IT and financial reporting have long been uncomfortable bedfellows. Excel-based spreadsheeting is still de rigeur for finance functions across even the most IT-savvy enterprises, and consolidating a global set of accounts is an intensive, manual process.

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So, as these same businesses prepare to release their first ‘live’ set of IFRS-compliant interims, a cloud will hang over those that have not engaged in some form of ‘pillow-talk’, and instigated fundamental changes to their systems to ensure they publish the right figures.

But what should a group finance director of a UK-listed company have done by now to make sure the technology is in place to handle a new reporting regime?

This is where the arguments begin. Some members of the software community have called for potential clients to switch providers, or risk not meeting reporting requirements. Others have argued that ‘switching sides’ would be a disastrous move.

Tim Harris, a partner in PwC’s global capital markets group, argues that the biggest challenge facing businesses dealing with IFRS is the thorny issue of data. ‘It’s not necessarily about calculating balances differently, but collecting the right data for publication,’ he says. ‘This is still a current issue as companies prepare for full IFRS accounts at the start of 2006.’

Harris is concerned that companies are still struggling to collate the relevant information, and the biggest issue involves the flexibility and robustness of ERP systems. ‘The ease of dealing with the changing data requirements of IFRSdepend how flexible and robust a company’s underlying systems are.

‘ERP systems may be able to deal with the changes but it depends on how they are implemented. It can cost a lot to change systems to meet new data requirements.’

But rather than make huge swathes of changes to accounting and consolidation IT, many companies are making smaller changes to systems, ensuring that their reported numbers are still auditable and reliable.

Companies have decided not to make big changes to systems while so much regulatory and legislative exchange affects the business community, according to Sheree Fleming, a solutions architect at enterprise software giant SAP.

‘Even an upgrade is a large project for customers,’ she says. ‘Businesses will use consultants and advisers to help them make decisions, but a lot of what they suggest we believe we can do for them.’

But what of the future? If companies are risk averse in terms of their current IT strategy, are there any other drivers that will revolutionise the way they deal with future IFRS-style data issues?

Fleming believes the answer lies in a movement of management and statutory reporting into one mass. Rather than producing management reports, while making wholesale changes for external reporting, it makes sense to rely on a single set of information.

One potential solution could be the use of eXtensible Business Reporting Language (XBRL). The mark-up language enables data to be ‘tagged’, allowing it to be more easily searched and analysed. It was mooted as being a great tool for the investment community, but its take-up has been slow, due to difficulties in mapping accounting information to the relevant tags.

But its stock grew strongly when the US Securities & Exchange Commission announced a pilot scheme for companies to file using the technology.

Harris believes the XBRL ideology is ‘sound’, and the technology holds a lot of promise. ‘It is attractive but is more developed in the US at the moment. The ITholds a lot of promise and companies are starting to look at it.’

But there are still pitfalls. BASDA, the body representing the UK’s biggest application software companies, vehemently opposes the adoption of XBRL in its current guise, due to the prohibitive cost and the complexity of creating these taxonomies.

BASDA chairman Eduardo Loigorri says that creating a single standard for financial reporting is a ‘fantastic principle’, but that it has been ‘hijacked’ by national accounting bodies looking to develop their own taxonomies.

‘The resultant divergence has completely undermined the previous clarity. XBRL is a huge missed opportunity,’ he says.

In the meantime, companies are working with accountants, consultants and software companies to deal with financial reporting issues they face today.

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