Accounting Change as per IFRS

1. Acquisition Accounting, Joint Ventures, and Goodwill:

IFRS requires the identification of an acquirer and measurement of fair value (IFRS 3.17). Measurement of these acquired businesses must be by the IFR S “acquisition method,” including identification of any non controlling interests and goodwill, and fair value valuation for all assets (IFRS 3.36).

SAP Solution – (IAS3) SAP ER P Financials supports a broad variety of consolidation and business combination methods compatible with IFRS.

2. Property, Plant, and Equipment Valuation

All values must be at cost, and though total costs can include things like borrowing, acquisition, and construction or production costs under certain circumstances, these can only be in cases where valuation policies can be shown to be consistent across the entity (IAS 16.15, IAS 23.11). Classes of assets may be revalued, if applied consistently across the entity (IAS 16.3 and 36). Depreciation charged to write off the value of assets over their estimated useful life, down to their salvage value (recoverable amount), must be straight-line.
Impact: Because companies have often used multiple tax, cost, and other management depreciation methods for financial accounting purposes, the transition to IFRS will require extensive analysis and careful planning to smooth the economic impact of potential revaluations.

SAP Solution -– (IAS16): Once a thorough evaluation of all new depreciation methods and their impacts is made, a review of asset tracking and valuation systems is in order, to determine their suitability under the company’s chosen approach to the new regulations.