IFRS and Its Impact on Hyperion Financial Management

Mike Arnoldy

By
September 21st, 2011


My last blog discussed the potential impact of IFRS on the transactions systems. Now let’s take a look at how IFRS impacts Hyperion Financial Management. Not surprisingly, the impact is different for each application, depending primarily on how that application is designed.

If you have not paid much attention to IFRS, I would suggest you take a look at what the financial statements look like. Compare these statements with your current financial statements.  IFRS financial statements have different line items from our US GAAP statements. A well designed Hyperion Financial Management application is built to support creating the required financial statements with efficiently designed reports. This is mainly done with the chart of accounts. If the financial statements change, the chart of accounts most likely needs to change. You may be able to create the new reports by cherry picking accounts in your application and building subtotals into the reports, but this approach results in poorly designed reports that require substantial maintenance going forward.

So if we accept that the chart of accounts has to change in your application, what is the impact? This is where the application design enters the picture.

When I think about implementing IFRS, I think there are really two types of applications. The first type are those applications that are built with a very granular level of detail in the accounts. The base accounts may be based directly on the transaction system with a one-to-one relationship. With this application design, most likely the application will not need to be rebuilt. That is not to say that there is not work to be done.

To make this application IFRS ready, you would build an alternate hierarchy in the account dimension. All of the base accounts will be rolled up into new parents to support the lines on the IFRS financial statements. There will most likely need to be some additional rules added to the application that are based upon this new account hierarchy. You may need to add some custom dimension members to have the ability to make GAAP to IFRS adjustments or vice versa, depending upon how IFRS is being adopted. A completely new set of reports will need to be developed. The current data loads will probably not need to be changed unless this is required by changes to the transaction systems. The data validation for the new chart of accounts should be relatively painless. The application will be using the same base level data, just rolling it up differently. The validation will primarily be focused on the correctness of how the base level accounts are placed on the new hierarchy.

If you have an application that falls into this category, you should not have particularly difficult time adopting IFRS. You will be able to have a single application that supports both US GAAP and IFRS concurrently. There will be some additional overhead on the application as long as you are running both the US GAAP and IFRS rules. And of course there will be maintenance of both the USGAAP and IFRS account hierarchy and reports. Presumably at some point in the future, the US GAAP components can be removed.

My next blog will look at the second type of application, those that have a summarized chart of accounts.

 

 


Mike Arnoldy

About Mike Arnoldy

Mike Arnoldy has over 20 years experience in all phases of design, development, and implementation of financial applications. He has exceptional problem-solving and architecting skills with a strong technical background. He specializes in financial consolidation applications that include complex calculations, foreign currency translation, inter-company/equity eliminations and varied reporting requirements to satisfy both external and management reporting needs. Mike is also a Certified Public Accountant.

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