The question many Accounting/Finance organizations are facing is when and how do they adopt the IFRS (International Financial Reporting Standards) that need to be adopted by the year 2014.  The SEC has published a Roadmap document to discuss various areas of consideration for participants looking to be early adopters of the change. “ The Commission is proposing this Roadmap towards requiring the use of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”)  by U.S. issuers as part of its consideration of the role a single set of high-quality accounting standards plays in investor protection and the efficiency and effectiveness of capital formation and allocation.  As capital markets have become increasingly global, U.S. investors have a corresponding increase in international investment opportunities. In this environment, we believe that U.S. investors would benefit from an enhanced ability to compare financial information of U.S. companies with that of non-U.S. companies international investment opportunities.” Based on the current economic climate and the fluctuating currency positions, it is inevitable that this change is coming.   

A large amount of Global companies have experience with IFRS reporting, however, many of the local ledgers have a GAAP focus.  Approximately 113 countries around the world currently require or permit IFRS reporting for domestic, listed companies.   Many organizations already have some adjustments being made to accommodate the consolidation requests of the Parent US companies to comply to GAAP requirements.    

What is truly required to accommodate the required change?  In my opinion, I believe there is an easy solution from the technical Hyperion Financial Management perspective to accommodate this request.   The overall solution requires a functional understanding of the Standard changes as it relates to GAAP vs. IFRS so that the appropriate adjustments can be made.  There are a number of continuing education opportunities provided by the major Accounting firms to help you gain a clear understanding of the differences.   Once you have the clear understanding, then you can attack the technical aspect of your application design change to accommodate the request.

So from an HFM design perspective, a couple key questions need to be answered:

• Do you want <Entity Currency> in HFM to be IFRS or to be Local GAAP?
• Do you want <Entity Curr Adjs> to store the local GAAP to IFRS adjustments?

Hyperion Financial Management stores all Journal Entries in a Value named <Entity Curr Adjs>.  This value can only be populated by Journals and provides clear audit trail from the unadjusted trial balance loaded to the Entity Currency value, to the overall Contribution to the parent with the “adjustments” loaded to <Entity Currency Adj>.   If you choose <Entity Currency> to be IFRS, then Financial Data Quality Management has to be the source of your local GAAP to IFRS adjustments.  The Excel Journal Templates in FDM can be leveraged to enter the IFRS adjustments if the local source ledger contains the GAAP information.   The IFRS Journal adjustments get merged into the existing GAAP Trial Balance Extract and are loaded to the <Entity Currency> Value of HFM.  

If you wanted <Entity Curr Adjs> to store the local GAAP to IFRS adjustments, you then have an option for Financial Data Quality Management or Hyperion Financial Management.  The general ledger extract would load to the <Entity Currency> value dimension.   You could provide further transparency to the source of the transaction by leveraging one of the 4 custom dimensions in your application design.  With FDM, you would have to use a separate location that would be set to load its data as an HFM journal to <Entity Curr Adjs>.  You could then use an FDM Excel journal to populate this entity.  It would need to be a separate entity though as FDM can be set to load to different value dimension members on a location by location basis.  One FDM location can only load to one Value dimension.

The problem I see with using FDM with adjustments to load to the Entity currency is the reliance you would be putting on the FDM reporting engine.  Now don’t get me wrong, there is a robust reporting repository of FDM reports that will provide transparency, however, I think you will have more flexibility with your end user community by leveraging the BI+ reporting capability with proper application design.   I would go with the hybrid solution of creating a separate location in FDM for adjustments only, that way you will be able to load directly to the Entity Currency Adjustments and it will be considered a journal entry.   

These are two very basic solutions that will not require a large amount of effort to deploy from the Hyperion Financial Management perspective.  The effort will be spent on the functional side to address the ledger changes.   A seasoned TUSC FM consultant would be able to guide you through the roadmap of meeting this challenge and explain the clear vision to deploying a quick and easy solution.