Introduction
Accounting standards like the IFRS aim to offer a global structure of how public companies are supposed to release their financial statements apart from setting rules for business reporting specific standards. According to AICPA (2010), IFRS signifies a major transformation in the way most organizations produce their monetary results. Many companies would benefit from using the IFRS, especially those with other subsidiaries in many countries. Having the same set of worldwide standards will make it easier for companies to use one reporting system throughout. However, changing the local or nationwide financial reporting systems that are presently used such as US-GAAP to meet the IFRS requirements will need a conversion project to incorporate the latest systems such as SAP. This paper focuses on IFRS conversion project and SAP ERP.
Features of SAP ERP for IFRS conversion
According to Bernhard (2009), SAP has developed many solutions that are compatible with IFRS, thus it becomes easy to convert to IFRS such as the SAP ERP. SAP ERP is an application that provides business management solutions such as management of resources, human capital, asset management and other business services. In particular, the SAP ERP FI package incorporates several financial management systems such as profitability management systems, future forecasting systems and other accounting systems. Therefore, the IFRS accounting standards will benefit many companies, especially those in the international business because they will use the same financial reporting systems. Similarly, there will be comparability among companies and it will ease international investments and access to international markets. Moreover, the IFRS will incorporate the global financial Information technology Systems.
When a company decides to convert to IFRS, it should consider the effects to the IT and financial solutions. The impact will differ depending on the structure of the company. There are several attributes to consider. For example, the size of the company and the inner control structure. If a company’s systems are incorporated globally, then it will be easier to make any modifications. Changes may be made primarily on sub-ledger or on general ledger system. However, if a company has many financial systems or entities that are not integrated, then the extent of the system impact may be more, especially on the sub-ledger stage and the inner reporting stage. The degree of changes may also differ due to the method of consolidation used by the company. The companies that implement consolidations level may be forced to restate their financial entries in case they are not trailed properly. SAP ERP is able to accommodate the discrepancy between the IFRS and generally Accepted Accounting Principles (AICPA, 2010).
Other SAP Solutions and IRFS Considerations
Monk et al (2009) argues that the oracle Enterprise Resource Planning systems and People Soft have familiar features to those of IFRS. Other SAP solutions include Oracle GRC, Oracle Hyperion, SAP Net viewer, SAP Business Objects, SAP HR, and SAP BI. The oracles ERP solutions contains an accounting structural which makes it possible for transition to IFRS. For instance, People Soft has multiple ledgers. The Oracle GRC solutions permit a user to manage changes to internal controls during changeover period. The Oracle Hyperion financial management aids in assembling, consolidation and reporting of monetary result in GAAPS and IFRS. SAP also enables a unified technology method supported by the SAP Net weaver platform and is able to work with all main architectures.
The business Objects XBLS application is essential in publishing, thus enabling Extensive Business Reporting Language, which is set in accordance to IFRS taxonomies. SAP has Business objects with the financial and reporting systems that allow companies to create consolidated financial statements for creating reports used by the regulators and investors. These objects are one of the IFRS requirements.
The SAP HR is an information system that allows easy retrieval of an employee records. It has features such as time management, travel, training and development. SAP BI is an integrated management system that manages financials, HR as well as customer relationship (Monk & Wagner, 2009).
Summary and Conclusion
SAP supports the configuration changes as well as other reporting alternatives. SAP ERP solution systems hold a variety of business combination methods that are well suited with IFRS. The SAP business Objects are also compatible with IFRS solutions. The Business Objects risk and other SAP solutions enable a user to incorporate data and other processes. AICPA (2010) highlights that SAP has parallel reporting features for updating data, creating the details required to integrate with the IFRS requirements and classifying data for improved reporting accuracy. It also automates difficult calculations, performs and stores multiple consolidations and as well generating reports in different designs that are meant for group-level reporting. These features give a complete audit trail for adjustments and those for IFRS Consolidation. The rule-based environment permits a user to configure company rules without relying on IT solutions and thus the system becomes flexible. This environment also supports general reporting and records needed to comply with IFRS needs. In addition, it has features that allow commentaries and disclosures. The user can deal with additional data sources and adding narrative information for financial information on the reports that comply with IFRS.
In conclusion, many people around the world have used SAP business solutions because it is easy to implement IFRS. The customer has achieved many benefits, including easy conversion to IFRS with the use of rules, calculations and controls. They have also benefited from reduced consolidation and reporting times, enhanced compliance. Globally, companies with subsidiaries are able to use similar financial reporting system.
References
AICPA, 2010. Financial system considerations in IFRS conversion projects. Web.
Bernhard, W., 2009. Financial management and ERP: Integrated accounting and control with SAP ERP(TM). Australia: Auxilia Pty Limited.
Monk, E.F. and Wagner, B.J., 2009. Concepts in enterprise resource planning. 3rd ed. Boston: Thomson Course Technology.