Tech Solutions For IFRS: Posted At 35,000 Feet

Dina Medland

Technology can give a real boost to better corporate governance. We saw that with the tech challenge to #rethinksupplychains I wrote about on Forbes earlier this year (Competing To End Labor Trafficking in Global Supply Chains: With Technology). Making the process of documentation quick and easy is an important first step to transparency. It is also critical for compliance.

New International Financial Reporting Standards (IFRS) will address a suite of measures by the International Accounting Standards Board to overhaul accounting in the long wake of the financial crisis and to increase international regulatory cooperation.

But with less than 18 months to go before the new IFRS rules go into effect, a survey by Deloitte reveals that nearly two-thirds of banks are unclear on the effect the rules may have on their balance sheets – and uncertainty abounds.

A staggering 99% of respondents to Deloitte’s Sixth Global Banking IFRS survey said their local financial regulator had yet to say how they might incorporate IFRS 9 numbers into regulatory capital requirements. The survey included 91 banks, including 16 global, systemically important financial institutions (but excluding U.S. banks).

Almost half of banks think they do not have enough technical resources to deliver their IFRS 9 project and almost a quarter of these do not think that there will be sufficient skills available in the market to cover shortfalls, says Deloitte. Some 60% of banks either did not or could not quantify the transition impact of IFRS 9. Of the banks who responded, the majority estimate that total impairment provisions will increase by up to 25% across asset classes.

Seventy percent of respondents anticipate a reduction of up to £50 in core tier 1 capital ratio due to IFRS 9, according to the survey.

But amid the guesswork, time is running out. One answer comes from SAP; I was at 35,000 feet, en route to California to learn more when I wrote this blog. SAP has just announced the latest enhancements to its revenue accounting platform designed to help CFOs and chief accounting officers master the new IFRS 15 (which is known as ASC 606 in the U.S.) revenue-recognition standards.

It is not just the banking sector that’s taking note. These new accounting standards will apply to all entities – public, private, and not-for-profit – that have contracts with customers, and will supersede virtually all current revenue accounting requirements.

IFRS 15/ASC 606 eliminates the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replaces it with a principle-based approach for determining revenue recognition. The change can affect companies’ reported revenue, how and when they report financial performance, and overall financial decision making.

It sounds like a discussion for the boardroom. But time to implement the new process is running out. To find out how much time you have, visit the IFRS 15 Doomsday clock here.

For more on making sense of the new IFRS regulations, see The Digitalist’s post on Wrestling With IFRS 15.

This article appeared originally in Board Talk. It is republished by permission.


Dina Medland

About Dina Medland

Dina Medland is an independent writer, editor, and commentator with a strong focus on issues around corporate governance, ethics, and the workings of the boardroom. She is on the team of contributors to @ForbesEurope with a page on corporate leadership, the boardroom and governance, and is an ex-Financial Times permanent staff member who has been a regular contributor in recent years.