Creating an IFRS Setup in SAP Business One<\/strong><\/span><\/h2>\n<\/div><\/div><\/div><\/div><\/div><\/div>The International Financial Reporting Standards or IFRS are frameworks, interpretations, and standards needed for the presentation and preparation of financial statements of an organization that are adopted by the International Accounting Standards Board (IASB).<\/p>\n
Companies need to prepare their financial statements as per the local GAAP reporting needs as well as the IFRS regulations. SAP Business One<\/b><\/a> has enhanced features that help companies in preparing these statements. Implementing IFRS using SAP Business One assists companies in coping with the systematic demands imposed by IFRS and avoiding any unpleasant surprises.<\/p>\n<\/div><\/div><\/div><\/div>![\"IFRS](\"https:\/\/praxisinfosolutions.com\/blog\/wp-content\/uploads\/2022\/03\/IFRS-Setup-in-SAP-Business-One-600.jpg\" "\\"IFRS")
<\/span><\/div><\/div><\/div><\/div><\/div><\/div>Since IFRS adoption can bring several changes in the process and philosophy of financial reporting, companies need to have adequate knowledge about IFRS SAP implementation and what changes they should expect.<\/p>\n
How to Prepare for Financial Reporting According to the IFRS? <\/b><\/h2>\n
There are a few pre-requisites that you need to complete before you can adjust your SAP Business One application for preparing financial statements according to the IFRS. Here are a few steps that you should follow:<\/p>\n
1. Analyze the differences between the IFRS and local Generally Accepted Accounting Principles (GAAP). Some of the common differences are:<\/p>\n
a. Provisions<\/p>\n
b. Inventory valuation<\/p>\n
c. Foreign currency valuation<\/p>\n
d. Revenue and cost recognition<\/p>\n
e. Valuation and depreciation of fixed assets<\/p>\n
2. Identify the differences that are relevant to your organization.<\/p>\n
3. Try to minimize the number of differences as well as their extent as much as possible.<\/p>\n
4. Set up your internal accounting policy as it is needed to support the financial statement preparation as per the IFRS.<\/p>\n
What are the Basic Concepts of the IFRS Setup?<\/b><\/h2>\n
The IFRS can be implemented and used by your organization in the following ways:<\/p>\n
\n- Parallel postings to G\/L accounts that are specifically created.<\/li>\n
- Marking journal entries using user-defined and reference fields and in the reports selection criteria, setting the filters accordingly.<\/li>\n
- A combination of the above two methods.<\/li>\n<\/ul>\n
Parallel Accounting Systems<\/b><\/h2>\n
When the IFRS is introduced into the accounting system, it means that parallel accounting systems are also being introduced into the G\/L ledger. There can be different meanings and valuations of a transaction for local legislation and IFRS. Hence, companies must comply with IFRS-related postings as well as with local legislation by creating special G\/L accounts. In fact, a G\/L ledger should have these three types of accounts:<\/p>\n
\n- One for the local legislation<\/li>\n
- One for IFRS<\/li>\n
- One for common purposes<\/li>\n<\/ul>\n
This setup can be used to cover every possible scenario resulting from the adoption of the IFRS in the accounting system. SAP Business One will help you cover the following scenarios:<\/p>\n
\n- A transaction is made that has the same impact on the IFRS rules as well as the local legislation. In this scenario, the transaction can be submitted to the common G\/L accounts themselves. An example is a purchasing invoice for services.<\/li>\n
- A transaction is made having a different valuation for the local legislation and a different valuation for the IFRS. The transaction is posted to both the local and IFRS G\/L accounts parallelly. An example would be pension liabilities.<\/li>\n
- A transaction that is made following only the local GAAP rules or only the IFRS rules. In such a case, the transaction gets posted to only the concerned G\/L account, either local or IFRS. A specific provision is an example of such a transaction.<\/li>\n<\/ul>\n
When IFRS is being adopted, companies should consider that the main challenge would be the introduction of this parallelism in the organization’s accounting module. SAP Business One has support for parallel G\/L accounts and provides the ability to report and record the G\/L accounts and transactions in parallel.<\/p>\n
Process of Implementing the IFRS using SAP Business One<\/b><\/h2>\n
1. Create new IFRS accounts. You can also rename existing accounts if needed.<\/p>\n
2. When there is any transaction occurring in SAP Business One, it gets posted in a G\/L account. If needed, you can adjust the settings which decide on the G\/L account.<\/p>\n
3. Check the reference fields and journal entries and see if any changes are required in the predefined values or user-defined values for both fields respectively.<\/p>\n
4. If you use semi-automatic or automatic internal reconciliation, you need to decide whether the reference fields will have the matching reference parameters (semi-automatic) or matching rules (automatic). Define these settings as per requirements. Do note that these settings don\u2019t affect the IFRS directly and only affect the reconciliation process.<\/p>\n
5. The next step is to define the templates of financial reports that you\u2019d be using for the IFRS. The template generally includes a mixture of common and IFRS accounts.<\/p>\n
\u25cb If you want to include the credit and debit sides of an account apart from just the overall balance, you can go into the G\/L Account Details<\/b> window and click the checkbox Allow Multiple Linking to Financial Templates<\/b>. In the balance sheet, you can then place one side in the liabilities section while the other in the assets section.<\/p>\n
\u25cb Create the financial report templates that you\u2019ll use for the IFRS.<\/p>\n
\u25cb Go to the Account Category – Details window and change the values of the Linked and Sign<\/b> fields.<\/p>\n
\u25cb Go to Tools > Queries > System Queries > G\/L Account Location in Balance Sheet Templates<\/b> to review the accounts that are linked to the balance sheet templates.<\/p>\n
6. Now you need to decide on which G\/L accounts will be used with which reports.<\/p>\n
7. Check the user authorization of your organization as needed for the IFRS and adjust accordingly if you haven\u2019t done it already.<\/p>\n
8. Create any parallel posting required for IFRS manually.<\/p>\n
9. Create the following reports:<\/p>\n
\u25cb Profit and loss statement<\/p>\n
\u25cb Document journal<\/p>\n
\u25cb G\/L report<\/p>\n
\u25cb Balance sheet<\/p>\n
\u25cb Trial balance<\/p>\n
You need to specify the selection criteria for user-defined fields and reference fields for these reports as well.<\/p>\n
10. Next, you need to generate the financial reports for the IFRS as required by your company.<\/p>\n
11. You also need to generate the following inventory reports:<\/p>\n
\u25cb Inventory audit report<\/p>\n
\u25cb Inventory valuation simulation report<\/p>\n
\u25cb Inventory valuation method report<\/p>\n
Also Read: SAP Business One Helps In Implementing Best Practices Of Inventory Management<\/a><\/b><\/p>\nSo there you have it, the complete procedure of implementing the IFRS using SAP Business One. While you are setting up the IFRS in your organization, you must discuss with the company accountant and your partner which IFRS postings can be made manually and which postings can be done automatically. A majority of IFRS postings are currently done manually.<\/p>\n
Praxis Info Solutions<\/b><\/a> helps businesses prepare their financial statements. Praxis is an SAP-certified SAP Business One partner with more than a decade of experience in implementing this application for several companies from different industry segments.<\/p>\n\u201cIf you want to know more, please write to marketing@praxisinfosolutions.com\u201d<\/p>\n<\/div>
<\/div><\/div><\/div><\/div><\/div>Business Intelligence & Analytics<\/strong>.. Perfect enabler for insightful decision making. Call us on<\/span> +91-88050 25521\/18<\/a>\/19<\/a><\/span><\/strong><\/h3>\n<\/div><\/div><\/div><\/div><\/div><\/div><\/div><\/div><\/div>
The International Financial Reporting Standards or IFRS are frameworks, interpretations, and standards needed for the presentation and preparation of financial statements of an organization that are adopted by the International Accounting Standards Board (IASB).<\/p>\n
Companies need to prepare their financial statements as per the local GAAP reporting needs as well as the IFRS regulations. SAP Business One<\/b><\/a> has enhanced features that help companies in preparing these statements. Implementing IFRS using SAP Business One assists companies in coping with the systematic demands imposed by IFRS and avoiding any unpleasant surprises.<\/p>\n<\/div> Since IFRS adoption can bring several changes in the process and philosophy of financial reporting, companies need to have adequate knowledge about IFRS SAP implementation and what changes they should expect.<\/p>\n There are a few pre-requisites that you need to complete before you can adjust your SAP Business One application for preparing financial statements according to the IFRS. Here are a few steps that you should follow:<\/p>\n 1. Analyze the differences between the IFRS and local Generally Accepted Accounting Principles (GAAP). Some of the common differences are:<\/p>\n a. Provisions<\/p>\n b. Inventory valuation<\/p>\n c. Foreign currency valuation<\/p>\n d. Revenue and cost recognition<\/p>\n e. Valuation and depreciation of fixed assets<\/p>\n 2. Identify the differences that are relevant to your organization.<\/p>\n 3. Try to minimize the number of differences as well as their extent as much as possible.<\/p>\n 4. Set up your internal accounting policy as it is needed to support the financial statement preparation as per the IFRS.<\/p>\n The IFRS can be implemented and used by your organization in the following ways:<\/p>\n When the IFRS is introduced into the accounting system, it means that parallel accounting systems are also being introduced into the G\/L ledger. There can be different meanings and valuations of a transaction for local legislation and IFRS. Hence, companies must comply with IFRS-related postings as well as with local legislation by creating special G\/L accounts. In fact, a G\/L ledger should have these three types of accounts:<\/p>\n This setup can be used to cover every possible scenario resulting from the adoption of the IFRS in the accounting system. SAP Business One will help you cover the following scenarios:<\/p>\n When IFRS is being adopted, companies should consider that the main challenge would be the introduction of this parallelism in the organization’s accounting module. SAP Business One has support for parallel G\/L accounts and provides the ability to report and record the G\/L accounts and transactions in parallel.<\/p>\n 1. Create new IFRS accounts. You can also rename existing accounts if needed.<\/p>\n 2. When there is any transaction occurring in SAP Business One, it gets posted in a G\/L account. If needed, you can adjust the settings which decide on the G\/L account.<\/p>\n 3. Check the reference fields and journal entries and see if any changes are required in the predefined values or user-defined values for both fields respectively.<\/p>\n 4. If you use semi-automatic or automatic internal reconciliation, you need to decide whether the reference fields will have the matching reference parameters (semi-automatic) or matching rules (automatic). Define these settings as per requirements. Do note that these settings don\u2019t affect the IFRS directly and only affect the reconciliation process.<\/p>\n 5. The next step is to define the templates of financial reports that you\u2019d be using for the IFRS. The template generally includes a mixture of common and IFRS accounts.<\/p>\n \u25cb If you want to include the credit and debit sides of an account apart from just the overall balance, you can go into the G\/L Account Details<\/b> window and click the checkbox Allow Multiple Linking to Financial Templates<\/b>. In the balance sheet, you can then place one side in the liabilities section while the other in the assets section.<\/p>\n \u25cb Create the financial report templates that you\u2019ll use for the IFRS.<\/p>\n \u25cb Go to the Account Category – Details window and change the values of the Linked and Sign<\/b> fields.<\/p>\n \u25cb Go to Tools > Queries > System Queries > G\/L Account Location in Balance Sheet Templates<\/b> to review the accounts that are linked to the balance sheet templates.<\/p>\n 6. Now you need to decide on which G\/L accounts will be used with which reports.<\/p>\n 7. Check the user authorization of your organization as needed for the IFRS and adjust accordingly if you haven\u2019t done it already.<\/p>\n 8. Create any parallel posting required for IFRS manually.<\/p>\n 9. Create the following reports:<\/p>\n \u25cb Profit and loss statement<\/p>\n \u25cb Document journal<\/p>\n \u25cb G\/L report<\/p>\n \u25cb Balance sheet<\/p>\n \u25cb Trial balance<\/p>\n You need to specify the selection criteria for user-defined fields and reference fields for these reports as well.<\/p>\n 10. Next, you need to generate the financial reports for the IFRS as required by your company.<\/p>\n 11. You also need to generate the following inventory reports:<\/p>\n \u25cb Inventory audit report<\/p>\n \u25cb Inventory valuation simulation report<\/p>\n \u25cb Inventory valuation method report<\/p>\n Also Read: SAP Business One Helps In Implementing Best Practices Of Inventory Management<\/a><\/b><\/p>\n So there you have it, the complete procedure of implementing the IFRS using SAP Business One. While you are setting up the IFRS in your organization, you must discuss with the company accountant and your partner which IFRS postings can be made manually and which postings can be done automatically. A majority of IFRS postings are currently done manually.<\/p>\n Praxis Info Solutions<\/b><\/a> helps businesses prepare their financial statements. Praxis is an SAP-certified SAP Business One partner with more than a decade of experience in implementing this application for several companies from different industry segments.<\/p>\n \u201cIf you want to know more, please write to marketing@praxisinfosolutions.com\u201d<\/p>\n<\/div><\/span><\/div>How to Prepare for Financial Reporting According to the IFRS? <\/b><\/h2>\n
What are the Basic Concepts of the IFRS Setup?<\/b><\/h2>\n
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Parallel Accounting Systems<\/b><\/h2>\n
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Process of Implementing the IFRS using SAP Business One<\/b><\/h2>\n
Business Intelligence & Analytics<\/strong>.. Perfect enabler for insightful decision making. Call us on<\/span> +91-88050 25521\/18<\/a>\/19<\/a><\/span><\/strong><\/h3>\n<\/div><\/div><\/div>