How important a role do you think IT will play in the conversion process from GAAP to IFRS?
Manager 1: Earlier, we never expected the new rules to have such an impact on the IT. However, with time we are seeing that there will be a lot of changes required in the financial reporting systems. IFRS and U.S. GAAP rules differ regarding revenue recognition, compensation, fixed assets, inventory etc. The two standards are said to have more than 100 differences and each of these differences signifies a change needed in the IT system. The IT cost is also expected to be huge. IT expenses are expected to account for about 50% of the total cost of conversion to IFRS.
Manager 2: IT is no doubt going to play a very big role in the conversion process from GAAP to IFRS. Each and every change will require a huge amount of IT support for the conversion process to occur smoothly. IFRS is going to require a lot more frequent data and thus it would require the systems to be in place. For e.g. The financial department might be dependent on the manufacturing department to get data on the inventory. Similarly all other departments that need to provide any accounting and financial data to the finance department will need to be linked to the finance department.
IT is definitely going to play an important role in the conversion process from GAAP to IFRS. IT systems help connect all the departments and systems in the organization together. Therefore, in order to shift to the IFRS system, it would be very important to have the right IT systems in place in the organization. Considering the amount of time and effort the entire conversion process and changing the IT systems is going to take, it is extremely essential for companies to become prepared for the change. If the companies are not ready on time, the IT systems might pose a hindrance to the conversion process. In case the IT systems are not ready, the figures would need to be converted from GAAP to IFRS manually, which would be a very time consuming and costly process. (Hennie van Greuning, Marius Koen, 2009)
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