This is how you successfully transition to IFRS reporting
Accounting is a language that communicates information about a company’s well-being to various stakeholders, and IFRS reporting is the international standard for this language. IFRS reporting enters the picture at the latest when the desire is to be listed on a stock exchange. IFRS is also necessary when a company wants to enter the international market and it is necessary to report in an internationally comparable manner. Is the transition to IFRS reporting relevant in your company? How to successfully complete IFRS reporting? And what are the most common pitfalls in the introduction of IFRS reporting and how can they be avoided?
IFRS reporting – what is it and when will it be introduced?
The acronym IFRS comes from the words International Financial Reporting Standards: it is an international standard for a company’s financial statements. IFRS has been in use in EU countries for more than 15 years, since 2005. The purpose of IFRS reporting is to produce internationally comparable key figures between companies. IFRS reporting will therefore be introduced at the latest when the company wants to expand into international markets. An IFRS report is also required when a company is listed.
There are numerous benefits to IFRS reporting and it is accelerating the path to growth and internationalisation. However, the introduction of IFRS reports means a commitment to more precise regulation and transparency. Compared to simple K3 reporting under Swedish accounting law (or FAS in Finland), IFRS has much more detailed criteria for recording provisions and acquisitions, for example. As the level of reporting becomes more precise, the requirement for the company’s level of expertise will also increase. The workload is also increasing: when K3 reporting is transitioned to IFRS reporting, the number of pages and attachments will be many times higher. In some cases, it is also necessary to report in duplicate: the figures in one format for the IFRS report and in another format for the Swedish K3 report.
What to consider when moving to IFRS reporting?
There is no one right way to make the transition to IFRS reporting, but it should always be done on a company-by-company basis. However, there are certain rules of thumb that all companies should follow when transitioning to IFRS. Before deciding to replace the K3 report with an IFRS report, you should consider how much the workload of accounting will increase with the change. Is there enough knowledge and time of our own employees to report to IFRS or is external help needed for this?
It is also not worth underestimating the resources required by the transition to IFRS itself. Facilitating IFRS is not straightforward and failure to do so can result in high financial costs and extra work. For this reason, it is advisable to seek the assistance of specialised consultants for the implementation of IFRS reports. It is also important to keep in mind that the transition to IFRS in a company is not just an exercise in accounting, but requires, among other things, business controllers, salespeople, HR and representation from the legal department.
In addition to facilitation, also some thoughts should be given to the end product: the IFRS report. The company must design the financial statement and reporting templates for the IFRS report. A copy-paste from the K3 report is not sufficient, as the IFRS report must include a number of balance sheet items that are not required in the K3 accounts. The next question is the level of accuracy of the data. How is the data organised and how are IFRS adjustments and eliminations reported correctly? Although the level of regulation and the requirement for transparency are at a higher level, it is worth remembering that in the IFRS report, splitting hairs is also unnecessary. An unnecessarily high level of accuracy does not add value, but adds workload and complicates reporting unnecessarily.
Synchronise IFRS reporting with an automated reporting system
IFRS reporting often creates a need for new reporting systems. As the level of accuracy and scope of IFRS reporting increases compared to K3, it also requires significantly more sophisticated accounting methods and reporting systems. It is quite possible that the company has managed K3 reports with Excel alone, this is no longer the case with much more complex IFRS reporting. A good reporting system for IFRS is one that is easy to implement in different parts of the organisation and that minimises the number of errors and manual work.
Clausion’s cloud-based solution makes IFRS reporting easy. When IFRS reports are in the cloud, the figures stay safe. Destroying a database in the cloud is virtually impossible, so its use is secure and worry-free. The cloud-based reporting system also ensures that the number of report versions does not increase, and everyone looks at the same numbers. Such a system is also able to minimise the number of formula errors and see who has made the changes. Modern reporting systems make it possible to define and limit the level of access rights. Unique identifiers guarantee the reliability of the Audit trail: the audit trail can be traced from accounting up to profit or loss.
Automation is one of the great benefits of a cloud-based reporting system. Advanced automation allows manual work to be kept to a minimum and accountants to focus on analysis. In Clausion’s solution, the extra work has also been reduced by including ready-made content solutions. The reporting system offers ready-made functionalities all the way to the balance sheet and cash flows. So you can focus on the essentials of the IFRS report, not the outline and tapping of the figures.
Why IFRS reporting and why Clausion?
By introducing international IFRS reporting, you will increase the quality of your company’s reporting and enable you to be listed on the stock exchange and transition to international financial markets. However, the transition to IFRS reporting is a major effort for the company and requires commitment to more precise regulation and the creation of comparable information. To maximise your chances of success in implementing IFRS, your company should acquire an automated reporting system as well as expert assistance. Clausion’s consolidated financial reporting system is a flexible cloud service that is standardised for the use of IFRS reporting. Our experienced expert organisation will assist you at every stage of the IFRS transition.
Join our more than 400 satisfied customers and get Clausion’s system for financial consolidation and IFRS reporting.