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Feb 10, 2012 12:29 AM

Oracle E-Business Suite and IFRS Compliance

What is IFRS?

The International Financial Reporting Standards (IFRS) is a set of accounting standards developed by the International Accounting Standards Board (IASB) and its interpretative body, the International Financial Reporting Interpretations Committee (IFRIC) in an effort to create a global standard for the preparation of public company financial statements.

 

More than 12,000 companies in 90 countries have adopted IFRS, including many nations in the European Union, Canada, and India.

In United States, U.S. GAAP (Generally Accepted Accounting Principles) is the gold standard, and Securities and Exchange Commission (SEC) has been expressing support for a core set of accounting standards that coule serve as a framework for global finncial reporting.  The expectation is that the SEC will make a determinationthis year (2012) on whether to incorporate IFRS into the financial reporting system for U.S. issuers, and the method of incorporation.

 

It is anticipated that an IFRS transition will require parallel reporting in local GAAP and IFRS for at least one year.  Multi-GAAP accounting functionality is required and needs to be implemented in the ERP systems.

Oracle E-Business Suite supports parallel reporting through various ledger related features, with the two main ones being global consolidation or sub-ledger accounting.

 

Global Consolidation System Approach

For an organization currently using Oracle E-Business where general ledger (GL) and sub-ledgers are GAAP compliant, a consolidated ledger needs to be created for IFRS reporting.  Any standard functionality, such as allocations and recurring journals can be utilized to post journals directly into the consolidated GL.  IFRS adjustments will then only be applicable to the consolidation GL.  Pros and cons of this approach - it provides an easy way to handle IFRS adjustments, but calculations and adjustments can be time consuming and may have to be performed manually.

 

Sub-Ledger Accounting Approach

In Oracle E-Business Suite R12, Oracle introduced the sub-ledger accounting functionality.  This functionality enables creating specific rules and implementing conditions in sub-ledgers such as payables, receivables, and assets.  Using the sub-ledger accounting, it is easier to map between the local GAAP and IFRS sub-ledgers to facilitate parallel reporting to meet both requirements.  Configuration rules will allow for automation of the parallel reporting process.

 

Since the sub-ledger accounting functionality is not available in previous Oracle E-Business releases, organizations using earlier versions may have to upgrade to Release 12 or use the Global Consolidation System approach until upgrade to R12.

 

JAGGY has successfully performed upgrades to Oracle E-Business Suite Release 12 (see additional information on our Release 12 upgrade services here), and our team will work with your finance professionals to help them configure Oracle's ERP to meet IFRS compliance.

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