10 things to do before 2012
Our IFRS conversion experience in Malaysia and in the region have pinpointed at least 10 key things that Malaysian publicly listed companies can focus on now to keep their IFRS conversion on track for 2012.
Measure yourself up against the following checklist:
Obtain top management commitment to get tasks done
The backing of the highest level of authority and getting the job done is critical. Those headed in the right direction will deal with issues on a timely basis, have a realistic monitoring process and, and IFRS will appear regularly on the audit committee agenda. Those who aren’t, should prepare to answer to investors and regulators disappointed by delayed results.
Have a contingency plan
IFRS presents an array of known and potential contingencies: ongoing changes to standards, financial instruments, fair value, the inability to obtain financial data, unexpected business combinations and changes in key personnel. Have a list of fall-back resources.
Get ready to be audited, reviewed and challenged
With IFRS, organisations will be making significant judgment calls - which need to be documented, defended (for example, to analysts) and audited. Well-armed organisations will prepare pro forma IFRS financial statements, practice account closings, data gathering parallel run, and conduct industry benchmarking.
Ensure functional human resources are in place
No matter how well-prepared the systems or processes may be, the people living with IFRS can make or break an IFRS conversion. The first step is identifying these individuals; the next step is training them. Such planning takes time and training.
Design processes to capture information needed for disclosure
IFRS frequently requires the disclosure of additional data that may not be routinely produced. Unless there’s a process in place to capture this additional data, it may prove difficult to find when it is needed at a later date.
Check for data availability for IFRS calculations
Certain IFRS calculations may hinge on data not previously required or not readily available. This “you don’t know what you don’t know” factor has sparked last-minute scrambling in many IFRS conversions. Assembling such data on short notice (particularly on impairment) may prove difficult.
Prepare for IT system changes and design
Underestimating the extent of IT changes has thrown many projects unexpectedly off-course. The list of potential IT process changes required to capture data under IFRS is extensive – affecting everything from revenues and expenses, to currencies, to subsidiaries and assets held for sale. The risk of using a 2012 “go live” date is that there won’t be ample time to re-process comparative statements. Potentially meaning double trouble in 2012.
Ensure all your related entities are IFRS-ready
Subsidiaries, joint ventures, equity investors, and newly consolidated entities all need to be accounted for using IFRS. Likewise, auditors, actuaries and valuators will need to work within IFRS requirements. Will these parties be ready for IFRS? That’s a question you don’t want to ask at the eleventh hour.
Evaluate business combination protocols
Although any business combinations completed in 2010 can initially be reported under current Malaysian GAAP, those 2010 acquisitions must be restated to IFRS standards in the 2011 IFRS comparative statements. This may substantially change the results of the transaction – and of the 2010 operations when reported under IFRS. For example, some items, such as transaction expenses, are written off under IFRS. To avoid surprises, organisations should be ready to evaluate all proposed transactions, and process any completed transactions, under both Malaysian GAAP and IFRS.
Check for the anomalies within Malaysian practice
Experience has shown that conversion to IFRS can expose situations that have been tolerated under Malaysian practice, but that don’t make sense and can’t exist under IFRS. For example, Malaysian practice for property development allows for recognition of revenues and expenses progressively using the percentage of completion method. That will change under IFRS with implications on income volatility and on taxes.
What’s your score? Now is the time to get your IFRS conversion progressively on track.
We can help. Contact us.