International Financial Reporting Standards (IFRS)
Companies operating in Europe confront challenges unknown elsewhere in the world. Nowhere but here do they face a common union with a common market and centralized bureaucracy sitting on top of sovereign states with their own cultural identities, legal environments and national administrations.
For example, from an accounting perspective, a company operating in the United States has a simply task. It is free to produce a single (US GAAP) report with which it can meet its financial, regulatory and (with relatively minor adjustments) tax reporting obligations. In Europe, it works somewhat differently.
Each member state, being a sovereign nation, expects companies doing business within its borders to conform to its laws and regulations. The European Union, with its mandate to create and maintain a common market, expects member states and companies operating within their borders to conform to its regulations and directives.
The result? A company operating in just three EU countries, could be required to produce 10 different reports: three compliant with the “national GAAP”, three compliant with tax law, three compliant with IFRS (at the entity level) and one more for the consolidated group.
To meet this challenge, a company must employ at least 7 experts: one for each “national GAAP”, one for each tax code and one for IFRS. Also, if the company intends to bridge the gap between IFRS and the “national GAAPs”, it would be best if its IFRS expert also had a working knowledge of all three (and tax codes, in those counties where they are interrelated).
Obviously, a company with a bottomless budget can equip its accounting department with a robust information system, hire a team of experts and maintain the army of accountants needed to keep 10, 20, 30 or more sets of books. Or, it would, if a sufficient number of IFRS experts were available.
Advantages of using IFRS reporting in your business
- IFRS informs about the entity’s economic resources (assets), claims to those resources (liabilities and equity) and changes therein (revenue, expenses gains and losses)
- IFRS is useful for presenting to potential investors and creditors and others (users) in making investment, credit, and similar resource allocation decisions
- IFRS helps users assess the amounts, timing, and uncertainty of the entity’s future cash inflows and outflows
- IFRS helps to unify information from different branches in different countries no matter of local accounting or tax system requirements
IFRS outsourcing in accace
Since many regional companies lack the recourses to build a reporting system capable of meeting the challenges outlined above, accace has begun offering IFRS outsourcing. Since each company is unique, and requires a customer tailored solution, generalities are difficult to make. Nevertheless, IFRS outsourcing can be provided in accace at these three general levels of service.
IFRS conversion
IFRS conversion involves the drafting a report that meets, as closely as possible, the fundamental IFRS requirements for recognition, and measurement and disclosure, by reconciling the differences between IFRS and “national GAAP”.
IFRS outsourcing
IFRS outsourcing involves drafting a report fully compliant with IFRS requirements for recognition, measurement and disclosure.
Accounting outsourcing
Accounting outsourcing comprises the entire accounting function from IFRS to “national GAAP” and tax accounting. Including licensed tax advisory in compliance with local structure.
As an additional option, the client can choose to expend this service to incorporate its entire ERP environment, including an unlimited number of internal reports, tailored to the particular needs of its management.