IFRS – The effects on Human Resources
Resolution No. 08.G.DSC.010 of the Superintendency of Companies obliges all companies subject to and governed by the Securities Exchange Law to apply IFRS from year 2010. Consequently, 2009 is the year of transition. However, it’s not only in accounting and financial reporting that Ecuadorian companies will be undergoing change. Human resources is another of the impacted areas and organizations need to consider the implications.
QUALIFIED PROFESSIONALS - For most professionals in Ecuador, IFRS is new and will demand appropriate training that focuses on the needs of their company’s particular industry, business and nature. The first questions that spring to mind are: who needs to be trained and when? More difficult to answer are questions related to who will provide the training and the requirements of the regulators and professional associations.
Within Latin American, various countries require accounting professionals to undergo Continued Professional Education – CPE training programs to ensure updated knowledge. In some cases, IFRS has spawned diploma programs on the subject as an alternative means of renewing professional licenses.
COMPETITIVE SALARIES - Those wishing to be at the forefront of the profession will need an in-depth understanding of the new regulations. Knowledge and experience in IFRS will undoubtedly be rewarded in the employment market through better salaries. Nevertheless, keeping up-to-date on the technical aspects doesn’t just mean acquiring accounting knowledge. Professionals involved in financial reporting and management will need to refresh their knowledge of other concepts involving corporate finance and business if they are to understand and determine Fair Value, for example. Sound knowledge of these areas will ensure continued employment and a career for the foreseeable future.
Those professionals who become their company’s internal IFRS reportingchampions will have a significant influence on how their organization is perceived by the general public. Analysts and investors will be approaching them to gain more extensive information on major decisions affecting financial reporting.
NEW CHALLENGES - The days when the notes to the financial statements played a minor supporting role are over. Accounting experts are now faced with the challenge of measuring the scope of disclosures if they are to comply, on the one hand, with users’ expectations of greater transparency and, on the other hand, determine the risks that sensitive information could fall into the hands of their competitors or the control authorities. Balancing user expectations against the more extensive IFRS compliance requirements will be no easy task. The individual with responsibility for this mission will be highly valued within the organization when it comes to deciding upon disclosure options and how to apply the regulations.
Those who have acquired experience in IFRS will not only have safeguarded their job but will also be subject to interesting job offers in the employment market.
Ecuadorian companies must apply IFRS by year 2012 at the latest, although the need to adopt international accounting standards becomes more pressing every day.
Various leading organizations in Ecuador have already begun the convergence process and the worldwide or the local economic crisis is no reason to postpone application. Nor should it be used as an excuse to slacken the pace of implementing a process that has already started. The outcome can only be positive in terms of the quality of financial information as well as being a growth opportunity for accounting and finance professionals.
Finance directors and controllers failing to get to grips with the IFRS not only run the risk of undermining their reputation but could even be replaced by others that took the trouble to immerse themselves in the subject matter.
TIMELY TRAINING - However, the absence of any knowledge of IFRS is no reason to panic. Extensive training on the relevant standards may require too much time and, in some cases, more time than is available before entering the new reporting era, especially for those companies who have earmarked year 2009 as their year of transition.
In these circumstances, the best strategy is to consult an expert and focus efforts on those areas where the transition impact will be greatest. Nevertheless, consideration should also be given to how the required technical updating will affect, on a lesser scale, other non-finance departments. Those responsible for technology, recruitment, client and supplier relations as well as directors will need an overview based on their specific concerns.
TEMPORARY PERSONNEL - One consequence of implementing IFRS will be companies seeking temporary personnel to help them through the transition period that, in some cases, may involve a retrospective analysis of the impact on accounting standards. This could involve retracing steps over a number of years to determine the fair value of certain items and the training and analysis required for the IFRS convergence process may well mean that attention to daily reporting activities strays. Hiring temporary personnel to undertake certain transitory tasks will ensure that processing and reporting tasks do not slip behind schedule.
Comparing financial information generated by similar companies and market rivals is becoming the norm among many finance and business directors, but interpreting a report issued under IFRS is no straightforward task for those without the required grounding. And deferring the moment until the year of obligatory application will only compound the problem.
Various Ecuadorian companies have the advantage of belonging to multinational groups that have already begun the process of reporting under IFRS. These companies should enjoy a trouble-free convergence process and will be the beneficiaries of knowledge transfer acquired through international assignments and professional secondments.
CONCLUSION - Adoption of IFRS evidently involves a great deal more than merely reorganizing charts of accounts. The resulting changes will have a cascade effect extending beyond the finance and accounting departments. Consequently, human resource-related aspects will require exhaustive analysis. Since the conversion project will make high demands on the personnel involved, most companies will be struggling to cope. Common practice is to equip accounting departments with the required number of personnel for day-to-day activities, but no more. Companies will then be looking to recruit qualified personnel who, inevitably, will be in short supply during the next 3 or 4 years. By the time Ecuadorian universities start to turn out graduates with updated knowledge on IFRS it may well be too late.
IFRS compliance checklist & IFRS presentation & disclosure checklist - https://www.deloitteaudit.com/Content/2/39f6cdba-008e-4438-afe4-8c1d680eba53.htm
Questions and Answers: First-time Adoption of International Financial Reporting Standards - Guidance for Auditors on Reporting Issues (IAASB).- https://www.deloitteaudit.com/Attachments/2/First_Time_Adoption-IFR-IFAC-04081.pdf