How SAP ERP Combats the Challenges of Global Accounting and Financial Reporting Standards

  • by Kehinde Eseyin, Security Architect
  • December 9, 2009
Review some SAP ERP solutions, functionalities, and capabilities that you can use to meet the challenges of specific International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) requirements, including ones that cover revenue, accounting policies, operating segments, and more.
Key Concept

International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) guide global financial accounting practices and reporting. The aim of these standards is to harmonize financial accounting and reporting standards of different countries. SAP solutions for global accounting and financial reporting standards are a set of functionalities and components that are designed to enforce compliance with and adherence to IFRS. To ensure total compliance and optimize the many benefits, it is expedient to appropriately configure these solutions based on international financial reporting best practices, requirements, and standards.

Compliance with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) is a pressing issue for most companies as the deadline for adoption draws closer. Over the years, the International Accounting Standards Board (IASB) has amended a number of IAS standards and replaced some with IFRS standards. Furthermore, the regulatory body has adopted some IFRS standards on matters that are not covered by IAS standards.

ERP systems play an important role in simplifying and streamlining the adoption of global accounting and financial reporting standards. Even if you are already using SAP ERP for managing business processes and reporting, you likely will need to reevaluate the capability and adequacy of your system to satisfy global reporting requirements. IFRS-compliant solutions must be able to do the following:

  • Support subledger accounting, hedge accounting, parallel accounting, parallel valuation, and multi-currency

  • Leverage a centralized database management system to enhance flexibility of financial reporting, analytics, planning, and consolidation

  • Integrate business processes across the enterprise

  • Support efficient data exchange through Extensible Business Reporting Language (XBRL)

  • Be scalable and adaptable to cater to dynamic reporting standards as a result of changes to international reporting standards, disclosure requirements, and standards reviews

These attributes are targeted at ensuring and enforcing compliance with global reporting standards in the areas of project management (construction contracts), revenue recognition, segment reporting, fixed asset management, leasing, governance, risk, and compliance (GRC), and so on. SAP ERP Financials, coupled with systems such as SAP ERP Human Capital Management or SAP BusinessObjects GRC solutions, plays a key role in achieving IFRS compliance. To optimize the benefits of the system for IFRS compliance, the system has to be well-configured to ensure that transactions are automatically and correctly posted to the right General Ledger accounts.

Kehinde Eseyin

Kehinde Eseyin is a security architect. He holds a bachelor’s degree in computer science. He has about 12 years of IT security, governance framework, IS risk, and compliance experience gained by working in numerous global organizations. Over the years, he has demonstrated competencies in security design, information assurance, cyber security, data privacy, threat and vulnerability management, penetration testing, business architecture, project management, IT audit, IS controls framework, and identity and access management.
 

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