International Financial Reporting Standards, IFRS (IAS) - How to Ensure Compliance. from Peracto Solutions IThound

International Financial Reporting Standards, IFRS (IAS) - How to Ensure Compliance.
by Peracto Solutions
Published:January 2008
Format: Portable Document Format (.pdf)
Length: 32 pages
Overview

Effective January 1, 2005 all listed companies in the 15 European Union (EU) countries must prepare consolidated financial statements compliant with International Accounting Standards (from 2003: International Financial Reporting Standards, IFRS).

IAS/IFRS 2005 will impact financial reporting in relation to recognition and measurement, and in relation to consolidation and reporting. Depending on the local GAAP currently in use, one of the major recognition and measurement changes is extended use of fair-value principles instead of historical cost. Fair-value, net present value concepts (NPV) are focused on current and expected cash flow streams rather than historical purchase price (e.g. amortization of goodwill over 30 years, which will now be evaluated based on discounted cash flows every period). On the reporting side, segment reporting by business unit and geographical location will be required.

This compliance statement is intended to explain the position of Microsoft Dynamics NAV in relation to IAS compliance for 2005. Within this compliance statement, the IAS standards are compared to Microsoft Dynamics NAV. Only those IAS where you would expect the ERP system to support decision making and reporting in regard to the given IAS are considered. IAS 1, 2, 14, 16, 21, 27, 46, 38, 39, and 40 are described in more detail regarding Microsoft Dynamics NAV. The description will provide a summary of the given IAS, in general terms, the relevance for Microsoft Dynamics NAV and commentary on how Microsoft Dynamics NAV users can comply with the given IAS.

Compliance is defined as the ability to meet the requirements in the IAS standards using Microsoft Dynamics NAV. That means that, for standards for which Microsoft Dynamics NAV has functionality, compliance is met when the functionality in Microsoft Dynamics NAV allows the user to prepare a financial statement in accordance with IAS. For standards for which Microsoft Dynamics NAV does not have functionality compliance is implied as long as the standards do not contain requirements that should be fulfilled by Microsoft Dynamics NAV. This is the reason why several IAS's can be excluded from deeper analysis.

Complying with IAS does not necessarily require the ERP system to be able to generate the final financial statement used for public disclosure (i.e. the annual report). Availability of information needed to prepare financial statements and the absence of any misleading information (e.g. incorrect bookkeeping) is emphasized in this report. It should be emphasized that IAS Compliance for an ERP system is more than just functionality - it includes both the setup and use of the system.

Potential issues regarding add-ons and country localized versions of Microsoft Dynamics NAV products are not addressed in full. The sheer number of available add-ons makes it impossible to make any definite statement regarding these; hence the comments are only guidelines.

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