Blog : BOARD TALK
|Posted on September 12, 2016 at 9:25 AM|
Technology can give a real boost to better corporate governance. We saw that with the tech challenge to #rethinksupplychains covered by me on Forbes earlier this year (Competing To End Labor Trafficking in Global Supply Chains: With Technology). Making the process of documentation quick and easy is an important first step to transparency. It is also critical for compliance.
New International Financial Reporting Standards (IFRS) are set to come into place around a suite of measures by the International Accounting Standards Board to overhaul accounting in the long wake of the financial crisis and to increase international regulatory co-operation.
But with less than 18 months to go, a survey by Deloitte reveals that nearly two-thirds of banks are unclear on the effect the rules may have on their balance sheets, and uncertainty abounds.
A staggering 99% of respondents to Deloitte’s Sixth Global Banking IFRS survey said their local financial regulator had yet to say how they might incorporate IFRS 9 numbers into regulatory capital requirements. There were 91 banks, including 16 global systemically important financial institutions (but excluding US banks) surveyed.
Almost half of banks think they do not have enough technical resources to deliver their IFRS 9 project and almost a quarter of these do not think that there will be sufficient skills available in the market to cover shortfalls, says Deloitte. Some 60%of banks either did not or could not quantify the transition impact of IFRS 9. Of the banks who responded, the majority estimate that total impairment provisions will increase by up to 25% across asset classes.
70% of respondents anticipate a reduction of up to 50 bps in core tier 1 capital ratio due to IFRS 9, according to the survey.
But amid the guesswork, time is running out. One answer comes from SAP, which I am en route to visit in California. SAP has just announced the latest enhancements to its revenue accounting platform designed to help CFOs and chief accounting officers master the new IFRS 15/ASC 606 standards.
It is not just the banking sector ."These new accounting standards apply to all entities — public, private and not-for-profit — that have contracts with customers and will supersede virtually all current revenue accounting requirements" says SAP.
"The SAP® Revenue Accounting and Reporting application automates and simplifies revenue accounting and supports companies as they comply with both current and impending accounting standards. This is the first in a series of International Financial Reporting Standard (IFRS) solutions from SAP designed to help finance executives comply with IFRS 15, IFRS 16 and IFRS 9" it says.
The new IFRS 15 revenue recognition standard is also known as ASC 606 in the US.
It eliminates the transaction and industry-specific revenue recognition guidance under current U.S. GAAP and replaces it with a principle-based approach for determining revenue recognition. "The change can affect companies’ reported revenue, how and when they report financial performance, and overall financial decision making" says SAP.
It sounds like a discussion for the boardroom. But time to implement the new process is running out. To find out how much time you have, visit the IFRS 15 DoomsDay clock here.
Watch this space - and me on Forbes - for more from Silicon Valley in September.