A conversion to IFRS is a paradigm change that impacts not only the Finance and Accounting functions of an entity but also the information technology systems, legal contracts and employee policies. It has the potential to have a spin-off and collateral impact on the working of an organisation in various ways. A few such areas are discussed below.
The notes to the financial statements prepared by the management start off with a statement, which goes somewhat like this:
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. A discussion on the Group's critical accounting judgements and key sources of estimation uncertainty is detailed below. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
A novice reading this could be forgiven if he assumes that the financial statements are estimated ...