There are parallels between IFRS Conversion and the initial Sarbanes-Oxley Compliance initiatives and applying the lessons learned from Sarbanes-Oxley will significantly reduce the cost of conversion. The most important lesson is to prepare early and start early.
The changing requirements of Sarbanes-Oxley compliance in the first years after the legislation was initially passed gave most companies a false sense of security in pushing off the start date. Each company in this situation found significant resource shortages, an inefficient compliance process, and increased fees from professional services firms. Starting early could have made the compliance process far easier and would have spread the cost over multiple financial periods.
Similarly, early IFRS conversion will streamline the process and spread the cost out over multiple financial periods. IFRS implementation has enterprise wide application – with implications beyond finance and financial reporting – reaching and affecting all parts of the business. It requires modification of processes and systems to support the new accounting and reporting requirements. Companies should begin embarking on their initiatives to achieve timely convergence with IFRS, taking a slower and methodical approach. Some of the advantages to early conversion to IFRS include:
- Simplified reporting
- Reduced operating costs
- Greater transparency
- Comparability for investors
- Improved access to capital
Eventually, GAAP will go away, and IFRS will be the lone standard. This is a historic event. It is accelerating. And it is inevitable. Those who embrace this early will be rewarded.
