As part of its economic growth strategy, Japan's central government is promoting the expansion of IFRS applicability throughout industry, and many companies are already making preparations to adopt IFRS.
However, an IFRS implementation project requires a companywide effort that affects not just accounts processing and business processes, but also impacts systems and organizations in a wide range of domains. Scattered cases are emerging in which companies hold off on IFRS implementation because of this high level of difficulty.
ABeam Consulting provides comprehensive services that include formulation of implementation plans and also encompass accounts processing, business processes, systems, internal control and organizations. While assisting with the efficient, effective application of IFRS, we can also provide separate services in which we resolve cases in which IFRS has been prohibitively difficult by working on convergence of accounting standards and IFRS implementation-oriented BPR.
The significance of IFRS implementation
Increasing numbers of companies are voluntarily adopting IFRS in order to cope with the changes in economic climate brought on by globalization. For these companies, IFRS implementation projects entail more than just working with a given system. They represent a superb opportunity to reinforce the cornerstone that strengthens their foundation for consolidated management.
Many companies that have adopted IFRS find that doing so has enabled them to shore up their consolidated management platform with more sophisticated overall administrative management and streamlined financial reporting processes, while bringing a global expansion of capital procurement into view.
ABeam's view on the effects of IFRS implementation
- Upgraded overall group management
- More rapid, relevant business decision-making due to more accurate administrative management information made available by improvements in the overall group administrative management platform and standardization of accounting process criteria
- More efficient financial reporting processes
- Progress in standardizing account settlement and financial reporting processes streamlines groupwide account settlement processes
- Ensuring groupwide financial reporting process transparency reduces internal control-related risks
- Global expansion of capital procurement
- Issuance of financial reports that are highly transparent to investors
- Diversification of capital acquisition methods with an eye on expansion among new investor demographics and global capital markets
The latest IFRS trends in Japan
The number of companies adopting IFRS has been increasing in recent years, but the reasons for IFRS implementation go beyond external factors such as improved chances of differentiation from the competition. Internal factors such as more sophisticated administrative management also play a role. (Source: SAP/IFRS Seminar survey)
In the immediate future, companies considering IFRS implementation will need to go beyond just determining the presence or absence of issues that IFRS can resolve. It will be crucial for them to correctly evaluate the cost of implementation balanced against the improvement of risk factors.
IFRS voluntary implementation / year of announcement / total number of companies
Key reasons for implementing or deciding to implement IFRS (multiple responses allowed)
The main reasons that companies cite for implementing IFRS or deciding to do so are not just the result of changes in the external environment, such as trends among competitors and changes in accounting standards. Changes in internal environment, such as improved administrative management and unification of group accounting standards, are also major factors.
(Source: SAP/IFRS Seminar survey)
Two forms of IFRS implementation
Successful implementation of IFRS demands a wide range of transformations that involve numerous organizations. Adopting IFRS within a short timeframe therefore requires a highly complex companywide effort with a high level of difficulty (i.e., the companywide transformation method).
In cases where companywide transformation is difficult, however, it is often possible to solve company problems and produce results by focusing action on individual points at issue, one at a time. In such cases effectiveness can be verified issue by issue, and the company may want to consider IFRS implementation over the medium-term (i.e., the individual transformation method).
Companywide transformation method
- When companywide transformation is the objective of IFRS implementation, multiple responses must be carried out within a specified period of time. ERP is used to achieve thoroughgoing BPR.
- In order to accomplish multiple actions in tandem, project management involving coordination among each stakeholder is critical.
Individual transformation method
- IFRS implementation is positioned as a corollary objective, and transformations are undertaken individually in light of corporate circumstances.
- Since transformations are handled individually, it becomes possible to consider implementation of IFRS over a medium-term timeframe.
IFRS implementation support by ABeam Consulting makes it possible to select the approach that best suits the company and its IFRS implementation aims