03 IFRSImplementation-PreparedOrScared LindawatiHalim

IFRS Implementation: Prepared or Scared?
Lindawati Halim
Solution Architect
SAP Indonesia
IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
IFRS Is Becoming a Global Reporting Standard*

Global Capital Markets
US
US GAAP moving toward IFRS
Japan
Convergence to IFRS
UK
IFRS
France
IFRS
Canada
Convergence to IFRS
Germany
IFRS
Hong Kong
HKFRS (equivalent to IFRS)
Spain
IFRS
Switzerland
IFRS or US GAAP
Australia
AIFRS (equivalent to IFRS)
Indonesia
Convergence to IFRS
Every major non-US capital market is moving to IFRS

Over 100 countries around the world require or permit IFRS
*Source: Ernst & Young
2010 SAP AG. All rights reserved. / Page 4
IFRS Convergence by DSAK IAI (2009 2012)

CONVERGENCE METHOD
Progressively replace local GAAP approaches with IFRS.

Gradual strategy (not big bang):
Converge step by step with transition period,
To avoid psychological shock
To give more time for preparation
To reduce negative impact of the new PSAK (if

any)
The target of IFRS Convergence in Indonesia is to

revise the current PSAK to comply materially
with IFRS as per
1 January 2009, which will be effective in

2011 or 2012,
Some newly revised standards already effective

since 2008.
Source: Kompas 06 May 2010

Source: Deloitte Presentation by Merliyana Syamsul @ IFRS Event 18 May 2010
IFRS Convergence by DSAK IAI (2009 2012)

CONVERGENCE METHOD
Progressively replace local GAAP approaches with IFRS.
Reasons for Convergence
To improve the quality of the Financial

Accounting Standards and reduce to
cost of preparing the Standards
To improve the credibility and

functionality of the financial statements
by enhancing the quality and
comparability.
To inline with the standards that applied

internationally.
It is the commitment of the Government

as member of G20 and also Indonesia
as member of IFAC.
Source: Kompas 06 May 2010

IFRS
.. and the impact
Greater use of fair value as a measurement

basis pacing emphasis on obtaining reliable
measurements
Much more disclosure in the year-end

reports and accounts
IFRS is likely to have a significant impact on

the balance sheet and profit/loss figures
and statements for a company
Financial reporting model is more complex

and less understandable often requiring
narrative
Organizations need help to understand the

issues, assess the impact, and find
solutions
The Gap
1 January 2012

The Roadmap

Key Impact of IFRS

The table below illustrates the systems and processes that could be impacted by selected
IFRS rules
Converting to IFRS - Systems Functions affected by the transition to IFRS
IFRS
FS
Financial Reporting & Analytics
Management Reporting & Analytics
Financial Consolidation
General Ledger
Budgeting & Planning
Accounts Payable
Expense Reimbursement
Accounts Receivables
Cash Management
Fixed Assets
Lease
Property
Treasury
Project/Job Accounting
Contracts
Service Management/Costing
Sales/Order/Billing Management
Customer Relationship (CRM)
Purchasing/Procurement
Inventory
Manufacturing/Production
Human Resources
Payroll
Source: Ernst & Young, March 2008
SAP
/ Page
20102009
SAP AG.
All 12
rights reserved. / Page 12
IAS
2
IAS
11
IAS
12
IAS
14
IAS 16 /
IAS 40
IAS
17
IAS
18
IAS 19/
IFRS 2
IAS
36
IAS
37
IAS
38
IAS 32/
IAS 39
Key Impact of IFRS

The table below illustrates the systems and processes that could be impacted by selected
IFRS rules
Converting to IFRS - Systems Functions affected by the transition to IFRS
IFRS
FS
Financial Reporting & Analytics
Management Reporting & Analytics
Financial Consolidation
General Ledger
Budgeting & Planning
Accounts Payable
Expense Reimbursement
Accounts Receivables
Cash Management
Fixed Assets
Lease
Property
Treasury
Project/Job Accounting
Contracts
Service Management/Costing
Sales/Order/Billing Management
Customer Relationship (CRM)
Purchasing/Procurement
Inventory
Manufacturing/Production
Human Resources
Payroll
IAS
2
IAS
11
IAS
12
IAS
14
IAS 16 /
IAS 40
IAS
17
IAS
18
IAS 19/
IFRS 2
IAS
36
IAS
37
Its Pervasive
across organization
Involves Transactional System and

Consolidation & Reporting System
Source: Ernst & Young, March 2008
SAP
/ Page
20102009
SAP AG.
All 13
IAS
38
IAS 32/
IAS 39
IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
SAPs View of IFRS

SAP consider the implementation of IFRS a SIGNIFICANT PROJECT:
The complexity of project will be driven by your industry, company, and country
SAP will provide application support for SAP products. Basically SAP can help with configuration/
consolidations and reporting help.
Correct interpretation of the IFRS rules and guidelines, its best for company to work with their
consulting partner.
Customer IFRS project will require INPUT and GUIDANCE from:

Customer consulting / audit partner
SAP services
Customer internal experts
Customer current landscape status will also play a role in the complexity of project: System
upgrades, SAP General Ledger migration projects, SLO (System Landscape Optimization)
projects, etc
Theres no single best solution for IFRS

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
SAPs Approach to IFRS

How SAP supports:
Business Combinations and
Acquisition Accounting
Integrated Business Planning & Consolidation & Full ERP

Financials
IFRS Starter Kit for enhanced consolidation and reporting
Property, Plant and Equipment
Fully compliant asset accounting capabilities (SAP ERP)
Inventory/Stock
Fully compliant financial accounting, controlling,

materials management, production planning, material
ledger capabilities (R3/ECC)
Receivables, Payables and

Borrowing
FSCM for cash, collections & payments, and Treasury

Multi-currency support for revaluation and restatement
Revenue
Revenue Recognition capabilities for US-GAAP and IFRS

Comprehensive Incentive Compensation Management
Employee Costs and ShareBased Payments
Comprehensive HR, Payroll and Benefits functions

Support IFRS standards for recognition, exp and report
IAS12
Income Taxes
Sophisticated Fixed Asset, Project and Investment

Accounting app to track all relevant data for IFRS
IAS17
Leasing
SAP Leasing supports for finance and operating leases

Contract management and accounting for lessors
Valuations
Controlling and project system func for long-term contracts

Financial Asset Management app for fin instruments report
IFRS 3
IAS 16, IAS 23
IAS 2
IAS 36, IAS39, IAS46
IAS 18
IAS19, IFRS2
IAS39, IAS11
SAP
/ Page
20102008
SAP AG.
All 16
Classification of Differences
Differences between local GAAP and IFRS can be classified as:

Fully related to operational accounting, examples:
TRANSACTION
IAS 21 The Effects of Changes in Foreign Exchange Rates

IAS 16 Property, Plant and Equipment
Partially related to operational accounting, examples:

IAS 19 Employee Benefits
CONSOLIDATION
IAS 26 Accounting and Reporting by Retirement Benefit Plans
Related to consolidation, examples:

IFRS 3 Business Combinations
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
SAP
/ Page
20102009
SAP AG.
All 17
IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
IFRS Compliance Option

for Transactional Layer
Companies that report financial results under multiple Accounting standards (e.g. local
statutory, US GAAP, IFRS) have several options to capture accounting entries
representing the differences between the various standards:
Parallel Accounts/ Ledgers (e.g. ERP)
Topside Consolidation Entries (e.g. BPC)
Combination of parallel and topside entries
Which option is chosen will be influenced by several factors:
Complexity of accounting to comply with a specific standard
Existing Accounting and Consolidation System configuration and capabilities
Capabilities of Local and Group Accounting Staffs
Best Practice: Capture All Accounting Flows at the Ledger Level in ERP
Ensures a complete audit trail for all transactions recorded and complete transparency throughout
the accounting organization for results published
Parallel Accounting is one of the Challenge

Determine the Parallel Valuation Requirements
Most of the countries worldwide require the financial statement according to the
local GAAP and according to IFRS as well for many purposes (i.e. Legal)
That fact leads directly to the question of parallel accounting (valuation).
Aim of the parallel accounting/valuation:
Figure out the differences between local GAAP and IFRS or between PSAK and
legal or other reporting requirements.
Figure out which of these differences are affecting the company
VALUATION 1
PSAK
?
SAP
/ Page
20102009
SAP AG.
All 20
VALUATION 2
LEGAL
?
VALUATION 3
IFRS
?
VALUATION 4
OTHER
?
Alternatives - Parallel Management of Values in SAP

ERP General Ledger Accounting
Approach
Classic General Ledger
New General Ledger
Account-Based
Parallel Ledger
Current recommended configuration approaches for multi-GAAP valuation
First Approach
Parallel General Ledger Accounting
Pure
Local GAAP
Accounts
Pure IFRS
Accounts
Common
Accounts
How it works
Items with significant valuation differences are posted to different accounts. Each valuation
has its own set of pure accounts.
Each set of accounts contains its own retained earnings accounts in order to balance
Need clearly discernable account number ranges or distinguishing digits or letters to

distinguish among sets of accounts
Since each set must be in balance, extra care must be taken to ensure correct account
determination: establish a coding handbook.
IFRS Financial Statements report using common accounts and pure IFRS accounts
together
Alternatives - Creating Charts of Accounts Using Prefixes in

the Account Approach (Layer Model)
Options for creating charts of accounts:
Prefix and account number or last digit of the account
number
Prefix: Alphanumeric
Account Number
Suffix
or numeric
xxxxxx Common
accounts
xxxxxx IFRS accounts
xxxxxx Local accounts
Making entries
here entails
considerable
effort!
IFRS Reporting
0 common accounts and
1 IFRS accounts
SAP
/ Page
20102009
SAP AG.
All 23
-Generally
already filled
-Selection of
"from" and "to"
numbers is more
difficult
Common accounts retain a 0, but all local valuation accounts have

to be created again and can be transferred manually (with the
exception of FI-AA)
A prefix is added to all account numbers. Chart of accounts is
converted using the chart of accounts conversion tool.
Local Reporting
0 common accounts and
2 local accounts
=> Validation of the layer is

useful for postings
using the same valuation
approach and values
Second Option
Parallel Ledger With New GL
How it Works
Provides lead and non-lead ledgers in an integrated fashion
Posting to CO only from Lead GL
Replaces silo solutions with an unified solution
Default Postings in lead GL are replicated in non-lead GLs
Postings specific to accounting principles are recorded in the respective non-lead GLs only via Ledger
Groups
Segment reporting built-in
Implementation from the beginning of fiscal year
Real-time integration with CO eliminates FI-CO reconciliation
Integration with the lead GL standard, unlike special ledger approach where integration is done via
Integration Manager
Second Approach
Parallel Ledger
If ledger is not specified at time of document entry: Posting to all defined GL ledgers
Typical transactions: Ingoing invoice, Outgoing invoice, Payment
Any number of parallel ledger

for parallel valuation local
GAAP, group GAAP, tax
purposes and for different
fiscal year variants
Ledger A
(IFRS)
(leading
ledger)
Ledger B
(Local
GAAP)
Ledger C
(US-GAAP)
Second Approach
Parallel Ledger
If ledger is specified at time of document entry: Posting to the specified ledger only
Typical transactions: Valuation postings, Period end postings
Ledger A
(IFRS)
(leading
ledger)
Ledger B
(Local
GAAP)
Ledger C
(US-GAAP)
Summary
Comparison Parallel Account vs Ledger
Pure
Local GAAP
Accounts
Pure IFRS
Accounts
Common
Accounts
Parallel Account is recommended

where
Parallel Ledger is recommended

where
Relatively few valuation differences

exist which can be dealt in one GL
Complete set of separate books is

preferred
No issue with an increased number of

GL accounts
Segment reporting required
Standard reporting is used
Large number of GL accounts not

desirable
Different fiscal years not required
Different fiscal year is needed

Notes: Its available on version
ERP2004 (ECC 5.0) or later
Summary
SAP Recommended Solution
Pure
Local GAAP
Accounts
Pure IFRS
Accounts
Common
Accounts
Parallel Account
Easier to implement (no need to
migrate to the new GL for customer
who is using classic GL)
Can lead to unmanageable GL
Chart of Account Review might be
required
Adding some validations in the system
might be required
Parallel Ledger
Most transparent approach
Independent set of books
Future IFRS requirements more
easily accommodated
Customer Case Study

Matrix Solution Scenarios
ASPECTS to CONSIDER
IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
Potential Impact of IFRS on SAP Landscape

An Example
Source: Slide from Ernst & Young

IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
Project Steps High Level Overview

If Customer Wants to Utilize New GL
A high level overview of the project steps a company should follow in an IFRS conversion
project utilizing New GL. Assume all projects start with the Classic GL installed.
If you are currently on an older R/3 based release (4.6c & 4.7)
Define customer specific IFRS requirements
Upgrade to ERP6.0
Migrate to NewGL
IFRS Project
If you are currently on ERP2004
Upgrade to ERP6.0 (Suggested)
Migrate to NewGL
IFRS Project
If you are currently on ERP 6.0
Migrate to NewGL
IFRS Project
IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
SAP BusinessObjects solutions support IFRS

Financial consolidation and reporting solutions from SAP BusinessObjects Planning
& Consolidation (BPC) are fully IFRS capable
1500+ successful IFRS implementations
Key functionality to support IFRS is available today:

Parallel reporting
Top-side adjustments
Rules-based environment
Disclosures and commentary
Flexible and powerful reporting
XBRL publishing* (Optional)
Process Control* (using GRC-PC)
Deep integration into underlying transactional and GL systems

Including SAP ERP, SAP Business Suite, and SAP NetWeaver BW
Platform independent and open to non-SAP environments
SAP
/ Page
20102009
SAP AG.
All 35
SAP Business Planning & Consolidation

Use Case 1 - Consolidation
Differences between local GAAP and IFRS can be classified as:
Fully related to operational accounting, examples:
IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 16 Property, Plant and Equipment
Partially related to operational accounting, examples:

IAS 19 Employee Benefits
IAS 26 Accounting and Reporting by Retirement Benefit Plans
Related to consolidation, examples:

IFRS 3 Business Combinations
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
SAP
/ Page
20102009
SAP AG.
All 36
SAP Business Planning & Consolidation

Use Case 2 - Top-Side Solution
For ERP or R/3 customer running Classic GL
What can I do to meet the IFRS reporting deadline? Two options:
1. Migrate to New General Ledger and use one of the options:

Parallel Ledger
Leading Ledger is Local GAAP or IFRS
Account Based Approach
If a GL migration project is not an option continue with the Classic GL utilizing an Account based
configuration
Note: If currently using parallel accounts for local GAAP it will require additional investigation to determine
correct design
2. Look to a top side solution using a consolidations solution and various reporting options to make top side
adjustments to meet the IFRS requirement. This approach will not change any settings in the
transactional layer and will require a transactional layer conversion at a later date.
IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
Tackling the Challenge

SAP IFRS Assessment & Education Services
The SAP IFRS assessment service will help you identify the
system implications, qualify the process changes, and define the
resources you need to complete an IFRS adoption for your SAP
applications.
This service will:
Assess your current situation
Identify major hurdles based on SAP experiences
Prepare a high-level:
Solution Design Assessment
Technical/Architectural Assessment
Functional Assessment
Organizational Alignment Assessment
SAP Education Services, provide training services, such as:

AC207: Parallel Accounting and Reporting for IFRS
AC210: New General Ledger
IFRS
Key
Points
SAPs
View on
IFRS
Transactional Layer
Parallel
Accounting
IFRS
Project
Implementation
Consolidation
Layer
SAP
Services
Wrap
Up
Summary
Steps to IFRS
Transactional Layer Account Approach ONLY
DEFINE
Customer Specific
IFRS Requirements
Consolidation
Layer
Transactional Layer
Account/Ledger
Approach
Upgrade to ERP 6.0
Migrate to New General

Ledger
IFRS Projects
Top-Side Solution
SAP Business Planning

& Consolidation Project
Key Success Factors

Based on research done by independent consulting firm, the
following are the key success factors in IFRS implementation:
Source: IFRS Survey Result, Accenture, January 2010
Takeaways How to Be Prepared for IFRS
IFRS implementation is not a push-button

project.
Acquisition of detailed IFRS knowledge is a key
part.
Engage early and begin planning for an IFRS
transition
Know where you stand, complete an IFRS
assessment
Get your house in order prepare your systems
for IFRS
Initiate IFRS education and training
Resources
Read our IFRS white papers
Streamlining Your Conversion to IFRS
"Complying with IFRS
http://www.sap.com/solutions/sapbusinessobjects/brochures/in
dex.epx
Join the Business Process Expert (BPX) Community
For sharing IFRS on SAP knowledge
www.sdn.sap.com/irj/bpx/ifrs
Contribute to IFRS on SAP Ideas, Best Practices,
Tips and Tricks
https://wiki.sdn.sap.com/wiki/display/IFRS/IFRS+on+SAP++Best+Practices
Listen to the IFRS Webinar Series on SAP EcoHub
http://ecohub.sdn.sap.com/irj/ecohub/home?rid=/hub/uuid/601
9e662-4a58-2c10-91a9-a13e06f6135b
Read the SAP PRESS book Transitioning to IFRS in SAP ERP
Financials
http://www.sap-press.com/products/Transitioning-to-IFRS-in-SAP-ERPFinancials.html
Why Is SAP the Best Choice for IFRS?

SAP offers the most complete IFRS solution, addressing all facets
SAP provides a single technology stack with support for all major architectures
SAP provides market-leading, integrated ledger, and consolidation applications
Proven install base of customers already reporting according to IFRS
Agile solutions and content offer quickest wins for customers adopting IFRS
1,500+ financial consolidation and reporting implementations
4,000+ general ledger implementations (includes 100+ U.S. GAAP to IFRS conversions)
People
Technology
Process
Phased Transition to IFRS

Financial consolidation and reporting
General ledger
Sub-ledgers
Thank You
Questions?

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IFRS Implementation: Prepared or Scared?

IFRS Is Becoming a Global Reporting Standard*

US GAAP moving toward IFRS

HKFRS (equivalent to IFRS)

AIFRS (equivalent to IFRS)

Every major non-US capital market is moving to IFRS

IFRS Convergence by DSAK IAI (2009 2012)

Progressively replace local GAAP approaches with IFRS.

Converge step by step with transition period,

To avoid psychological shock

To give more time for preparation

To reduce negative impact of the new PSAK (if

The target of IFRS Convergence in Indonesia is to

1 January 2009, which will be effective in

Some newly revised standards already effective

Source: Kompas 06 May 2010

IFRS Convergence by DSAK IAI (2009 2012)

Progressively replace local GAAP approaches with IFRS.

Reasons for Convergence

To improve the quality of the Financial

To improve the credibility and

To inline with the standards that applied

It is the commitment of the Government

Source: Kompas 06 May 2010

Greater use of fair value as a measurement

Much more disclosure in the year-end

IFRS is likely to have a significant impact on

Financial reporting model is more complex

Organizations need help to understand the

2010 SAP AG. All rights reserved. / Page 7

Source: Deloitte Presentation by Merliyana Syamsul @ IFRS Event 18 May 2010

Source: Deloitte Presentation by Merliyana Syamsul @ IFRS Event 18 May 2010

Key Impact of IFRS

Source: Ernst & Young, March 2008

Key Impact of IFRS

Involves Transactional System and

Source: Ernst & Young, March 2008

2010 SAP AG. All rights reserved. / Page 14

SAPs View of IFRS

Customer IFRS project will require INPUT and GUIDANCE from:

Theres no single best solution for IFRS

SAPs Approach to IFRS

Integrated Business Planning & Consolidation & Full ERP

Property, Plant and Equipment

Fully compliant asset accounting capabilities (SAP ERP)

Fully compliant financial accounting, controlling,

Receivables, Payables and

FSCM for cash, collections & payments, and Treasury

Revenue Recognition capabilities for US-GAAP and IFRS

Employee Costs and ShareBased Payments

Comprehensive HR, Payroll and Benefits functions

Sophisticated Fixed Asset, Project and Investment

SAP Leasing supports for finance and operating leases

Controlling and project system func for long-term contracts

IAS 16, IAS 23

IAS 36, IAS39, IAS46

Differences between local GAAP and IFRS can be classified as:

IAS 21 The Effects of Changes in Foreign Exchange Rates

Partially related to operational accounting, examples:

IAS 26 Accounting and Reporting by Retirement Benefit Plans

Related to consolidation, examples:

2010 SAP AG. All rights reserved. / Page 18

IFRS Compliance Option

2010 SAP AG. All rights reserved. / Page 19