IFRS Risk Planning and Controls Execution
How U.S. public companies can begin preparing their internal control and operational risk systems for IFRS.
Conversion to IFRS will be far more than a technical accounting exercise. Implementing IFRS will impact many, if not all, aspects of your business operations, including information technology. It may bring companywide changes that will spawn new risks. These include system changes, modifications to processes impacting employees’ day-to-day duties and new accounting policies.
U.S. GAAP and IFRS share many similarities, but they are also different in many areas.
Staff responsible for internal control over financial reporting (ICFR) under Sarbanes-Oxley (SOX) section 404 and operational audits will need to understand how your company plans to apply IFRS so they can take appropriate actions based on both operational risks and the risk of material weakness in ICFR. (See author Steve Arnold, CPA, outline how to leverage your SOX investment for conversion to IFRS in this Steps to Success video.) While your company may be familiar with the general principles of IFRS, such as a potential need to depreciate components of fixed assets on a detailed level, a thorough review will make clear that there are many rules and requirements in these principles-based standards. Once they have analyzed the standards, companies may realize they do not have much flexibility under IFRS, but ICFR staff can assist with that analysis.
Companies will also need to evaluate the impact these differences may have on their accounting policies, as well as the underlying information technology systems that support the company’s financial reporting structure. Changes to policies and systems on this scale will invariably give rise to additional risks that your organization may need to monitor and control.
This article has been excerpted from the Journal of Accountancy. View the full article here.