This first series of four blogs is dedicated to handling IFRS adoption for consolidated statements. They provide an overview of a new SAP "How-to guide" called "IFRS Adoption in Consolidated Statements using SAP® BusinessObjectsTM Financial Consolidation, star.... The objective is to bring practical guidance to end-users in order to manage successfully all the issues raised by the adoption of IFRSs and to get the maximum benefit from SAP® BusinessObjectsTM Financial Consolidation. The blogs will cover:
In the previous blogs (IFRS Adoption In Consolidated Statements – Part 1 and IFRS Adoption In Consolidated Statements – Part 2), the retrospective method was described, along with the main issues to handle in financial reporting systems. We will now focus on the solutions proposed by SAP.
To find out more about Starter Kits & Innovations materials, go to the Starter kit for SAP BusinessObjects solutions Wiki
Chart of accounts
The chart of accounts delivered in the IFRS starter kit offers:
Furthermore, the chart of accounts is built in a way that makes it possible to map accounts with IFRS taxonomy items (XBRL).
Flows
The use of the flow dimension permits a full and consistent explanation of the changes between the opening and the closing balances on balance sheet accounts. Flow also helps to automatically produce the statement of cash flows and the statement of changes in equity.
Audit IDs
In order to ensure the audit trail, each amount stored in the database is traced by an audit ID.
For example, at the consolidated level, the entity shows a contribution of 10 000 CU at the end of the period. The audit IDs in the starter kit enable the Consolidation department to audit and understand the breaking down of the amount.
The consolidated amount, 10 000 CU, comes from 12 000 CU in the local books, increased by 200 CU from a central adjustment, and reduced by an intercompany elimination of 2 200 CU.
In summary, the audit IDs explain the transition from local to consolidated data.
Automated consolidation rules
The starter kit for IFRS provides a set of consolidation rules that automate the posting of entries and accelerate the consolidation process. The rules facilitate:
The scope changes managed in the product rely on the consolidation engine, the consolidation scope and the automated rules. Cases handled are:
Data collection "Package manager view"
Local data can be collected in data entry schedules according to IFRS or the local GAAP on audit ID "PACK01". Package data entry folders are:
Reports "Report navigator view"
The starter kit for IFRS contains prebuilt reports that comply with IFRS (IAS1 revised and IAS7):
Templates regarding segment information (IFRS 8), and several working reports classified by folders.
In SAP® BusinessObjectsTM Financial Consolidation with the starter kit for IFRS, the company can decide either to set up a unified reporting model or a two separate reporting model, depending on the requirements. The principles and consequences are explained in the next section.
Unified reporting
A single reporting model enables the entity to produce financial statements compliant with several standards in one application. In SAP® BusinessObjectsTM Financial Consolidation, this option is carried out in a single category (Actual).
Data is managed interdependently:
The chart below illustrates the process that can be handled from the source system to SAP® BusinessObjectsTM Financial Consolidation.
Separate reporting
A separate reporting model uses two categories: one dedicated to local GAAP, and the other one to IFRS. This model is based on a parallel approach, explained in blog 2, where data is not stored together in the database:
In a separate reporting model, configurations can be drastically different from one category to the other (e.g.: chart of accounts) and can lead to difficulties in reconciling local GAAP data and IFRS data. If the entity decides to implement two separate categories, we recommend loading data in the IFRS category as follows:
The chart below illustrates the recommended separate reporting process:
Warning: This approach implies that configurations of the two categories are perfectly aligned with a common chart of accounts.
Preferred solution
When it comes to make a choice and even if both models are convenient, we recommend the unified reporting model for the following reasons:
In the IFRS Adoption In Consolidated Statements – Part 4, we will give practical guidance on how to implement an efficient and simple project based on the starter kit for IFRS. We will also provide a link to the "How to guide" including more charts and a complete illustration of the operating process to handle the IFRS adoption with SAP® BusinessObjectsTM Financial Consolidation, starter kit for IFRS.
Acknowledgements to Fabienne Rojo, Patricia Meteil-Dutartre and Laetitia Lamoureux from the EPM SK&I team for their high contribution to the "How-to guide" paper.
Your comments about the contents are very welcome. Let us know what you wish to write about.
International Financial Reporting Standards (IFRS)
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