Link: IAS special
IT departments must start thinking about international accounting standards now, and make assumptions on standards not yet finalised, if the 2005 deadline is to be met.
The next three months are critical for the technology infrastructures of listed companies, with up to 70% of those having to meet the new requirements also needing to fundamentally change certain technology systems.
An IAS seminar held last week by financial software company Cartesis, and attended by FTSE100 finance staff, found that only 10% had a technology project under way. About the same number said they were planning to start one in the near future.
It was described by Nick Forman, finance director of Cartesis, as ‘very worrying’. He added: ‘You need a good nine to 12 months to go through the process. Time is getting very short – people are just not ready for it.’
Complacency could lead to huge problems, as people see it as an accounting issue, rather than a technical one. ‘I think what people see when they get into the process is that it is a big IT issue,’ said Forman.
And some companies will need to adopt a multi-GAAP approach to financial reporting over the next two or three years. ‘Depending on what your system is, the ease of coping with multi-GAAP could either be quite straightforward or it could be quite painful,’ said Forman.
‘Older systems don’t cope well with adding an additional dimension in order to cope with IAS. I would say that probably 70% of the market have these legacy type systems.’
Research carried out by Accountancy Age at last week’s Softworld show in Birmingham revealed that more than 80% of respondents felt training was the biggest area of concern with regards to the effects of IFRS.
But 50% also said they would be investing in new software to help them cope. It will come as a welcome boost to the software industry, which has experienced a slump since the millennium bug scare.
‘Everybody says that the year 2000 was a damp squib. But in my experience a lot of work went on behind the scenes to make changes to the systems. To some extent the same is true of IFRS,’ said John Taylor, managing director of Cartesis.
‘I don’t think anyone has fallen for a technology hype. The realisation and alarm sets in when the detailed work sets in.’
But Taylor conceded that most problems would occur on the reporting side and that companies would not have to replace entire infrastructures. ‘I would say it does hit transaction systems, but it’s not a revolution. I don’t think people are going to rip out their SAP. The impact is going to be more at the reporting end.’
He said that because changes are still being made to the standards, it keeps them in the policy arena.
‘You have to proceed and get into some of the detailed work, but make some assumptions and deal with the changes as they come along.’
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