IFRS, SAP and You
Meeting the Challenge of International Financial Reporting Standards
SAP’s Proven Approach
Angelo Correa
Solution Advisor
SAP America
August 28, 2009
IFRS - International Financial Reporting
Standards Agenda
IFRS
 Overview
of IFRS and Key Considerations
Reporting and Analytics Options
 SAP
BusinessObjects & IFRS Reporting
Transactional Layer Options
 SAP
General Ledger & IFRS Configuration
Frequently Asked Questions
Wrapup
Page 2
IFRS Reporting --- AGENDA
IFRS
 Overview
of IFRS and Key Considerations
Reporting and Analytics Options
 SAP
BusinessObjects & IFRS Reporting
Transactional Layer Options
 SAP
General Ledger & IFRS Configuration
Frequently Asked Questions
Wrapup
Page 3
What is IFRS?
Key Points — IFRS Adoption
International Accounting


Global wide standard for financial accounting and reporting
Currently in use in most of the world
 Europe, Japan, Australia, China, etc.
 Other countries are in the process of changing from local GAAP to International Financial Reporting Standards
(IFRS)
 How





it affects you — Key deadlines
US SEC has “proposed” a requirement that US Issuers use IFRS beginning in 2014 if it is in the public interest and for
the protection of investors to do so
Some companies have the option reporting in the IFRS format as early as the end of 2009
Dual Reporting begins in 2012
Requires re-statement of opening 2012 Balance Sheet to IFRS standards
IFRS cutover from Local GAAP to IFRS is 2014
– Local GAAP reporting requirements will not go away
– Some industries will still require Local GAAP reporting
 Other


Standards Board
key points to consider
The IFRS “answer” will be specific to your company, industry, and country
– “One size fits all” does not apply for IFRS
Prior planning including your audit/consulting partner and SAP is essential for success
Page 4
IFRS Implementation Considerations
The IFRS implementation is not just an accounting or reporting project
Broad implications across your entire organization
Parallel reporting requirement

Local GAAP



Industry Specific?
Tax (IRS)?
IFRS
Consider how SAP can help you meet these requirements?

SAP ERP


General Ledger and sub-ledgers
SAP Business Objects

IFRS starter kits
Transaction changes

End User Training ?
Page 5
Potential Impact of IFRS on an SAP
Landscape from Ernst and Young
SAP modules
FI - Financial
CO - Controlling
MM – Material
Management
AC – Asset Accounting
Process Areas
General
Ledger
Cost Element
Requisitions
Cost Center
Purchase Orders
Purchasing
PS – Project Systems
HR – Human Resources
Book Close
Accounts
Receivable
Accounts
Payable
Profit Centers
Tax
Internal Orders
Consolidations
ABC Costing
Inventory
Management
Good Receipts
Depreciation
Product Costing
Bill Of Materials
Sales
Make to Order
Plant Shut Down
SPL
Master raw
materials
Tracking
Third Party Billing
Employment History
Payroll
Training
Career Management
PP – Production Planning
Capacity Planning
Master
production scheduling
Material requirements
planning
Shop Floor
PM – Plant Maintenance
Labor
QM - Quality Management
SD – Sale and
Distribution
Planning
RFQ
Material
Executions
Sales Orders
Down time and outages
Inspections
Pricing
Picking
Certificates
Packing
Shipping
Possible Impact
Need to investigate to determine magnitude
Manufacturing industry example
Source: Ernst and Young
Are there any benefits to IFRS?

Improved quality of reporting –

A globally accepted set of principles-based standards may offer opportunities to consistently apply
accounting standards
 Improved

 Reduced


 Potential

 Cost
transparency and investor confidence –
As use of IFRS becomes more widespread, the new standards will increase comparability for investment
analysis and performance measurement
accounting complexity –
US GAAP accounting rules are viewed as complex and difficult to apply
IFRS in based on “principles” not rules which will provide the opportunity for more clear representation of
financial results
process and cost efficiencies –
The same financial reporting standards across the world will provide opportunities to simplify and centralize
financial reporting processes and functions
of capital –

 Process

A single global financial reporting standard will enhance the efficiency of capital allocation and should reduce
the cost of capital
and technology optimization –
Converting to IFRS may provide an opportunity to improve and streamline key components of the current
SAP landscapes
Page 7
Impact of Technology on Group Close
 Parallel

reporting
For how long?
 Top-side

adjustments
Audit Issues ?
 Consolidation

Which One ?
 Disclosures

of report writing
XBRL Considerations
 Amount

and commentary
More will be required
 Ease

engine and business rules
of customization required
Out of the box capable?
Page 8
IFRS Reporting --- AGENDA
IFRS
 Overview
of IFRS and Key Considerations
Reporting and Analytics Options
 SAP
BusinessObjects & IFRS Reporting
Transactional Layer Options
 SAP
General Ledger & IFRS Configuration
Frequently Asked Questions
Wrapup
Page 9
SAP Solution Portfolio for IFRS
 SAP
Business Suite solutions are already IFRS capable
 SAP BusinessObjects solutions can also play a key role in helping organizations
transition to IFRS
 With the combination of SAP ERP and SAP BusinessObjects solutions —

SAP offers the most complete solution to support IFRS
SAP Business Suite
SAP BusinessObjects

 SAP
SAP Business Suite 7

SAP ERP 6.0 –
– SAP ERP Financials
– SAP General Ledger
–
–
–
Parallel Ledgers
Asset Accounting
Etc.
BusinessObjects EPM and
GRC Solutions
 SAP BusinessObjects



SAP BusinessObjects Planning and
Consolidation + IFRS Starter Kit
SAP BusinessObjects Financial
Information Management
SAP BusinessObjects XBRL Publishing by
UBmatrix
Page 10
SAP BusinessObjects solutions support
IFRS
Financial consolidation and reporting solutions from SAP BusinessObjects are
fully IFRS capable (out of the box)

800+ successful IFRS implementations in EMEA
Key functionality to support IFRS is available today:




Top-side adjustments
Rules-based environment
Disclosures and commentary
Flexible and powerful reporting
Starter kits speed and smooth the transition process

Provide pre-configured IFRS compliant content
Comprehensive compliance

Documentation, automated testing and reporting of internal controls in accordance with
SOX 404 and 302
Deep integration into underlying transactional and GL systems


Including SAP ERP, SAP Business Suite, and SAP NetWeaver BW
Applications remain heterogeneous and open to non-SAP environments
Page 11
SAP BusinessObjects -- IFRS Starter kits
Faster legal compliance – reduce implementation times
Fast implementation

Pre-packaged content reduces implementation
times by up to 80%

Dynamic configuration enables easy
customization to specific requirements

Complete, generic reference implementation
Rapid and trusted legal compliance

Embedded expertise in meeting financial
regulations including best practice in financial
consolidations and internal controls

Detailed process guidance for business users
Comprehensive scope

IFRS/GAAP specific chart of accounts

Pre-configured IFRS/GAAP consolidation rules,
controls, and calculations

Publishable financial statements
Page 12
SAP BusinessObjects XBRL -- UBmatrix
Streamlining XBRL publishing for business users
Speed

Quickly navigate taxonomies and map data

Easy to use drag-and-drop mapping environment

Fast, thorough validation of generated XBRL
documents
Simplicity

Works with EPM solutions and SAP Business Suite

Link to and import disclosures stored in Microsoft Word

Insulates users from dealing with complex XBRL syntax
Flexibility

Easily extend published XBRL taxonomies

Complies with the XBRL 2.1 specification

Supports basic and block‐text footnotes, dimensions,
and business rules
Page 13
IFRS Reporting --- AGENDA
IFRS
 Overview
of IFRS and Key Considerations
Reporting and Analytics Options
 SAP
BusinessObjects & IFRS Reporting
Transactional Layer Options
 SAP
General Ledger & IFRS Configuration
Frequently Asked Questions
Wrapup
Page 14
SAP ERP General Ledger – What is It?
*Segment
Reporting
*Management
Reporting
*Extensibility
*Legal Entity
Reporting
*Balanced Books
in any Dimension
*Parallel
Accounting
*Compliance
Fast Close
*Transparency
Total Cost of
Ownership Reduction
Transactional Layer -- SAP General Ledger
 Project Plan
 Typical

Implementation Time Line (Net New Customer)
General Ledger Configuration Options based on it’s flexible design
– Option 1 – Account Based
– Option 2 – Parallel Ledgers
© / Page 16
Possible Implementation timeline (US)
Overview and recommendations
Consulting/Audit Partner, Customer + SAP Field Services
Begin IFRS Project Planning and Local
Impact Determine SAP Landscape
Solution Required
2009
2010
YE Close &
Restatement
to IFRS
Dual Reporting
Period Ends
Prepare Opening
Balance Sheet
under IFRS rules
2011
2012
IFRS go live
date
2013
2014
ERP Layer -- SAP Field Services + Customer
Initial
project blue
printing and
financial
project
begins
Begin configuration
Landscape for
IFRS
a.
b.
Transaction
Layer
Reporting Layer
Installation of
ERP 6.0
Completed
SAP General
Ledger Active
IFRS Standard
Dual Reporting Period
Go Live IFRS
with possible
SLO projects to
clear Local
GAAP Issues
Note: The effort required to meet the IFRS deadlines is directly dependant on the
Complexity of your business reporting requirements.
Page 17
IFRS Project Structure – Corporate Wide Effort
Corporate Organization Staffing:
Corporate Financial Office
 Set Project objectives
 Time Line
 Determines Accounting Gaps
Regional Financial Offices
 Determines Regional Differences
Analyzes IFRS impact vs. regional GAAP
requirement
Local IFRS Experts
 Identify local issues
 Performs reconciliation postings
 IT Department
 Upgrades and other Projects
Consulting Partner
 Opening IFRS Statements
 Reconciliation between Local GAAP and IFRS
 Dual Reporting
Page 18
Two Options for IFRS Reporting using
SAP General Ledger -- Flexibility
Suggested Approach
Account Based
Parallel Ledgers
SAP General Ledger
Easiest to implement
Single Ledger Approach
Most transparent approach
Independent set of books
Future IFRS requirements more
easily accommodated
Future enhancements easily
accommodated
Single Ledger (Account Based) Approach
SAP General Ledger
How it works
Uses single ledger for all posting

Pure
Local GAAP
Accounts
Pure IFRS
Accounts
Common
Accounts
Could be the Leading Ledger for SAP General Ledger
Accounts are “grouped” according to legal reporting requirements

Example

300000 to 400000 Operational Chart

500000 to 550000 IFRS

600000 to 650000 Local GAAP
Each group of accounts will be in balance

Requires extra care to ensure correct account determination

And the establishment of a coding handbook.
IFRS Financial Statements report using common accounts and “pure” IFRS
accounts together

Red Oval in diagram
Account Solution is recommended where
 Relatively few valuation differences exist between IFRS and local GAAP
 No issue with an increased number of General Ledger accounts
 Standard reporting is used
 Different fiscal years are not required
Page 20
Single Ledger Option – Key Points
The Account Based Approach for IFRS reporting:
 SAP

General Ledger
Simple configuration
 Should
be considered only after a completion of a through study to determine
the number of accounting differences between the current Accounting Standard
and the IFRS standard

Key Point – Local Interpretation of IFRS regulations will require different reporting
requirements
 Does
not require the set up of additional ledgers

Both Local GAAP and IFRS data will be contained in single ledger

Does require the “grouping” of specific accounts
Page 21
Parallel Ledger Approach -SAP General Ledger
How it Works
Provides IFRS and Local Accounting Standard reporting from multi-ledgers
Can be configured to meet both reporting requirements from the first go-live date
Utilizes the best features of the SAP General Ledger
Document Splitting
Segment Reporting
Etc.
Recommended option of complex installations
Large differences between IFRS reporting standards and the current legal reporting
standard
Feeds properly formatted IFRS data directly into the Reporting and Analytics layer
adjustment after Simplifies reporting and requires little manual consolidations






Parallel Ledger Configuration is recommended where
 Segment reporting is required
 Increasing the number of SAP General Ledger accounts is not desirable
 Complete set of separate legal reporting books is preferred
 Different fiscal year is needed for additional legal reporting requirements
Page 22
Parallel Ledger Approach – Key Points
Customers for this approach are defined as:

SAP ERP Financials installation prior to January 2012

SAP General Ledger planned to go live in the future

Parallel Ledgers favored option for SAP General Ledger configuration
Basic Considerations leading to Parallel Ledger Approach

IFRS knowledge available before GL configuration begins



Any current landscape issues resolved prior to any GL project



Consulting/Audit Partner engagement
SAP Field Services
Consolidation of multi-instances?
Upgrades and General Ledger migration
Major differences exist between current Local Accounting Standard* and IFRS reporting
requirements
Page 23
IFRS Reporting --- AGENDA
IFRS
 Overview
of IFRS and Key Considerations
Reporting and Analytics Options
 SAP
BusinessObjects & IFRS Reporting
Transactional Layer Options
 SAP
General Ledger & IFRS Configuration
Frequently Asked Questions
Wrapup
Page 24
Some Frequently Asked Questions
Typical Questions
Is the implementation of IFRS a significant project?
 Yes, but it does depend on the complexity of your specific environment
 System flexibility is key to overall complexity
 Your current landscape status will also play a role in the complexity of your specific project
 New Customers have an advantage
– Consider design requirements during early installation phase
 Your IFRS project will require input and guidance from
 Your consulting partner
 SAP Services
 You own internal experts
Is there a single best solution for IFRS?
 No, sorry
 The best solution for your company will be the result of a thorough review of your current
status and the overall impact on your company when adapting to IFRS
Page 29
Some Frequently Asked Questions
SAP’s View of IFRS (cont.)
Typical Questions
What type of support can I expect from SAP during this project?
 SAP


will provide application support for our products
Basically we can help with basic configuration/consolidations and reporting help
For correct interpretation of the IFRS rules and guidelines it is best you work with your consulting
partner
What is the first step I should take to begin this IFRS project?

SAP would suggest you contact both your consulting partner and SAP for guidance and
preliminary planning
IFRS Reporting --- AGENDA
IFRS
 Overview
of IFRS and Key Considerations
Reporting and Analytics Options
 SAP
BusinessObjects & IFRS Reporting
Transactional Layer Options
 SAP
General Ledger & IFRS Configuration
Frequently Asked Questions
Wrapup
Page 27
IFRS Summary
IFRS is coming and organizations need to understand the issues, assess
the impact, and find solutions
 Despite apparent reticence, IFRS is has momentum and is inevitable – don’t
fight it or bury your head in the sand
 Don’t leave it too late – it’s easier to collect comparative information as it
happens rather than 2 years after the fact
 Plan for change – you don’t know what all the changes will be, but you know
there’ll be some
 Short term solutions are expensive and dissolve ROI from other important
projects (fast close, systems integration etc.)
 Treat IFRS as an opportunity – use it to review and improve your financial
consolidation and reporting systems
Page 28
7 Things to Take Home
Keys to Success
1.
2.
3.
4.
5.
6.
7.
Engage with your consulting partner now
Complete a through analysis of the differences between the Local GAAP
standard in place and the IFRS standards
Take time to understand how and if these differences affect your company
Once the differences are recognized and verified seek internal solutions --such as the modification of internal accounting policies
Key on only those differences that do affect your current standards and can
not be changed via internal accounting changes.
Don’t postpone IFRS project planning thinking the SEC will delay the
deadline
Consider the impact of IFRS in any future landscape design considerations
Page 29
Contacts and Further IFRS Information:
Philip Mugglestone – SAP BusinessObjects

philip.mugglestone@sap.com
Pete Graham – SAP ERP Financials

pete.graham@sap.com
SAP Customer Network
SEC Web page for current status
Most Partners have IFRS home pages for Reference
Page 30
Thank you!
Angelo Correa
SAP America
3010 Highland Parkway
Downers Grove, IL 60515
M +1 224.595.0014
angelo.correa@sap.com
www.sap.com