When it comes to International Financial Reporting standards, the U.S. seems fairly committed to its adoption, and the pressing question seems to be not if a company will transition, but rather when.

While some businesses are comfortable postponing the seemingly inevitable, many global organizations requiring divisional reporting and visibility organization-wide consider it a current necessity.

So what does the transition to IFRS mean for you? When should accountants begin preparing for IFRS? Judging from lessons learned from Canadian and European companies, it's not too early to begin. Our counterparts in Canada and overseas encountered many more issues and challenges than they had expected. They underestimated the time that it would take to prepare for the transition and found themselves scrambling at the end.

While the possible deadline of 2015 for IFRS compliance for publicly traded U.S. companies may seem too far away to think about, it's not. Transitioning to IFRS is a major change management project that will likely impact operations and require significant planning and effort.

Unfortunately, during the period of change, corporate life goes on and all the typical business challenges also need to be addressed. Along with the new reporting and disclosure requirements of transitioning to IFRS, companies still have to manage continually changing local regulations and standards, among other issues.

The transition to IFRS is complex, requiring many changes to accounting processes, from data capture and implementation to reporting. Some of the areas that will be impacted include:

• Source data: Finance teams will typically need to gather more information than previously needed or require a different perspective on existing data.

• Chart of accounts: Account structure may need to be modified to address changes to the source data, support new requirements for analyzing financial data, and monitor adjustments and reconciliations between U.S. GAAP and IFRS reporting.

• Group or organizational reporting: The extent to which each company applies IFRS to its organization may vary. Changes to how data is gathered and structured may affect the way group data is consolidated, as well as the accounts for some or all of its individual reporting entities.

• Financial analysis: The shift to IFRS will impact financial reporting and the metrics used to assess corporate performance. Greater flexibility will be needed to analyze and model data, often requiring new tools and techniques to provide quick answers, comparisons and new key performance indicators.

LEARNING FROM OTHERS

So how can your clients effectively prepare for all of these challenges ahead? The following recommendations are based on best practices and lessons learned from companies around the world that have already made the transition:

• Start planning early.

• Put together an inter-departmental team involving various stakeholders. Obtain buy-in from the board and the audit department.

• Determine the business and operational changes that will need to occur. Map out a timeline for addressing the changes and for the transition plan.

• Coordinate with the tax and treasury departments to make sure everyone is taking tax implications into consideration.

• Put the right systems and processes in place. Make sure the accounting system can simultaneously handle both standards during the transition. Also ensure that the system has the flexibility it needs to accommodate future change. While IFRS is the current change management project on the horizon, there will likely be others in the years ahead due to changes in the business, marketplace or governmental regulations.

• Communications will be key. Accountants will need to explain the differences between the two standards to business executives -- particularly given the discrepancies that may appear in profits due to the differences in how some earnings are reported.

• Conduct effective training and get all constituents on board to ensure a successful transition.

• Bring in outside consulting support, as needed.

With a good head start, they will be well on their way to a successful implementation. By planning ahead, involving key stakeholders and implementing the right processes and systems, they will be able to not only effectively manage this transition, but also handle other business challenges that lie ahead.

Steve Pugh is CEO of UNIT4 Coda Inc., a specialist in international financial management software. Reach him at info.coda.na@unit4.com.