The conversion strategy is developed based on an analysis of the strengths and weaknesses of the internal and external financial reporting system.
Issues include:
does a project accounting system exist to reflect the percentage-of-completion method of recognizing revenues on long-term construction contracts?
is there a research and development accounting system to facilitate capitalization of internally generated intangible assets?
does an internal control system exist where financial instruments are used?
do business combinations from prior years have to be adjusted?
is the existing information system sufficient for segment reporting?
does it make sense to harmonize internal and external reporting as part of the conversion to international financial reporting?
does it make sense to stream-line the reporting processes (fast close) as part of the conversion to international financial reporting?
The strategy defines the optimal conversion option.
The conversion to international financial reporting can be performed in one of two ways:
conversion of the consolidated financial statements on the basis of separate financial statements which have been prepared in accordance with various sets of national accounting standards.
group-wide uniform accounting in each set of separate financial statements under IAS / IFRS.
The latter approach has the advantage of harmonizing the internal and external group reporting. Thus, the reporting processes are simplified, making the management information system more efficient.
However, it normally requires the implementation of new processes.
The decision in favor of one of the two strategies should be based on a company specific cost-benefit analysis.
