Top 10 Ways the Transition to IFRS Will Impact Your ERP System

GAAP, or Generally Accepted Accounting Principles, have long defined the standards for accounting and related practices in the US. GAAP ensures that companies can produce documents that auditors can verify according to standardized accounting practices.

GAAP is also important because it provides for consistency across industries and companies. A company using GAAP can have its financials compared with similar GAAP-compliant companies.

IFRS, or International Financial Reporting Standards, is a standard that has been implemented in over 120 European and Asian countries. On August 25, 2008, the US Securities and Exchange Commission (SEC) published a proposed schedule for IFRS to supplant GAAP.  The deadline for full conversion/compliance by US publicly traded corporations is 2016. Canada is expected to be completely IFRS-compliant by 2011.

The main effect of IFRS relates to a minimum standard for companies to recognize, measure, and disclose items in financial statements.

IFRS financial statements are significantly more complex than GAAP financial statements. Some (particularly those who earn their livelihood based on GAAP expertise) argue that this complexity threatens to undermine the utility of IFRS financial statements. Indeed, there is a real danger that the preparation of IFRS financial reports will become a technical compliance exercise rather than a mechanism for communicating actual organizational performance (to say nothing of financial position).

Because the transition to IFRS is so substantial, I decided to  list my top 10 most important accounting-related business issues that are impacted by the transition from GAAP to IFRS. These are some of the ways in which IFRS will impact your ERP system.

Note that I do not mention SOX-related issues, since SOX is a topic that deserves a blog post in its own right (stay tuned for that…)


Now it’s your turn!

Are you or will you be prepared for the transition to IFRS?


What do you think? Let me know by leaving a comment below!
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