Transitioning to IFRS in SAP ERP Financials

Paul Theobald, CFO of CAPE Consulting, Inc. has worked with SAP since 1993. He has been a Financials consultant for 14 years. Paul specializes in Foreign Currency Valuation, the General and Special ledgers, local GAAP reporting, etc. He has worked in two major international SAP Financials projects and has been lead consultant in various projects, focused on GL, Accounts Receivable and Payable, and Banking, Fixed Assets and the Special Ledger. A qualified chartered accountant (should getfrom the UK, Paul has lived and worked in the US for 12 yearsmaking him uniquely qualified to understand the problems that arise in large, global implementations.

... Acknowledgments ... 11 ... Preface ... 13 1 ... Introduction to IFRS ... 19 1.1 ... Introduction ... 19 1.2 ... IFRS Framework ... 19 1.3 ... Accounting Standards ... 21 1.4 ... Adoption of IFRS by Country ... 22 1.5 ... Current Status for Countries not Using IFRS ... 23 1.5.1 ... Current Status for the United States ... 24 1.6 ... Summary ... 29 2 ... IFRS and Local GAAPs ... 31 2.1 ... Introduction ... 31 2.2 ... Summary of IFRS ... 31 2.2.1 ... IFRS 1: First-Time Adoption of IFRS ... 33 2.2.2 ... IFRS 2: Share-Based Payment ... 34 2.2.3 ... IFRS 3: Business Combinations ... 35 2.2.4 ... IFRS 4: Insurance Contracts ... 36 2.2.5 ... IFRS 5: Noncurrent Assets Held for Sale and Discontinued Operations ... 36 2.2.6 ... IFRS 6: Exploration for and Evaluation of Mineral Resources ... 37 2.2.7 ... IFRS 7: Financial Instruments: Disclosures ... 38 2.2.8 ... IFRS 8: Operating Segments ... 38 2.2.9 ... IAS 1: Presentation of Financial Statements ... 40 2.2.10 ... IAS 2: Inventories ... 41 2.2.11 ... IAS 7: Cash Flow Statements ... 42 2.2.12 ... IAS 8: Accounting Policies, Changes in Accounting Estimates, and Errors ... 43 2.2.13 ... IAS 10: Events after the Balance Sheet Date ... 44 2.2.14 ... IAS 11: Construction Contracts ... 45 2.2.15 ... IAS 12: Income Taxes ... 46 2.2.16 ... IAS 16: Property, Plant, and Equipment ... 47 2.2.17 ... IAS 17: Leases ... 48 2.2.18 ... IAS 18: Revenue ... 50 2.2.19 ... IAS 19: Employee Benefits ... 51 2.2.20 ... IAS 20: Accounting for Government Grants and Disclosure of Government Assistance ... 52 2.2.21 ... IAS 21: The Effects of Changes in Foreign Exchange Rates ... 52 2.2.22 ... IAS 23: Borrowing Costs ... 54 2.2.23 ... IAS 24: Related Party Disclosures ... 54 2.2.24 ... IAS 26: Accounting and Reporting by Retirement Benefit Plans ... 55 2.2.25 ... IAS 27: Consolidated and Separate Financial Statements ... 56 2.2.26 ... IAS 28: Investments in Associates ... 57 2.2.27 ... IAS 29: Financial Reporting in Hyperinflationary Economies ... 58 2.2.28 ... IAS 31: Interests in Joint Ventures ... 58 2.2.29 ... IAS 32: Financial Instruments: Presentation ... 59 2.2.30 ... IAS 33: Earnings per Share ... 60 2.2.31 ... IAS 34: Interim Financial Reporting ... 61 2.2.32 ... IAS 36: Impairment of Assets ... 62 2.2.33 ... IAS 37: Provisions, Contingent Liabilities, and Contingent Assets ... 63 2.2.34 ... IAS 38: Intangible Assets ... 64 2.2.35 ... IAS 39: Financial Instruments: Recognition and Measurement ... 66 2.2.36 ... IAS 40: Investment Property ... 68 2.2.37 ... IAS 41: Agriculture ... 69 2.3 ... Differences between IFRS and Local GAAPs ... 69 2.3.1 ... Chile ... 70 2.3.2 ... Brazil ... 71 2.3.3 ... Canada ... 72 2.3.4 ... United States ... 73 2.4 ... Summary ... 75 3 ... SAP ERP Financials Functionality for IFRS ... 77 3.1 ... Introduction ... 77 3.2 ... Parallel Reporting in SAP Systems ... 77 3.2.1 ... Parallel Reporting in the Classic General Ledger ... 78 3.2.2 ... Parallel Reporting in SAP General Ledger ... 79 3.2.3 ... Pros and Cons of Parallel Reporting Solutions ... 82 3.2.4 ... Setting up Parallel Accounts for IFRS ... 83 3.2.5 ... Setting Up Parallel Ledgers for IFRS ... 85 3.3 ... IFRS and Parallel Reporting Options ... 90 3.3.1 ... Parallel Ledgers Scenario 1: New Implementations of SAP ... 90 3.3.2 ... Parallel Ledgers Scenario 2: Existing Implementations of SAP System ... 92 3.3.3 ... Parallel Accounts Scenario 1: New Implementations of SAP System ... 94 3.3.4 ... Parallel Accounts Scenario 2: Existing Implementations of SAP System ... 97 3.4 ... Other SAP General Ledger Functionality ... 98 3.4.1 ... Scenarios for Leading Ledger ... 99 3.4.2 ... Segment Reporting ... 101 3.4.3 ... Document Splitting ... 104 3.4.4 ... Foreign Currency Valuation and Translation ... 113 3.5 ... IFRS Functionality in Other SAP Components ... 124 3.5.1 ... Consolidations ... 124 3.5.2 ... XBRL ... 128 3.5.3 ... Asset Accounting ... 132 3.5.4 ... Other Functionality ... 133 3.6 ... Summary ... 133 4 ... SAP Upgrade and General Ledger Migrations ... 135 4.1 ... Introduction ... 135 4.2 ... Upgrade to SAP ERP 6.0 ... 135 4.2.1 ... Benefits of Upgrading ... 136 4.2.2 ... Upgrade Approaches ... 140 4.2.3 ... SAP Future Release Strategy ... 143 4.3 ... Migrating to SAP General Ledger from the Classic General Ledger ... 144 4.3.1 ... SAP Migration Service ... 144 4.3.2 ... Migration Scenarios ... 148 4.3.3 ... Migration Cockpit ... 150 4.3.4 ... Migration Project Phases ... 155 4.4 ... SAP General Ledger Migration Scenarios for IFRS ... 156 4.4.1 ... SAP Questionnaire for Migration Scenarios 6-8 ... 157 4.4.2 ... Scenario 6: Subsequent implementation of document splitting ... 160 4.4.3 ... Scenario 7: Subsequent Implementation of an Additional Ledger ... 165 4.4.4 ... Scenario 8: Switch from Parallel Account to Parallel Ledger ... 169 4.5 ... Summary ... 174 5 ... IFRS Transition Project ... 177 5.1 ... Introduction ... 177 5.2 ... Time Line ... 177 5.3 ... Project Phases ... 179 5.3.1 ... Phase 1: Review ... 179 5.3.2 ... Phase 2: Define ... 182 5.3.3 ... Phase 3: Design/Build/Test ... 182 5.3.4 ... Phase 4: Go-Live ... 184 5.4 ... What Should You Be Doing Now ... 184 5.5 ... Success Factors ... 185 5.6 ... Summary ... 185 6 ... Case Study ... 187 6.1 ... Introduction ... 187 6.2 ... CMPC ... 188 6.3 ... IFRS Project Phases ... 188 6.3.1 ... Phases 1 and 2: Review and Define ... 189 6.3.2 ... Phase 3: Design/Build/Test ... 197 6.3.3 ... Phase 4: Go-Live ... 202 6.4 ... Key Findings ... 203 6.5 ... Summary ... 203 ... The Author ... 205 ... Index ... 207