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Preparing for the Transition to International Financial Reporting

Standards (IFRS) with Oracle Governance, Risk, and Compliance
Sean Cronin – GRC Sales and Strategy Director
Stephanie Holmeen - Product Marketing Director, GRC Applications
IFRS: Why Should You Care?

• IFRS is coming for customers in Canada and US

• Major change in accounting and reporting
• The transition process needs to start now
• Can be a compelling event for Oracle Sales:
– Upsell to Hyperion Financial Management
– Upgrade to E-Business Suite Release 12, PeopleSoft 9, JD Edwards
EnterpriseOne 9, and JD Edwards World A9.1
– Cross-sell GRC
Agenda

• IFRS Overview <Insert Picture Here>

• Oracle and IFRS

• Focus on IFRS with Oracle GRC
• Summary
Global Momentum Towards IFRS

Countries that require or permit IFRSs

Countries seeking convergence with the IASB or pursuing adoption of IFRSs

Source: IASB, Dec 2007

 Expected Benefits from IFRS Convergence
A single standard for global business

More efficient access Improved

Reduced cost of
to capital transparency for
financial reporting
investors
It’s Not About Accounting; It’s About Capital Markets
 Impact on US Companies
Proposed implementation timeline from the SEC

2009: Limited group 2014: 2016: Non-

of large US firms are Large accelerated
permitted to use IFRS accelerated filers begin
on an optional basis filers begin filing in IFRS
for fiscal periods filing in
ending on or after Dec IFRS
15, 2009

2009 2010 2011 2012 2013 2014 2015 2016

2011: SEC evaluates

achievement of 2015:
roadmap milestones Accelerated
and decides whether to filers to begin
adopt a mandatory filing in IFRS
approach for IFRS

Source: SEC Announcement, Aug 2008

 Impact on US Companies
The value of starting early

Growing awareness of complex …drives preference for early planning

requirements… and assessment
Within what timeframe would your company
Cumulative Reporting adopt IFRS if given a choice?
Requirements
More than 7 Don’t Know
Companies are required to retrospectively years 9%
apply IFRS to all periods presented as if 2%
they had always been in effect.
Within 7
years Within 3
Multi-GAAP During Transition 8% years
During the transition period from US GAAP 55%
to IFRS, firms must continue to report in
US GAAP and any local statutories, as well Within 5
years
as begin tracking IFRS equivalents. 26%
Source: Deloitte, 2007

Potential Impact on Bottom Line

No one anticipated how big it was going
A study comparing of the impact of IFRS
adoption in the UK reveals that net income
generally rose by 39% while equity
“ to be. Every company was too late and
too slow in preparing – even the good
declined by 23%. UK GAAP is considered ones.”
close to US GAAP in most areas. Ken Wild, Global IFRS Leader, Deloitte

Sources: European Financial Reporting Research Group; Deloitte Touche Tomatsu

 Impact on US Companies
Start early for transition period with multi-GAAP

Transition Date?
2009: Limited group While IFRS requires 2 years2014:
of 2016: Non-
of large US firms are
permitted to use IFRS comparatives, best practiceLarge
accelerated
accelerated
filers begin
on an optional basis recommends 5 filers begin filing in IFRS
for fiscal periods filing in
ending on or after Dec IFRS
15, 2009

2009 2010 2011 2012 2013 2014 2015 2016

2011: SEC evaluates

achievement of 2015:
roadmap milestones Accelerated
and decides whether to filers to begin
adopt a mandatory filing in IFRS
approach for IFRS

Source: SEC Announcement, Aug 2008

US GAAP vs IFRS: What’s Different?
You can make a living cataloging the differences

US GAAP: 25,000 Pages IFRS: 2,500 Pages

 Much is the Same…

Approach IFRS US GAAP

(Some Examples)
Revenue Recognition



Fair Market (e.g. AR or Inventory
Valuation)


Detailed Disclosure



Segment Reporting



Chart of Accounts Not Mandated



Distinction Between Tax and
External Reporting


 …But There are Differences
US GAAP is always more specific, plus:
Approach IFRS US GAAP
(Some Examples)
Fair Market Revaluation Fixed Assets & Only Certain Fixed
Investments Assets
Extraordinary Items None Rare
(Negative Goodwill)
Consolidation Control 2 Models

Joint Ventures Proportional OK Only Equity

Research & Development Capitalized Expensed

Inventory No LIFO LIFO OK

Impairment 1 Step, Reversible 2 Step, No Reversal

 Industry-specific Considerations
Areas of Potential Concern

IFRS Change Area: PPE R&D FV INV IMPAIR M&A

Financial Services



High Tech





Retail




Communications



Utilities




CPG



Life Sciences

PPE = Property, Plant, & Equipment INV = Inventory

R&D = Research & Development IMPAIR = Impairment
FV =Fair Market Revaluation M&A = Mergers & Acquisitions
Agenda

• IFRS Overview <Insert Picture Here>

• Oracle and IFRS

• Focus on IFRS with Oracle GRC
• Summary
 Your IFRS Action Plan
Achieve “early mover” advantage

Stage 1 Stage 3 Stage 4

Stage 2
Study Impact & Record Transform Your
Enable Top End
Determine Strategy Transactions Business &
Reports
in both GAAPS Win with IFRS

Perform Determine impact Determine

Collect GAAP
preliminary study on accounting in changes to
financial results
subsystems business model

Adjust and Configure Transform

Assess impact consolidate under accounting rules operations using
GAAP & IFRS and set up ledgers IFRS results

Process and report Report IFRS

Determine Report, reconcile
using dual results, increase
strategy and audit results
accounting shareholder value

All Stages: Apply Policy and Control Management

Milestone 1 Milestone 2 Milestone 3 Milestone 4

Completed Preliminary IFRS Reports Produced Transactions Recorded Business Model
Study in Multiple GAAPs Optimized
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 Oracle Enables Key Stages in IFRS Action Plan

Stage 1 Stage 3 Stage 4

Stage 2
Study Impact & Record Transform Your
Enable Top
Determine Strategy Multi-GAAP
Multi- Business &
End Reports
Transactions Win with IFRS

Oracle Enterprise Performance Management

Oracle ERP Other ERP Oracle
Financials Financials Industry
Specific
Custom or
Legacy Applications

Oracle Governance, Risk, & Compliance Suite

All Stages: Apply Policy and Control Management

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Oracle Enterprise Performance Management
Enable Top End IFRS Reporting
CORE CONSOLIDATION FEATURES CUSTOM DIMENSIONS
Multiple reporting standards in a
single solution Enables tracking of
GAAP vs. IFRS
GAAP IFRS adjustments

Flexible Rules Engine

Journal Entries and Audit

DOCUMENT ATTACHMENTS FLEXIBLE REPORTING

Creates “Electronic Easy to

Binder” of all reconcile and
adjustments trend GAAP vs.
IFRS results

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 Oracle ERP Financials Designed for IFRS
E-Business Suite, PeopleSoft, JD Edwards
IAS/IFRS SUPPORT SINCE 2000 SPECIFIC IFRS FEATURES
Thousands of customers overseas Specific functionality developed for IFRS
reporting under IFRS
• Asset Componentization
IAS 2 Inventory Inventory, Costing

Parent & Child Assets
IAS 16 Property, Plant FA, ALM
Child Depreciation rates differ
IAS 18 Revenue Rec. OM, AR, BI, CA • Impairment Processing
IAS 21 Currency Multibook, MRC,GL
Impairment identification
More Segments, etc. Flex / ChartFields
Unplanned depreciation
… … …

DUAL GAAP ACCOUNTING IFRS MIGRATION PATH

Multiple Ledgers or Multi-GAAP
Ledger Set/Code:

GAAP

US Principles Differences
Expanded COA Expanded COA
Calendar Calendar
USD USD

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 Oracle Governance, Risk, and Compliance Suite
Manage changes to policies and controls

GRC DOCUMENTATION REPOSITORY COMPLIANCE WORKFLOW

Record changes to business
process due to IFRS
Automate
steps to audit
IFRS
compliance

APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS

Single subledger transaction creates multiple Monitor status of testing and
accounting representations exceptions
Control
changes to
ERP
applications

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Agenda

• IFRS Overview <Insert Picture Here>

• Oracle and IFRS

• Focus on IFRS with Oracle GRC
• Summary

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 Oracle Governance, Risk, and Compliance Suite
Manage changes to policies and controls

GRC DOCUMENTATION REPOSITORY COMPLIANCE WORKFLOW

Record changes to business
process due to IFRS
Automate
steps to audit
IFRS
compliance

APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS

Single subledger transaction creates multiple Monitor status of testing and
accounting representations exceptions
Control
changes to
ERP
applications

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 Manage IFRS Policies, Controls and Risks
Align processes to IFRS

Standard specific to IFRS Documentation of policies and

processes

Central repository for

policy, risk & compliance
documentation

Alignment of processes
and associated controls to
Standards & Mandates IFRS standard
Standard specific to IFRS
Easily compare US GAAP
and IFRS policies and
processes during transition

Risk and Compliance Process

Document Risk Test Controls
Assess Scope Remediate and Certify and
and Control and Analyze
Based on Risk Optimize Publish
Matrix Exceptions

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 Risk and Control Matrix
Identify risks and record changes to controls
Risks

Single system of record

for risk and controls

Document control
Controls changes to comply with
IFRS
Standards & Mandates

Standard specific to IFRS

Adjust audit scope to
new controls and risks

Risk and Compliance Process

Document Risk Test Controls
Assess Scope Remediate and Certify and
and Control and Analyze
Based on Risk Optimize Publish
Matrix Exceptions

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 Oracle Governance, Risk, and Compliance Suite
Manage changes to policies and controls

GRC DOCUMENTATION REPOSITORY COMPLIANCE WORKFLOW

Record changes to business
process due to IFRS
Automate
steps to audit
IFRS
compliance

APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS

Single subledger transaction creates multiple Monitor status of testing and
accounting representations exceptions
Control
changes to
ERP
applications

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 Automate and Streamline Audit
Audits become crucial with the IFRS principles-based approach

Sign-off and Publish

Certify

Remediate Retest Optimize
By allowing a higher degree

Respond of interpretation, IFRS makes
audits even more important
Investigate
Analyze
Receive Alerts Review Reports
Exceptions
Documentation, assessments,
tests, issue tracking and
remediation are evidence of
Perform
Scope
Test Monitor reasonable judgment
Self Manual Automated
Audits
Assessment Controls Controls
Assess

Easier sign offs over the
integrity of financial reporting

- Risk-Control Matrix of IFRS vs. GAAP

Differences
Document
- Policies and Procedures
- Evidence & Records Retention

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 Oracle Governance, Risk, and Compliance Suite
Manage changes to policies and controls

GRC DOCUMENTATION REPOSITORY COMPLIANCE WORKFLOW

Record changes to business
process due to IFRS
Automate
steps to audit
IFRS
compliance

APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS

Single subledger transaction creates multiple Monitor status of testing and
accounting representations exceptions
Control
changes to
ERP
applications

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 Support of IFRS Calls for Stronger Application Controls
Enforce proper access in applications

Simplify segregation of duties

enforcement with simulation and
• Policy Library
• Conflict Paths remediation

Mitigate risk of privileged user
access to enterprise applications
with approval workflow and audit
trails

Accelerate deployment and time
to value with pre-delivered
controls library

Detection Prevention
Define
Access Remediation Preventive Compensating
Access
Analysis (Clean-up) Provisioning Policies
Controls

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 Support of IFRS Calls for Stronger Application Controls
Ensure integrity of critical application setups

Achieve consistent application

setup and operating standards
across multiple instances

Track complete audit trails for
changes to key configurations

Tightly control change
management to accelerate
development and test time

Detection Prevention
Define Document or Monitor Enforce Manage
Configuration Compare Configuration Change Data
Controls Configurations Changes Control Integrity

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 Support of IFRS Calls for Stronger Application Controls
Identify inaccurate or fraudulent transactions

Continuously monitor accuracy

of transactions and mitigate
exposure to fraud
Pre-delivered
Transaction Controls • Test against thresholds
• Search for anomalies
Suspect
Transactions
• Perform transaction
sampling

Detection Prevention
Define Perform Review and Preventive
Transaction Transaction Address Transaction
Controls Analysis Suspects Controls

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 Oracle Governance, Risk, and Compliance Suite
Manage changes to policies and controls

GRC DOCUMENTATION REPOSITORY COMPLIANCE WORKFLOW

Record changes to business
process due to IFRS
Automate
steps to audit
IFRS
compliance

APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS

Single subledger transaction creates multiple Monitor status of testing and
accounting representations exceptions
Control
changes to
ERP
applications

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 Enterprise Visibility into IFRS Compliance
Timely access to information, better decisions

100+ pre-built KPIs for Risk,

Certification, Controls, and
Issues enable personalized
reporting

Self-service analysis and
reporting with interactive
dashboards and automated
alerts

Integrated IFRS compliance
information

GRC Reporting & Analysis

Configure Risk Investigate
Review GRC Monitor All
and Control Troubling
Dashboards Open Issues
KPIs KPIs

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Oracle Solutions for GRC

GRC Reporting & Analytics

Access Policy Risk & Control Certification

Purpose-built business
solutions for key
industries and GRC
KPIs KPIs KPIs
initiatives
GRC Process Management
Documentation Management Issues &
& Reporting Assessments

GRC Application Controls

Remediation

Best-in-class GRC core
solutions to support IFRS
and other mandates
SOD & Application Transaction
Access Configuration Monitoring
Pre-integrated with

Identity
GRC Infrastructure Controls
Data Systems Records & Digital

Oracle applications and
technology, supports
Mgmt Security Mgmt Content Mgmt Rights heterogeneous
environments

Custom or Legacy Applications

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Agenda

• IFRS Overview <Insert Picture Here>

• Oracle and IFRS

• Focus on IFRS with Oracle GRC
• Summary
Key Takeaways

• Use the benefit of a realistic implementation timeline –

don’t wait for the pressure of mandatory deadlines
Start Early • IFRS resources are scarce – start planning and education
sooner rather than later

• Report using IFRS principles with Oracle EPM

Leverage • Push changes into general accounting with Oracle ERP
Financials
Technology
• Document and test IFRS controls with Oracle GRC

• Consider how to optimize your business and gain

Optimize competitive advantage through IFRS
Your • Align your business model with the new capital market
Business model

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To Learn More

In Person Events

IFRS Briefings with PwC and Oracle: http://www.meetpwc.com/IFRSNorCal

Webcasts
Upcoming PwC-Oracle IFRS webcasts (Dec 2008 - March 2009) :
www.meetpwc.com/OracleIFRS

Whitepapers

Preparing US Companies for the Transition to IFRS

Managing the Transition to IFRS

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