During a recent Webcast on IFRS solutions for Oracle users, one of our attendees asked the following question:
“What impact does IFRS have on companies using Oracle Projects? For example, autoaccounting rules, the revenue extension, billing clients, etc.”
After doing some research, the IT Convergence Education Services team has put together the following answer:
Oracle Financials records business transactions according to the accounting rules you define, whether they’re based on U.S. GAAP, IFRS or another standard. Gradually, a company will reconfigure transaction systems to produce IFRS data directly, both at home and in subsidiaries facilitating IFRS for statutory reporting.
During the beginning stage of studying the impact and determining strategy for IFRS compliances, you’ll need to perform preliminary studies in conjunction with an accounting compliance advisor to assess the impact of IFRS on your business and systems. With this analysis, you’ll be able to determine their overall IFRS adoption
Currently, there are many features in the Oracle E-Business Suite that are currently used to support US GAAP or Canadian GAAP environments. If you’re converting to IFRS, you may need to make some reconfigurations to bring things in line with IFRS principles. For example, in certain circumstances, expenses classified as being “development” would need to be posted to the balance sheet and released into the P&L later according to the IFRS principles, where these expenses probably would have been expensed sooner under US GAAP.
You can comply with this IFRS principle by configuring Oracle Projects, by creating cost centers on the balance sheet and using allocations to release the expense, or by tracking the development into Bills of Material using Oracle Inventory. The appropriate choice will depend on your the circumstances, the products involved, the underlying business process, and so on.
To adopt standardized IFRS systems, for example, in respect of billing and revenue recognition means working with your accounting compliance advisors from major accounting firms to identify the right migration plan for your organization. With your accounting plan in place, your Oracle subject matter experts will be able to ensure that your systems are configured to comply with IFRS.
If you have any other questions, please feel free to leave a comment.
Otherwise, check out our IFRS page for more information on IFRS solutions for Oracle end-users. Likewise, you can also click here to register for our next webcast, “Put Oracle R12 Financials New Features to Work for You.”