In today's business environment, many companies are required to prepare their financial statements according to specific standards, such as the International Financial Reporting Standards (IFRS). The obligation to adhere to IFRS encompasses a wide range of entities, including public interest entities like banks, insurance companies, asset management firms, as well as global, international enterprises, and their branches. 

Moreover, companies aiming for an Initial Public Offering (IPO) begin to align their financial reporting with IFRS standards. The "Big Four" accounting firms offer templates for such reporting, with auditors subsequently assessing the accuracy of the prepared financial statements and calculations. Some companies also choose IFRS as the universal standard for internal reporting for management. 

This article provides an overview of the challenges in IFRS reporting and how modern Corporate Performance Management (CPM) solutions like 1C:Perform offer innovative strategies to address these issues.

The Hardships of IFRS Reporting

One of the foremost challenges in IFRS reporting stems from the use of diverse accounting systems within a single organization or across different branches. Companies often manage their financial data using multiple systems, leading to heterogeneity in the data they collect and store. 

This diversity complicates the consolidation process, as financial data must be standardized before starting the report preparation to comply with IFRS requirements. This can be a time-consuming and error-prone task, requiring sophisticated data management and integration solutions.

Multiple Adjustments and Reconciliations

In many organizations, the necessity for multiple adjustments and reconciliations emerges as an inevitable consequence of a complex corporate structure, significantly complicating the IFRS reporting preparation. Such complexities arise from varying accounting practices across different divisions, mergers, acquisitions, or internal transactions, which often lead to discrepancies that must be addressed. The process of aligning financial data from diverse sources requires a series of adjustments and reconciliations to ensure consistency and accuracy before even beginning to tackle the requirements of IFRS reporting. 

Complex Company Structure

For companies with complex organizational structures, the IFRS reporting process can be particularly daunting. This complexity is amplified in scenarios where different branches or divisions of the same company engage in interdependent operations, such as one branch producing goods that another consumes. Managing and reporting financial information in these contexts requires meticulous tracking of internal transactions and sophisticated consolidation processes.  

How CPM Solutions Can Save the Day

While Excel remains a common tool for financial reporting, the advent of modern IT solutions has revolutionized the preparation of IFRS reports. Corporate Performance Management (CPM) solutions, such as 1C:Perform, stand at the forefront of this transformation, offering a sophisticated approach to the consolidation of data across different branches of a company and facilitating the preparation of various reports, including those required by IFRS.

Tailored Solutions for IFRS Compliance

1C:Perform supports IFRS accounting through transaction and transformation models, enabling the translation of accounting data from local GAAP to the IFRS chart of accounts. The transaction model is particularly effective when accounting under the local standard is also managed within 1C:Perform or translated from the registers of external accounting systems. It allows for a detailed trace from the consolidated IFRS figure down to the local standard entry, ensuring transparency and accuracy. 

On the other hand, the transformation approach is based on analytical adjustments of the Trial Balance and is recommended when local standard data is provided by subsidiaries and affiliates as data collection forms, facilitating smoother integration and comprehensive adjustments.

Simplifying Parallel Accounting

1C:Perform excels in managing parallel accounting for up to 15 accounting objects, such as fixed assets, intangible assets, assets held for sale, loans, deposits, receivables, investments, accruals, and more. This capability significantly reduces the workload of maintaining parallel accounts by leveraging local standard accounting information and batch entry of IFRS accounting data.

Universal Integration Capabilities

The solution’s ability to integrate with virtually anything (via ADO connection technology) and to import data from various databases is particularly valuable for holdings. This flexibility allows for the preparation of reports from different accounting systems used by subsidiaries, addressing one of the major challenges faced by large organizations.

Special Considerations for Corporate Groups

For groups of companies, critical aspects include the elimination of intragroup transactions and consolidation. Calculating unrealized profit from internal operations, such as the use, production, sale, or storage of semi-finished products by subsidiary companies, represents one of the most complex aspects of reporting for large holdings. 1C:Perform's tracking and accounting methodology capabilities make it adept at handling such intricate operations, ensuring accurate IFRS reporting. Furthermore, its consolidation features prevent profit duplication through the calculation of effective ownership shares, considering reciprocal and indirect investments.

In conclusion

CPM systems have proven to be exceptionally attractive for businesses navigating the complexities of IFRS reporting due to their sophisticated features and functionalities. 1C:Perform distinguishes itself as an ultimate tool for IFRS reporting, encapsulated by the following key advantages:

• Comprehensive integration: Seamlessly imports data from various systems, including Excel and accounting systems, facilitating efficient consolidation of financial data for IFRS compliance.

• Flexible adjustment settings: Offers both standard (including 13 of the most commonly used IFRS adjustments) and customizable adjustments to cater to specific financial reporting nuances, enhancing accuracy and compliance.

• Efficiency and automation: Designed to maximize the automation of the reporting process, making the preparation of IFRS-compliant financial reports efficient and audit-ready, with a clear audit trail.

• Simplified reporting process: Makes building financial reports straightforward, even for those without specialized accounting knowledge, thereby democratizing the reporting process.

• Adaptation to holding structure: Fits into complex structure of holding companies with many divisions and allows to prepare IFRS reporting only along the required contour.

• Suitability for public reporting: Meets the high standards required for transparency and accountability in financial disclosures, making it ideal for preparing public reports.

• Methodological support from BIG4: The development and refinement of 1C:Perform were supported by methodological input from the BIG4 accounting firms, ensuring reliability and trustworthiness.

1C:Perform can become a powerful ally in navigating the complexities of IFRS reporting, providing companies with the confidence and precision needed to achieve and maintain compliance with international financial reporting standards.

1C:Perform supports a wide range of corrections from local Turkish GAAP to IFRS. Thus the following adjustments can be automated:

• Provisions for Severance payments, 

• Paid leave provisions, 

• Warranty Provisions / Promotions,

• Sales Agency / Commission Expense Provisions,  

There are special tools for automation of:

• Provisions for doubtful receivables, 

• Provision for Inactive Stocks, 

• Usage Rights (Based on Rental), 

• Net realizable value test in stocks, 

• Bank Loan effective interest expense, 

• Effective interest income on deposits, 

• Commercial Receivable aging, maturity test and provision if necessary, 

• Deferred Tax Calculation, 

• Inflation Accounting