Challenges for ipsas_adoption_-_final_-_1_nov_2011

Overcoming the Challenges of IPSAS Transition

Transition Strategies for:Successful IPSAS Implementation

Agenda• Introductions• Overall Planning and Project Management

– Transition scoping– Methodology for implementation– What is driving the decision to adopt IPSAS?– Choices and Their Impacts on Implementation– Who Should be part of the IPSAS transition team?

• High Impact Areas for IPSAS Transition• Treatment of Presentation of Financial Statements

Considerations• Treatment of Fixed Assets and Considerations• Cash versus Accrual Accounting• IPSAS PARTNER Demonstration• Closing Remarks and Questions and Answers

Seminar Materials Disclaimer• Presenters at the seminar have prepared materials for

the interest of participants. We trust that you will find the materials useful, but given the changing nature of the topic matter and the summary level of today’s presentation, neither presenters, nor Issues Central, Inc., can warrant that the use of the materials would be adequate to discharge the legal or professional liability of participants in the conduct of their practice or business operations.

About Issues Central, Inc.• To support our IPSAS consulting practice, Issues Central introduced IPSAS PARTNER. The world’s first transition product for IPSAS conversion. IPSAS PARTNER is the leading software solution to help automate and streamline the transition from local government accounting standards to IPSAS with ongoing IPSAS compliant financial reporting.

•Global website: www.ipsaspartner.com

•To support our IFRS consulting practice in 2008 Issues Central introduced the world’s first GAAP-‐to-‐IFRS transition product -‐ IFRS PARTNER. IFRS PARTNER is the leading software solution worldwide to help automate and streamline the transition from local GAAP to IFRS (and then provide ongoing IFRS compliant financial reporting.

• Global website: www.ifrspartner.com

http://www.ipsaspartner.com/

http://www.ifrspartner.com/

Seminar Presenter: Catherine Connally, CIA• Catherine Connally has over twenty-‐five years experience in financial

management and compliance, internal audit and executive management. She began her career in the extractive sector with internal audit responsibilities in both the mining and oil & gas sectors with Atlantic Richfield and British Petroleum.

• She is a well known technology and compliance sector entrepreneur having started technology businesses in both the United States and Canada.

• She has provided seminars and workshop to over one thousand organizations around the world on IFRS transition and related financial compliance activities.

• Catherine is a co-‐author and primary architect of industry leading financial transition and compliance products including IFRS PARTNER for GAAP to IFRS and CFO PARTNER for Sarbanes-‐Oxley compliance.

• She graduated in finance with honours from the University of Colorado at Boulder and is a Certified Internal Auditor.

• She has extensive knowledge of International Financial Reporting Standards (IFRS) and her lead role in the development of the IFRS PARTNER product has led to the market success of the product with over two hundred organizations in all key business sectors. Ms. Connally is a frequent speaker on IFRS transition and internal controls.

Catherine ConnallyCIAPresident of Issues Central, Inc

Seminar Presenter: Charley Best, MBA

• Charley Best has over 25 years of experience in executive management and consulting roles across the manufacturing, technology, and services sectors. He is an authority on the application of sound project management techniques to complex projects such as the transition to international financial reporting standards (IFRS) in various national settings.

• At Issues Central, Inc. (ICI) Charley has organized the company’s IFRS campaigns across Canada, the United States and abroad to bring over 200 companies to the new IFRS standards. Charley has worked extensively with companies and regulators in Canada, the United States, South Africa, and recently Nigeria, to develop and deliver methodologies and tools to streamline costs and time-‐to-‐comply for areas such as IFRS transition, Sarbanes-‐Oxley Act of 2002, NI 52-‐109, and Executive Compensation Disclosure.

• He is in charge of ICI’s IFRS activities in Nigeria and since November 2010 he and his team have provided IFRS TRAINING and training to over 100 organizations including regulators, NSE listed firms, government entities and external auditors.

• He is also the main project architect behind the IFRS Transition Program series for Insurance, Manufacturing and other sectors in Nigeria. Charley is a best-‐selling author of the Manufacturing Systems Implementation Methodology (MSIM) first published in 1988. He has a BA from Queen’s University in Kingston, Ontario, Canada and an MBA from York University in Toronto, Canada.

Charley BestMBAVice President ofIssues Central, Inc.(Toronto, Canada) and

Seminar Presenter: Marc Neal, CMA• Marc Neal has over 27 years of experience in accounting and

executive financial and project management roles. • His international accounting experience includes ad Deputy

Director Finance for the Supply Division and Agency of the North Atlantic Treaty Organization (NATO). In that role he successfully transitioned NATO from cash accounting to full accruals accounting using IPSAS. The project deliverables included application standards for the 21 reporting entities, and sample disclosure notes that would be adapted to individual entity reporting requirements.

• This four year implementation of IPSAS also involved dealing with the following related issues: refining and implementation of new projects both IT and construction related; handling change management issues related to internal development projects; successful implementation Oracle 7 ERP solutions; establishment of Activity Based Costing (ABC); review of contracts, MOUs and implementing agreements; oversaw the execution of operational budgets in excess of 1.5 billion Euros; providing internal financial management reports for the use of the board of directors and senior management; and lastly the management of 32 staff.

• Marc is a graduate of the University of Ottawa, Ontario, Canada and is a Certified Management Accountant (CMA).

Marc Neal,CMAIPSAS PARTNER –Product Manager

Planning & Project Management

Best Practices

Overall Planning

Transition scoping and diagnostic:The overall steps to a successful IPSAS transition encompass the following:– Identification of an appropriate transition team

• All individuals who will participate as project team members and advisors

– Identifying the optimal implementation criteria across the entities impacted entities

Overall Planning (cont’d)

Transition scoping and DiagnosticThe overall steps to a successful IPSAS transition encompass the following:– Cross functional areas to be evaluated in addition

to the finance and accounting areas such as:• Business processes, • ITC requirements, • the audit function, • stakeholder management and • change management areas

Overall Planning (cont’d)The overall steps to a successful IPSAS transition encompass the following:– Engagement of the External Audit Function:

• Court of Auditors, • internal auditors, • audit committees, and • senior financial expert body

Methodology for implementation• The choices you make when implementing across the various levels and entities are critical

• There are many potential ways to approach the adoption of IPSAS. –Careful consideration should be taken to evaluate the impact in the following areas:

• What is the time line for implementation?• At what level will consolidation take place?• What are the spheres of influence between entities?• Can certain parts of the entity implement first without an adverse impact on other areas?

Methodology for implementation (cont’d)

–Careful consideration should be taken to evaluate the impact in the following areas:

• What are the future chart of accounts requirements?• How will future changes in chart of accounts be accommodated?

• What is the level of IPSAS competence within the entities?

• Will a phased in approach be utilised?• Will a phased-‐in approach be taken to accommodate training requirements?

Choices and Their Impacts on Implementation

IPSAS versus a custom set of standards:• Developing a set of national public sector custom set of standards:– Takes many years to develop– Independence from international influence– May put the organisation on its own as opposed to part of the international community

• Very costly to develop in terms of staff availability = high opportunity cost

Choices and Their Impacts on Implementation (cont’d)

• Adopting IPSAS has many benefits which include:– Reduced time to implementation, – Lower opportunity costs, – Comprehensive set of standards:

• Developed with combined world-‐wide expertise • Benefit of evolving over many years and• Are in line with IFRS

– IPSASB is comprised of experts from around the world• Board has very good process for evaluating and setting standards

– Standards are internationally recognized• The standards address most situations governments and public sector organizations face

– IPSAS is promoted by the World Bank

Incremental versus “Big Bang” implementation:• A decision to implement IPSAS incrementally may require significantly longer than a “Big Bang” implementation – but often provides a smoother transition and does spread the cost over a longer period of time

• Incremental implementation will have an impact on the ability to consolidate financials

• Scheduling IT system upgrade requirements is difficult with an incremental approach

Choices and Their Impacts on Implementation (cont’d)

Who Should be part of the IPSAS Transition Team?

• The IPSAS Transition Team should be:– A multidisciplinary team with representation from budget, accounting, IT, Business functional areas,

• The basic team should have reporting lines to a decision making committee– such as an audit committee with financial Experts

• The team will need access to:– Audit authority, or – external auditors, – to ensure that decisions can be supported within the audit

• The team will need to provide regular updates to the Executive Board

• Team responsibilities include:– Responsibility for project management, – Accounting policy development – Support for implementation– Change management activities, – Communications with auditors and executive committees

– Training

What are Team Responsibilities?

High Impact Areas

Issues and Considerations

High Impact Areas for IPSAS Transition• Presentation of Financial Statements• Property plant and equipment• Intangible assets• Inventory• Accruals accounting• Cash flow statements• Investment in associates• Budgets• Consolidations

Treatment of Fixed Assets

Issues and Considerations

Fixed Assets Issues and Valuation• Within many public sector organizations, fixed assets poses a great deal of difficulty– Difficulties arise in terms of:– assessing an initial value for assets, particularly for large assets such as infrastructure, heritage assets, artwork and so on

• Valuation choices and options include:– historical cost, – independent evaluators/appraisers

Fixed Assets Issues and Valuation• There are choices to make

– To depreciate the asset over its useful life or – To revalue on a periodic basis

• Within IPSAS, the choice to amortize or revalue are made for each class of assets

• IPSAS allows for a 5 year transition period for fixed assets– from the first year of presenting IPSAS compliant financial statements

Accrual & Cash Basis Accounting

Discussion and Advantages/Disadvantages

Reasons for Change to Accrual Accounting• What is driving the decision to move to accruals accounting? –According to recent studies, there is an increased drive towards the adoption of accrual based accounting standards for the public sector. • Top reasons cited include:

– Increased transparency– Increased insight into the use of and stewardship of the public’s tax payments and the assets entrusted to the government

–Overall better information for decision making purposes

Cash versus Accrual AccountingAdvantages of Cash Accounting• Simpler to maintain• Data can be taken from minimal sources:

– bank statements– cheque books– deposit book

• Preparation of financial reports requires less time because minimal adjustments are required when prepared from cash records

• People with limited accounting knowledge can more easily understand the financial reports

• Finalized financial reports can be prepared on demand without the need for adjusting entries

Cash versus Accrual Accounting (cont’d)Advantages of Cash Accounting• Simpler to maintain• Data can be taken from minimal sources:

– bank statements– cheque books– deposit book

• Preparation of financial reports requires less time because minimal adjustments are required when prepared from cash records

• People with limited accounting knowledge can more easily understand the financial reports

• Finalized financial reports can be prepared on demand without the need for adjusting entries

Disadvantages of Cash Accounting• Financial reports do not represent the true financial position and performance of the business

• This method does not comply with the accounting concept of the matching principle

• Financial institutions may not accept this accounting method when making loan applications

• It is an unreliable financial analysis and decision making tool due to an incomplete picture of financial commitments

• Performance comparisons are difficult:– With previous period results and– Other organisational benchmarks

Cash versus Accrual Accounting (cont’d)

Advantages of Accrual Accounting• Provides a truer and fairer representation of the financial position and performance of the organization

• Complies with accounting standard requirements• Financial reports have more credibility with financial institutions and investors

• More reliable financial analysis and decision making tool with valid comparisons with prior periods and benchmarks

• Positions the organization for future growth– Accrual accounting system will eventually need to be adopted


Disadvantages of Accrual Accounting• More transactions are required to record the same number of financial events

• More complex with the requirements to calculate and manage the 'end of period adjustments' .

• Often requires the professional accounting training to assist in preparation of the financial statements

• Greater requirement to retain all source documents to help identify the timing and scope of revenues and expenses

• Financial reports take longer to prepare since income/expense adjustments require additional investigation


• The benefits of accrual accounting are to ensure transparency to stakeholders

• With accrual accounting, there is greater visibility on assets and liabilities, – This does not exist with a cash basis presentation

• In other words, presentation is more accurate under accrual based accounting and more comparable world-‐wide

• As a result the organization has a greater ability to develop and track key performance metrics


A step-‐by-‐step, GAAP-‐to-‐IPSAS methodology delivered as an easy-‐to-‐use product with support and assistance

The IPSAS PARTNER approach to meeting your transition requirements

Product Benefits• Rapid to deploy• Cuts through the IPSAS fog and gets you working immediately

• Create policies quickly and accurately• Impact Assessment documentation easily customized• Reporting will help you to substantiate your decision making for audit committees and external auditors

• Works with Microsoft Office® tools• Proven product and very affordable• Various options for deployment

IPSAS PARTNER -‐ GAAP to IPSAS Transition

Step 2:Capacity Building on IPSAS

Step 3:Generate Scoping & Diagnostic Reports

START HERE

Step 4:Review ‘Clean Slate” Draft IPSAS Policies

Step 5: Generate IPSAS policy impact assessment details for review

Step 6:Generate IPSAS policy impact assessment details documentation for measurement, disclosures, systems, business activities and internal controls.

Step 7:Document policy decisions for review and generate adjustments and IPSAS elections.

Step 8:Prepare opening balance sheet, notes and quarterly comparatives.

Step 1:Develop Project Plan

Two Options for IPSAS PARTNER

• Option One: – IPSAS PARTNER Software + Content plus – Training and Support

Two Options for IPSAS PARTNER• Option Two:

– Tailored workshops with experts on IPSAS delivering capacity building with your peers

– As part of the workshops, assistance in completion of project deliverables

– IPSAS PARTNER software + Content– Training and Support

What you are about to see

Brief product demonstration:• Quick overview of IPSAS PARTNER structure• Then focus on:

– IPSAS Draft Policies with elections– Disclosure checklists– Helpful templates for calculations and analysis– Impact Assessment documentation– Graphical reporting for project management and auditors

PRODUCT PRESENTATION:IPSAS PARTNER

IPSAS PARTNER Main Menu

Special Pricing Available until 31 December• For the first 25 organisations who become IPSAS PARTNER customers– There is a special 33% discount available for placing an IPSAS PARTNER software order by 31 December

– If this is of interest to you, please contact us after this session and we will put together a proposal specially tailored to your organisation

Discussion and QuestionsNote: you can use the chat feature to ask questions

or email [email protected]

Contact Information• For sales and pricing information please contact:– Charley Best – Vice President

• E-‐mail: [email protected]• Tel: +14169771496 ext 112

• For questions about today’s seminar materials please contact:– Marc Neal – IPSAS Product Manager

• E-‐mail: [email protected]

mailto:[email protected]

mailto:[email protected]

Challenges for ipsas_adoption_-_final_-_1_nov_2011

Economy & Finance

Transcript of Challenges for ipsas_adoption_-_final_-_1_nov_2011