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Three steps to prepare for the successful adoption of IFRS

By Ali Hussain Almohashi posted 01-24-2017 06:25 AM

  

The global accounting standards adoption rate has been increasing around the world. Saudi Arabia has decided to adopt IFRS. The date of adoption for publicly traded companies will be on January 1, 2017 and January 1, 2018 for other organizations, but other organizations have the option to adopt IFRS on January 1, 2017. Transferring to IFRS is a complex process and requires thorough planning. The following are three steps to implement for the successful adoption of IFRS. 

 

  1. It is necessary to understand how these changes will affect a company. The best way to accomplish this is by forming an initial team. The job of this team includes the following:

    • Identify the differences between the company’s GAAP and IFRS.

    • Review each affected account in the financial statements due to the adoption of IFRS.

    • Trace the effects of IFRS on the required processes and procedures to capture financial transactions and record them.

  2. Get the Board of director’s support. The initial planning phase will provide a good idea of how wide the effects of IFRS adoption will be on the organization. IFRS will impact the financial statements as well as bring changes to employee records, fixed assets register, information technology, and more. Thus, due to the extent of IFRS, board of director’s support is crucial in the successful adoption of IFRS.

  3. Form an adoption team. This team should include representatives from affected parties. The following list is not inclusive as every company is different, but since Saudi Arabia is a heavy industrial country, this list will serve as a good starting point. It is important to form a team that is suitable to the respective company.

    • Accounting/Finance: Responsible for accounting policy changes and identification, recording, and reporting of financial transactions;

    • Information Technology: Work on implementing changes on the general ledger charts of accounts and information system processes ;

    • Human Resources: Assist with IAS 19 employee benefits and, specifically, actuarial valuation of end-of-service benefits liability;

    • Company Operations: This is most likely an engineer who will work with accountants to satisfy IAS 16 property, plant, and equipment requirements;

    • Training: Analyze the IFRS knowledge gap and establish efficient training and plans for talent acquisition;

    • External Auditor: Must be involved in the whole process;

    • Consultant: Hiring a consultant for IFRS transformation is wise because IFRS implementation is a long and complex project bringing long-term effects to companies;

 

One final note regarding preparing to adopt IFRS is to consider each company’s specific needs and industry in planning IFRS adoption.

 

References

Deloitte. (2016, 10 18). International Financial Reporting Standards for U.S. companies. Retrieved from Deloitte: http://www.iasplus.com/en/binary/usa/0808ifrsplanning.pdf

EY. (20016, 10 14). Preparing for the Transition to IFRS in Hungary. Retrieved from EY: http://www.ey.com/Publication/vwLUAssets/Preparing_IFRS_Hungary/$FILE/Preparing%20for%20IFRS%20conversion%20in%20Hungary%20flyer.pdf

SABIC. (2016, 4 15). محاضرة حول "تجربة شركة سابك في التحول من معايير المحاسبة السعودية إلى المعايير الدولية". SOCPA.

 

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