On February 24, 2010, the SEC issued a Statement in Support of Convergence and Global Accounting Standards reiterating its belief “that a single set of high-quality globally accepted accounting standards will benefit U.S. investors ….” It reconfirmed that statement as recently as early August with its latest update.

A final decision on IFRS for the U.S. has NOT been issued. In fact, such a decision is not expected until 2011, after the efforts of several working groups have been reviewed and public comments assimilated. In Canada, however, IFRS is a done deal and the first compliance deadlines are approaching.

So, if IFRS happens, what is the implication for the technology infrastructure? “It will be huge,” observes Matthew J. Kinver, director of the IFRS practice at Sunera Business Consulting.

IFRS goes far beyond mere financial reporting. It reaches deep into the systems that actually generate the data as it changes how financial data is handled. “With IFRS, you actually have to dig into the numbers. It is about the accounting treatment of the data,” says Kinver.

The way the numbers are treated in U.S. GAAP may be considerably different under IFRS and result in different numbers. “We have seen the differences in Canada result in material changes, as much as 3.5 percent in the bottom line,” Kinver continues.

Finance’s IT group should prepare for significant infrastructure changes. “About 90 percent of an IFRS conversion relates to how the internal infrastructure handles change,” Kinver estimates.

How big the changes will be depends on how closely the standards folks eventually align U.S. GAAP and IFRS. At a minimum, Finance and IT will have to review all the financial applications. “IFRS is more detailed in different ways than the U.S. GAAP,” notes Kinver.

In terms of technology, IFRS especially will challenge the ERP software companies, notes Glenn Johnson, senior vice president, Magic Software Enterprises Americas, which provides integration tools. Systems integration surely will be impacted, and IT will have to examine, and probably tweak, the interfaces for ERP and other systems. “Remember Y2K? Then we had to change just one thing, the date. Now we’re going to have to apply a whole set of business changes to many things,” he adds. For example, it will change how assets are valued. It also will change compensation plans and how revenue is reported.

Whatever the decision regarding IFRS in the U.S., it already is a fact of life in Canada and Europe. Companies with Canadian or European subsidiaries are going to have to deal with IFRS soon. Here, any conversion to IFRS will spread over several years, most likely beginning in 2014 or 2015. For some period of time during the conversion, the organization will likely run parallel systems and dual reporting.

When, or if, IFRS actually arrives, it will be a big deal. Initially, IFRS will generate a lot of work for both IT and Finance; plan to expend much time and resources. ###