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.