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Preparing for the Transition to International Finan cial Reporting Standards (IFRS) with Oracle Governance, Risk, and Compliance

Sean Cronin – GRC Sales and Strategy DirectorStephanie Holmeen - Product Marketing Director, GRC Applications

IFRS: Why Should You Care?

• IFRS is coming for customers in Canada and US• Major change in accounting and reporting• The transition process needs to start now• Can be a compelling event for Oracle Sales:

– Upsell to Hyperion Financial Management– Upsell to Hyperion Financial Management– Upgrade to E-Business Suite Release 12, PeopleSoft 9, JD Edwards

EnterpriseOne 9, and JD Edwards World A9.1– Cross-sell GRC


Agenda

• IFRS Overview• Oracle and IFRS• Focus on IFRS with Oracle GRC • Summary

Global Momentum Towards IFRS

Source: IASB, Dec 2007

Countries seeking convergence with the IASB or purs uing adoption of IFRSsCountries that require or permit IFRSs

Expected Benefits from IFRS Convergence A single standard for global business

More efficient access More efficient access to capitalto capital

Reduced cost of Reduced cost of financial reportingfinancial reporting

Improved Improved transparency for transparency for

investorsinvestors

It’s Not About Accounting; It’s About Capital Marke ts

20092009 20102010 20112011 20122012 20132013 20142014 20152015 20162016

Impact on US CompaniesProposed implementation timeline from the SEC

2009: Limited group of large US firms are permitted to use IFRS on an optional basis for fiscal periods ending on or after Dec 15, 2009

2014: Large accelerated filers begin filing in IFRS

2016: Non-accelerated filers begin filing in IFRS

20092009 20102010 20112011 20122012 20132013 20142014 20152015 20162016

2011: SEC evaluates achievement of roadmap milestones and decides whether to adopt a mandatory approach for IFRS

2015: Accelerated filers to begin filing in IFRS

Source: SEC Announcement, Aug 2008

Companies are required to retrospectively apply IFRS to all periods presented as if

they had always been in effect.

Cumulative Reporting Requirements

Multi -GAAP During Transition

Don’t Know 9%

Within 3 years

Within 7 years

Growing awareness of complex requirements…

…drives preference for early planningand assessment

Impact on US CompaniesThe value of starting early

More than 7 years

2%

Within what timeframe would your company adopt IFRS if given a choice?

During the transition period from US GAAP to IFRS, firms must continue to report in

US GAAP and any local statutories, as well as begin tracking IFRS equivalents.

Multi -GAAP During Transition

A study comparing of the impact of IFRS adoption in the UK reveals that net income

generally rose by 39% while equity declined by 23%. UK GAAP is considered

close to US GAAP in most areas.

Potential Impact on Bottom Line

years55%

years 8%

Within 5 years26%

Sources: European Financial Reporting Research Grou p; Deloitte Touche Tomatsu

““ No one anticipated how big it was going to be. Every company was too late and too slow in preparing – even the good ones.”

Ken Wild, Global IFRS Leader, Deloitte

Source: Deloitte, 2007

2009 2010 2011 2012 2013 2014 2015 2016

Impact on US CompaniesStart early for transition period with multi-GAAP

2009: Limited group of large US firms are permitted to use IFRS on an optional basis for fiscal periods ending on or after Dec 15, 2009

2014: Large accelerated filers begin filing in IFRS

2016: Non-accelerated filers begin filing in IFRS

Transition Date?While IFRS requires 2 years of comparatives, best practice recommends 5

2009 2010 2011 2012 2013 2014 2015 2016

2011: SEC evaluates achievement of roadmap milestones and decides whether to adopt a mandatory approach for IFRS

2015: Accelerated filers to begin filing in IFRS

Source: SEC Announcement, Aug 2008

US GAAP vs IFRS: What’s Different?You can make a living cataloging the differences

IFRS: 2,500 PagesUS GAAP: 25,000 Pages

Much is the Same…

ApproachApproach(Some Examples)(Some Examples)

IFRSIFRS US GAAPUS GAAP

Revenue Recognition��

Fair Market (e.g. AR or Inventory Valuation) �� Detailed Disclosure

�� Detailed Disclosure

�� Segment Reporting

�� Chart of Accounts Not Mandated

�� Distinction Between Tax and External Reporting ��

…But There are DifferencesUS GAAP is always more specific, plus:

ApproachApproach(Some Examples)(Some Examples)

IFRSIFRS US GAAPUS GAAP

Fair Market Revaluation Fixed Assets & Investments

Only Certain Fixed Assets

Extraordinary Items None Rare (Negative Goodwill)

Consolidation Control 2 Models

Joint Ventures Proportional OK Only Equity

Research & Development Capitalized Expensed

Inventory No LIFO LIFO OK

Impairment 1 Step, Reversible 2 Step, No Reversal

Industry-specific ConsiderationsAreas of Potential Concern

IFRS Change Area:IFRS Change Area: PPEPPE R&DR&D FVFV INVINV IMPAIRIMPAIR M&AM&A

Financial Services ��

High Tech ��

Retail ��

Communications �� Communications ��

Utilities ��

CPG ��

Life Sciences ��

PPE = Property, Plant, & Equipment

R&D = Research & Development

FV =Fair Market Revaluation

INV = Inventory

IMPAIR = Impairment

M&A = Mergers & Acquisitions


Agenda

• IFRS Overview• Oracle and IFRS• Focus on IFRS with Oracle GRC• Summary

Determine impact on accounting in

subsystems

Configure accounting rules

Stage 3Stage 3

Record Record Transactions Transactions

in both GAAPSin both GAAPS

Stage 1Stage 1

Study Impact & Study Impact & Determine StrategyDetermine Strategy

Perform preliminary study

Assess impact

Determine changes to

business model

Transform operations using

Stage 4Stage 4

Transform Your Transform Your Business & Business &

Win with IFRSWin with IFRS

Your IFRS Action PlanAchieve “early mover” advantage

Collect GAAP financial results

Adjust and consolidate under

Stage 2Stage 2

Enable Top End Enable Top End ReportsReports

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All Stages: Apply Policy and Control ManagementAll Stages: Apply Policy and Control Management

accounting rules and set up ledgers

Process and report using dual accounting

Milestone 3Transactions Recorded

in Multiple GAAPs

Milestone 1Completed Preliminary

Study

Assess impact

Determine strategy

operations using IFRS results

Report IFRS results, increase

shareholder value

Milestone 4Business Model

Optimized

consolidate under GAAP & IFRS

Report, reconcile and audit results

Milestone 2IFRS Reports Produced

Oracle Enables Key Stages in IFRS Action Plan

Stage 2Stage 2

Enable Top Enable Top End ReportsEnd Reports

Stage 3Stage 3

Record Record MultiMulti--GAAP GAAP

TransactionsTransactions

Stage 1Stage 1

Study Impact & Study Impact & Determine StrategyDetermine Strategy

Stage 4Stage 4

Transform Your Transform Your Business & Business &

Win with IFRSWin with IFRS

Oracle Enterprise Performance Management

Oracle ERP Financials

Other ERP Financials

Oracle Industry

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Financials Financials Industry Specific

Applications

Oracle Governance, Risk, & Compliance Suite

Custom or Legacy

All Stages: Apply Policy and Control Management

CORE CONSOLIDATION FEATURES CUSTOM DIMENSIONS

GAAP IFRS

Flexible Rules Engine

Journal Entries and Audit

Enables tracking of GAAP vs. IFRS adjustments

Multiple reporting standards in a single solution

Oracle Enterprise Performance Management Enable Top End IFRS Reporting

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DOCUMENT ATTACHMENTS FLEXIBLE REPORTING

Creates “Electronic Binder” of all adjustments

Easy to reconcile and trend GAAP vs. IFRS results

IAS/IFRS SUPPORT SINCE 2000Thousands of customers overseas

reporting under IFRS

Oracle ERP Financials Designed for IFRSE-Business Suite, PeopleSoft, JD Edwards

SPECIFIC IFRS FEATURESSpecific functionality developed for IFRS

IAS 2 Inventory Inventory, CostingIAS 16 Property, Plant FA, ALMIAS 18 Revenue Rec. OM, AR, BI, CAIAS 21 Currency Multibook, MRC,GLMore…

Segments, etc.…

Flex / ChartFields…

• Asset Componentization� Parent & Child Assets� Child Depreciation rates differ

• Impairment Processing� Impairment identification� Unplanned depreciation

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IFRS MIGRATION PATHMultiple Ledgers or Multi-GAAP

Ledger Set/Code:

DifferencesDifferencesExpanded COAExpanded COACalendarCalendarUSDUSD

US PrinciplesUS PrinciplesExpanded COAExpanded COACalendarCalendarUSDUSD

DUAL GAAP ACCOUNTING

GAAP

GRC DOCUMENTATION REPOSITORY

Oracle Governance, Risk, and Compliance SuiteManage changes to policies and controls

COMPLIANCE WORKFLOW

Automate steps to audit IFRS compliance

Record changes to business process due to IFRS

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Single subledger transaction creates multiple accounting representations

APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS

Control changes to ERP applications

Monitor status of testing and exceptions


Agenda


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COMPLIANCE WORKFLOW



21





�Central repository for policy, risk & compliance documentation

�Alignment of processes and associated controls to IFRS standard

Documentation of policies and processes

Standard specific to IFRS

Manage IFRS Policies, Controls and RisksAlign processes to IFRS

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IFRS standard

�Easily compare US GAAP and IFRS policies and processes during transition

Assess Scope Based on Risk

Certify and Publish

Document Riskand Control

Matrix

Test Controls and AnalyzeExceptions

Remediate andOptimize

Risk and Compliance Process

Standards & Mandates


�Single system of record for risk and controls

�Document control changes to comply with IFRS

�Standards & Mandates

Risks

Controls

Risk and Control MatrixIdentify risks and record changes to controls

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�Adjust audit scope to new controls and risks

Assess Scope Based on Risk

Certify and Publish

Document Riskand Control

Matrix

Test Controls and AnalyzeExceptions

Remediate andOptimize

Risk and Compliance Process

Standards & Mandates




COMPLIANCE WORKFLOW



24





Automate and Streamline Audit Audits become crucial with the IFRS principles-base d approach

AnalyzeReceive Alerts Review Reports Investigate

Exceptions

RespondRemediate Retest Optimize

Certify

Sign-off and Publish

�By allowing a higher degree of interpretation, IFRS makes audits even more important

�Documentation, assessments,

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Document- Risk-Control Matrix of IFRS vs. GAAP

Differences- Policies and Procedures- Evidence & Records Retention

Assess

PerformSelf

Assessment

TestManualControls

ScopeAudits

MonitorAutomated

Controls

Analyze�

tests, issue tracking and remediation are evidence of reasonable judgment

�Easier sign offs over the integrity of financial reporting



COMPLIANCE WORKFLOW



26





Support of IFRS Calls for Stronger Application Cont rolsEnforce proper access in applications

• Policy Library • Conflict Paths• Policy Library • Conflict Paths

�Simplify segregation of duties enforcement with simulation and remediation

�Mitigate risk of privileged user access to enterprise applications with approval workflow and audit trails

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Detection

Access Analysis

CompensatingPolicies

Define Access

Controls

Remediation(Clean-up)

PreventiveProvisioning

Prevention

trails

�Accelerate deployment and time to value with pre-delivered controls library

Support of IFRS Calls for Stronger Application Cont rolsEnsure integrity of critical application setups

�Achieve consistent application setup and operating standards across multiple instances

�Track complete audit trails for changes to key configurations

�Tightly control change management to accelerate

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Detection

Document orCompare

Configurations

Manage Data

Integrity

Define Configuration

Controls

Monitor Configuration

Changes

EnforceChange Control

Prevention

management to accelerate development and test time

Support of IFRS Calls for Stronger Application Cont rolsIdentify inaccurate or fraudulent transactions

�Continuously monitor accuracy of transactions and mitigate exposure to fraud

•Test against thresholds

•Search for anomalies

•Perform transaction

Pre-delivered Transaction Controls

Suspect Transactions

Pre-delivered Transaction Controls

Suspect Transactions

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Detection

Perform Transaction

Analysis

Define Transaction

Controls

Review and Address Suspects

Preventive Transaction

Controls

Prevention

•Perform transaction sampling



COMPLIANCE WORKFLOW



30





�100+ pre-built KPIs for Risk, Certification, Controls, and Issues enable personalized reporting

�Self-service analysis and reporting with interactive dashboards and automated alerts

Enterprise Visibility into IFRS ComplianceTimely access to information, better decisions

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alerts

�Integrated IFRS compliance information

Configure Risk and Control

KPIs

Review GRCDashboards

Investigate Troubling

KPIs

Monitor All Open Issues

GRC Reporting & Analysis

Oracle Solutions for GRC

Purpose-built business solutions for key industries and GRC initiatives

�

Best-in-class GRC core solutions to support IFRS and other mandates

�GRC Application Controls

GRC Process Management

Risk & Control KPIs

Certification KPIs

Access Policy KPIs

GRC Reporting & Analytics

Management Assessments

Issues & Remediation

Documentation& Reporting

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Pre-integrated with Oracle applications and technology, supports heterogeneous environments

and other mandates

Custom or Legacy Applications

GRC Infrastructure Controls

SystemsMgmt

Digital Rights

Data Security

Identity Mgmt

Records & Content Mgmt

GRC Application Controls

TransactionMonitoring

SOD & Access

Application Configuration

�


Agenda


Key Takeaways

• Use the benefit of a realistic implementation timel ine –don’t wait for the pressure of mandatory deadlines

• IFRS resources are scarce – start planning and educa tion sooner rather than later

• Use the benefit of a realistic implementation timel ine –don’t wait for the pressure of mandatory deadlines

• IFRS resources are scarce – start planning and educa tion sooner rather than later

Start EarlyStart Early

• Report using IFRS principles with Oracle EPM

• Push changes into general accounting with Oracle ER P

• Report using IFRS principles with Oracle EPM

• Push changes into general accounting with Oracle ER P Leverage Leverage

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• Push changes into general accounting with Oracle ER P Financials

• Document and test IFRS controls with Oracle GRC

• Push changes into general accounting with Oracle ER P Financials

• Document and test IFRS controls with Oracle GRC

Leverage Leverage TechnologyTechnology

• Consider how to optimize your business and gain competitive advantage through IFRS

• Align your business model with the new capital mark et model

• Consider how to optimize your business and gain competitive advantage through IFRS

• Align your business model with the new capital mark et model

Optimize Optimize Your Your

BusinessBusiness

To Learn More

WebcastsWebcasts

Upcoming PwC-Oracle IFRS webcasts (Dec 2008 - March 2009) : www.meetpwc.com/OracleIFRS

In Person EventsIn Person Events

IFRS Briefings with PwC and Oracle: http://www.meetpwc.com/IFRSNorCal

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www.meetpwc.com/OracleIFRS

WhitepapersWhitepapers

Preparing US Companies for the Transition to IFRS

Managing the Transition to IFRS

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