impact on US CompaniesStart early for transition period with multi-GAAP Transition Date?While IFRS requires 2 years of comparatives, best practice recommends 5 2009: Limited group of large US firms are permitted to use IFRS on an optional basis for fiscal periods ending on or after Dec 15, 2009 2014: Large accelerated filers begin filing in IFRS 2016: Non-accelerated filers begin filing in IFRS 2011: SEC evaluates achievement of roadmap milestones and decides whether to adopt a mandatory approach for IFRS 2015: Accelerated filers to begin filing in IFRS Source: SEC Announcement, Aug 2008 7

  8. US GAAP vs IFRS: What’s Different?You can make a living cataloging the differences US GAAP: 25,000 Pages IFRS: 2,500 Pages 8

  9. Much is the Same… 9

  10. …But There are DifferencesUS GAAP is always more specific, plus: 10

  11. Industry-specific ConsiderationsAreas of Potential Concern PPE = Property, Plant, & Equipment R&D = Research & Development FV =Fair Market Revaluation INV = Inventory IMPAIR = Impairment M&A = Mergers & Acquisitions 11

  12. Agenda <Insert Picture Here> • IFRS Overview • Oracle and IFRS • Summary • Q & A 12

  13. Oracle’s History with the IASB International Accounting Standards Board® • Monitoring IFRS standards since 2000 • Active member of IASB “IT Company Discussion Group” • Attend the Standards Advisory Council (SAC) meeting three times a year • Provide input on practicality • Get a heads up on features needed • National domain experts monitor Local GAAP 13

  14. Select Oracle Financial Management Customers12,000+ worldwide, with 25% in Europe 14

  15. Your IFRS Action PlanAchieve “early mover” advantage All Stages: Apply Policy and Control Management Stage 1 Study Impact & Determine Strategy Stage 2 Enable Top End Reports Stage 3 Record Transactions in both GAAPS Stage 4 Transform Your Business & Win with IFRS Perform Preliminary Study Determine changes to business model Determine impact on accounting in subsystems Collect GAAP financial results Assess Impact Transform operations using IFRS results Configure accounting rules and set up ledgers Adjust and consolidate under GAAP & IFRS Report, reconcile and audit results Determine Strategy Process and report using dual accounting Report IFRS results, increase shareholder value Milestone 1Completed Preliminary Study Milestone 2IFRS Reports Produced Milestone 3Transactions Recorded in Multiple GAAPs Milestone 4Business Model Optimized 15

  16. Oracle Enables Key Stages in IFRS Action Plan All Stages: Apply Policy and Control Management Stage 1 Study Impact & Determine Strategy Stage 2 Enable Top End Reports Stage 3 Record Transactions in both GAAPS Stage 4 Transform Your Business & Win with IFRS Oracle Enterprise Performance Management Oracle ERP Financials Other ERP Financials Oracle Industry Specific Applications Custom or Legacy Oracle Governance, Risk, & Compliance Suite 16

  17. Oracle Enterprise Performance Management Enable Top End IFRS Reporting CORE CONSOLIDATION FEATURES CUSTOM DIMENSIONS Multiple reporting standards in a single solution Enables tracking of GAAP vs. IFRS adjustments GAAP IFRS Flexible Rules Engine Journal Entries and Audit DOCUMENT ATTACHMENTS FLEXIBLE REPORTING Easy to reconcile and trend GAAP vs. IFRS results Creates “Electronic Binder” of all adjustments 17

  18. ERP Products Designed for IFRSE-Business Suite, PeopleSoft, JD Edwards SPECIFIC IFRS FEATURESSpecific functionality developed for IFRS IAS/IFRS SUPPORT SINCE 2000Thousands of customers overseas reporting under IFRS • Asset Componentization • Parent & Child Assets • Child Depreciation rates differ • Impairment Processing • Impairment identification • Unplanned depreciation IFRS MIGRATION PATHMultiple Ledgers or Multi-GAAP DUAL GAAP ACCOUNTING Ledger Set/Code: GAAP US Principles Expanded COA Calendar USD Differences Expanded COA Calendar USD 18

  19. Oracle Governance, Risk, and Compliance SuiteManage changes to policies and controls COMPLIANCE WORKFLOW GRC DOCUMENTATION REPOSITORY Record changes to business process due to IFRS Automate steps to audit IFRS compliance APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS Single subledger transaction creates multiple accounting representations Monitor status of testing and exceptions Control changes to ERP applications 19

  20. Product Support for External Reporting:IAS/IFRS or US GAAP 20

  21. IFRS and Product Areas by Statement Note: IAS and IFRS statements are all listed, but not in sequence. “Area covered” is abbreviated for space reasons.Product usage is typical and generic, and products not listed in a given area are often used to contribute to that area. 21

  22. IFRS in Practice at Customers • EU Public Company customers all using IFRS • Australian Public Company customers all using IFRS • Swiss, Emirates, others using IFRS many years now • Issues in the transition from previous GAAP • Fixed Assets often not granular enough • Not really ERP issues: • Difficulty interpreting “principles” when accustomed to “rules” • Not much official interpretation of IFRS • IFRIC is the official interpretive body • Difficulty with segment & impairment logic: desire to stamp data with segments or cash generating units before segment or impairment identified 22

  23. Transform Your Business & Win with IFRS Going beyond compliance 23

  24. <Insert Picture Here> Andrew MidgleyHead of Financial ReportingPearson “There were fewer adjustments at the reporting unit levelthan we had expected and they tended to be relatively minor. They mainly related to acquisitions, intangibles, leases, and joint ventures. Adjustments at headquarters were more significantand more complex and related to pensions, share option expenses, deferred tax, and financial instruments. Given this relatively straightforward framework, the group was able to quickly establish a unified chart of accounts in Hyperion Financial Management covering UK GAAP, U.S. GAAP, and IFRS. It was then a simple matter to post the adjustments against these accounts as required.” “We had total visibilityof the process and could instantly see the effect of changes posted anywhere in the group. Also, if we needed to maintain the central model—for example, to collect more data—we could effect the change, and it was immediately available throughout the group. We could nothave managed this so easily using our old business consolidation system.” 24

  25. Agenda <Insert Picture Here> • IFRS Overview • Oracle and IFRS • Summary • Q & A 25

  26. Key Takeaways 26

  27. To Learn More 27

  28. 28

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