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International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements. What is the IASB? The IASB is an independent accounting standard-setting body, based in London. It consists of 15 members from nine countries, including the United States. The IASB began operations in 2001 when it succeeded the International Accounting Standards Committee. It is funded by contributions from major accounting firms, private financial institutions and industrial companies, central and development banks, national funding regimes, and other international and professional organizations throughout the world. While the AICPA was a founding member of the International Accounting Standards Committee, the IASB's predecessor organization, it is not affiliated with the IASB. The IASB neither sponsors nor endorses the AICPA's IFRS resources website (www.IFRS.com). What are the advantages of converting to IFRS? By adopting IFRS, a business can present its financial statements on the same basis as its foreign competitors, making comparisons easier. Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide. Companies also may need to convert to IFRS if they are a subsidiary of a foreign company that must use IFRS, or if they have a foreign investor that must use IFRS. Companies may also benefit by using IFRS if they wish to raise capital abroad. What could be the disadvantages of converting to IFRS? Despite a belief by some of the inevitability of the global acceptance of IFRS, others believe that U.S. GAAP is the gold standard, and that a certain level of quality will be lost with full acceptance of IFRS. Further, certain U.S. issuers without significant customers or operations outside the United States may resist IFRS because they may not have a market incentive to prepare IFRS financial statements. They may believe that the significant costs associated with adopting IFRS outweigh the benefits. What is the difference between convergence and adoption? Adoption would mean that the SEC sets a specific timetable when publicly listed companies would be required to use IFRS as issued by the IASB. Convergence means that the U.S. Financial Accounting Standards Board (FASB) and the IASB would continue working together to develop high quality, compatible accounting standards over time. More convergence will make adoption easier and less costly and may even make adoption of IFRS unnecessary. Supporters of adoption, however, believe that convergence alone will never eliminate all of the differences between the two sets of standards. What are some of the most important specific differences between IFRS and U.S. GAAP? Because of longstanding convergence projects between the IASB and the FASB, the extent of the specific differences between IFRS and GAAP has been shrinking. Yet significant differences do remain, most any one of which can result in significantly different reported results, depending on a company's industry and individual facts and circumstances. For example: • IFRS does not permit Last In, First Out (LIFO). • IFRS uses a single-step method for impairment write-downs rather than the two-step method used in U.S. GAAP, making write-downs more likely. • IFRS does not permit debt for which a covenant violation has occurred to be classified as non-current unless a lender waiver is obtained before the balance sheet date. Is the possible conversion to IFRS from U.S. GAAP solely a financial reporting issue? Conversion to IFRS is much more than an accounting exercise. It will affect many aspects of a U.S. company's operations, from information technology systems and tax reporting requirements, to internal reporting and key performance metrics and the tracking of stock-based compensation.
You will reach to change view "activation of New GL A/cg" detail screen and tick the checkbox and save. the Leading Ledger receives exactly the same settings that apply to that company code : the currencies. If you then define your profit centers. It is not possible to designate more than one ledger as the leading ledger. New textbooks covering IFRS are currently being written and should be in circulation in the reasonably near future. Begin IFRS implementation project • • • IFRS reporting must begin at start of a new fiscal year Configure/design SAP General Ledger and subledgers as required Configure/design reporting and consolidation tools as required Activate the New General Ledger Accounting by a single click on the clock icon 2. and many colleges and universities are including IFRS in their curricula. you can enter an associated segment in the master record of a profit center. It is integrated with all subsidiary ledgers and is updated in all company codes. Others.Activation has created a new field in Profit Center Master Record : the SEGMENT 6. After activation of New General Ledger Accounting. and certification programs. you exit the IMG screen When you re-enter . you can use several Ledgers in parallel. When defining Ledgers . testing. Professional associations and industry groups have begun to integrate IFRS into their training materials. Some textbooks are already covering IFRS. you find that a new node is added Financial Accounting (New) 4. In each company code. 3. you define your segments. 5. publications. most CPAs. This allows you to produce financial statements according to different accounting principles. You must designate one of your ledgers as the Leading Ledger. This means that it is automatically assigned to all company codes. A ledger uses several dimensions from the totals table it is based upon. are not currently taught IFRS and will have to undertake comprehensive training. primarily in a comparative presentation to their instructions on U.Leading and Non. The Leading Ledger is based on the same accounting principles as that of the consolidated financial statements. such as actuaries and valuation experts who are engaged by management to assist in measuring certain assets and liabilities. The segment is then derived from the assigned profit center during posting. a new sub node appears in the IMG structure. GAAP. This sub node is Define Segment The menu path is: SAP Customizing IMG ---> Enterprise Structure -----> Definition ---> Financial Accounting ---> Define Segment In this IMG activity. financial statement preparers and auditors will have to become knowledgeable about the new rules.After activation of New General Ledger Accounting . one must be defined as the Leading Ledger .S.What other areas of the profession will IFRS affect? As IFRS grows in acceptance. the fiscal year variant and posting period variant .Leading Ledgers In General Ledger Accounting . The menu path is : .
It is not possible to create additional scenarios. Non. for example. The menu path is : SAP Customizing IMG ----> Financial Accounting ( New ) ------> Financial Accounting Basic Settings (New) ------> Ledgers -----> Ledger ------> Define and Activate Non – Leading Ledgers 8. Cost of sales accounting Cost of sales accounting is a way to create a profit and loss statement (P&L) for a company by comparing the revenues to the costs or expenses incurred to obtain these revenues. You have to activate a non. The menu path is: SAP Customizing IMG -----> Financial Accounting ( New ) ------> Financial Accounting Basic Settings (New) ------> Ledgers ----->Fields ------> Display Scenarios for General Ledger Accounting.You assign the desired scenarios to your ledgers. you define which fields are filled with posting data from other application components.Ledgers . For each ledger.SAP Customizing IMG ----> Financial Accounting ( New ) ------> Financial Accounting Basic Settings (New) ------> Ledgers -----> Ledger ------> Define Ledgers for General Ledger Accounting Clicking on the checkbox identifies one of your ledgers as the Leading Ledger. such as cost Center update or Profit Center update . They can be based on local accounting principle. Activation of Non Leading Ledgers Non Leading Ledgers are parallel ledgers to the Leading Ledger . The expenses are mainly divided by functional area such as: Manufacturing Administration Sales Research and Development We can activate Cost of Sales Accounting by the following menu path : SAP Customizing IMG -----> Financial Accounting ( New ) ------> Financial Accounting Basic Settings (New) ------> Ledgers ----->Ledger------> Activate Cost of Sales Accounting xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxx Important concepts in NEW G/L are 1. 9. SAP delivers a number of scenarios in the standard system. 7. Each business view specifies which posting data is transferred from different application components in General Ledger Accounting.Leading Ledgers can have different fiscal year variants and posting period variants per company code to the Leading Ledger of this company code.Assign scenarios to ledgers A Scenario combines Customizing settings from different business views.Leading Ledger for individual company codes.
Splitting is categorized in to three types and those are given below. However you should take a precaution i.Integartion Ledgers Sap provides Leading Ledger 02 with the standard system.1 Activate or Deactivate document splitting for any company code if required. 1.e either the rules defined by Sap or the rules defined by us only one can be used. After defining the segment it can be populated through Profit center Master in T code KE51. SAP defines six scenario.1 there is only one leading ledger. Active splitting 3Creation of additional lines/Zero balancing for documents SAP provides a standard splitting method which covers all the business process provided in SAP which covers all the splitting Rules. But you can activate and deactivate document splitting for company codes created under the client as per the needs. Scenarios: Scenarios defines the fields which is updated in the ledger (G/L view) when the posting happens during application.Cost center: It updates the sender cost center and the receiving cost center field in the ledger 2Profit center 3Business area 4. Define addl. 1. 1.2 Data to controlling only flows from leading ledger. Six Scenarios are 1. Currency 2. 1. Any other ledger defined in the system is non Leading ledger.2. Document splitting is activated at client level. If your client want the segment report then you define the segment and populate it through the profit center master. Segment 5. Depending upon the client requirement you can assign all or any of the scenario to the leading ledger. Passive splitting 2. Splitting rules also can be defined by the Consultant. Assign Scenario to Ledger 3. As per the splitting rules defined by SAP when ever the end user puts any entry the b/s items are split for various characteristics.receivable and other Balance sheet items for characteristics like Business area. . Define and activate Non leading ledger if required 4.3 The important parameters like FY variant. 1. SAP strongly recommends that we should as far as possible should use the standard rules.4 Leading ledger is defined at the client level.profit centre and segment if the client requires the full fledged Financial statement. Customization required for Ledger 1. Cost of sales accounting 6. Following Configuration are required under Document Splitting 1Activation of Document splitting.Curreny defined for the company code is used by the leading ledger.Posting period variant.Document Splitting 3. Cost of Sales accounting Segment. Define segment. Document Splitting Document splitting is a procedure to split the Balance sheet items like Payable. The Important characteristics of Leading ledger are 1.
1. Define the variant for real time integration of FI co.3 Define document splitting characteristics for controlling 2. Adopt the standard 4.Define Zero Balance clearing account 5. Assign the variant to the company codes where the on line reconciliation is required.2 Define Characteristics for document splitting. 1.edit constant for non assigned process Integration Here the most important step is the integration of FI Co.Classify G/L a/c for Document splitting 3Classify Documents types for Document splitting. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxx .
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