From the IFRS Institute - February 2017
There are three main reasons a US company may want to consider adopting IFRS – as a substitute for, or to complement, its US GAAP financial statements.
- To access international capital markets that require financial statements prepared in accordance with IFRS. This has been an increasing trend recently, both for mid-sized firms unable to generate sufficient investor interest/capital in the United States, and for larger firms seeking access to previously untapped markets.1
- The fact that a US-based company has foreign investors, intends to attract foreign capital providers, or has significant foreign operations.
- As a result of being acquired by a foreign company that prepares IFRS financial statements.
Converting to IFRS is a significant finance transformational event for a company and may be prompted by any of the reasons stated above. The long-term effects on a company go beyond accounting and if planned right can improve various aspects of the organization. We have accumulated the following lessons learned from prior IFRS conversion projects.
Ten factors for success
- A well-developed and ‘living’ plan, including realistic timelines and clear accountability.
- Buy-in from senior management and members of the audit committee from the outset.
- Sufficiently focused and appropriately engaged company resources, including a designated Project Management Office.
- A comprehensive and detailed accounting gap analysis, leading to an impact assessment of process, data and systems, people and change, and other potentially impacted business areas.
- Timely involvement of the external auditor.
- Tailored training delivered throughout all phases of the IFRS implementation project – designed to meet the various needs of specific company personnel.
- Early assessment of regulatory requirements, such as pro forma financial information, prospectuses, specific disclosures, number of comparative years, etc.
- Careful management of internal controls: An IFRS implementation opens many opportunities to reengineer/transform key processes and systems; such integrated efforts create very significant risks and challenges that need to be carefully managed.
- An effective protocol for resolving, cataloging and sharing technical accounting and key process issues.
- Proactive and early development of sufficiently comprehensive messaging to support the organization’s level of engagement, consistency in execution, and clarity and consistency of external communication.