Einstein once said calculating income tax requires a philosopher, rather than a mathematician. I can see his point. There’s a lot of uncertainty in putting new regulations into practice, particularly with regard to IFRS 9. It’s a topic we’ve spent a lot of time reviewing internally. That’s why I want to give you some practical tips and advice for implementing IFRS 9 with confidence.
- Plan your path and start now. The first of January 2018 may seem like a long way away, but there are a lot of internal considerations and discussions that need to take place first – so start now. Yes, now. IFRS 9 is more principles-based than any other standard that’s gone before it, which means it can be open to interpretation. An early assessment of the impacts on provision levels is an absolute necessity. Talk to your auditors to find out different ways of implementing that are right for your business. You need to know the best strategy for reducing the cost of the system, given your structure. Now is also the time to be speaking with your internal colleagues to identify the wider considerations and implications of any decisions. If you haven’t already started, you’re late. Get going.
- Think widely and cross-functionally, then go step-by-step. IFRS 9 is something that should be done stepwise. One of the main reasons for a step-by-step approach is because each step may lead to changes that could have a knock-on effect elsewhere. IFRS 9 provision calculation requires integration of multiple processes across different areas, including risk, finance, and accounting. That means you need to look at the holistic picture with each step you take. Make the most of the transition phase as it will help you understand the wider implications. Think widely and cross-functionally to get the best understanding of your economic exposures, and don’t try to boil the ocean by doing it all in one go.
- Put a dedicated budget in place – One of the biggest “lessons learned” we hear from companies going through this process is that they failed to put a dedicated budget in place at the outset. They’ve then had to scramble to pull time and resources together as they progress across different steps. Everyone focuses on the compliance requirements and the hard deadline, but regulation budgets are often overlooked. They can consume considerable resources and software. Yet reporting, by nature, involves at least two parties (and usually more), so there will always be an impact on someone. Companies often say they are surprised at the time and budget of changing content and technical requirements around reconciliation efforts, for example. Avoid the pitfalls by thinking ahead about what’s required.
For the sake of brevity, I’ve only included three of the most important guidelines above, but there are many others I could discuss in more detail for a well-governed approach. As technology continues to automate much of the operational work, your role as treasurer is evolving. You’re able to take a wider view of the business with consultative input, rather than just keeping the books clean. With that in mind, IFRS 9 gives you an opportunity to take a fresh look at some of your own processes and strategies.
For example, are your accounting systems tightly integrated to your treasury solution, or do you need to upload all the data, replicate the system, and bring all the data back again? Part of your consultative remit means looking ahead to future-proof your systems for seamless integration and a smooth implementation path.
The good news is that there’s no shortage of information available in the form of conferences, customer councils, external events, and peer-level user organizations that are all focused on this topic. I’d urge you to get involved. Given the evolutionary nature of IFRS 9, iterating model development cycles and learning from others are time well spent. Whether you choose to put any of it into practice, of course, is up to you.
For more on IFRS 9, read Is Your Investment Accounting Software Ready for IFRS 9?
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