Converting from generally accepted accounting principles (GAAP) to International Financial Reporting Standards (IFRS) would mean an increase in the burden throughout the telecom organization in capturing, analyzing, and reporting new data to comply with IFRS requirements, KPMG international says in a published study.

The publication, entitled Impact of IFRS: Telecoms, identifies areas in the information systems of telecom companies that may require changes upon conversion to IFRS such as new data requirements, changes to the chart of accounts, reconfiguration of existing systems, modifications to existing systems, new systems interface and mapping changes, consolidation of entities, reporting packages, and financial reporting tools.

KPMG suggests that disregarding the need for changes in these areas may lead to unnecessary costs and risks due to possible duplication of effort or changes in approach at some later time. The consultancy firm goes on to advise telecom companies to make strategic and tactical decisions relating to information systems and supporting processes early in the project to limit these risks and costs.

The foundation of the project is to understand the IFRS to local GAAP accounting differences and the effects of those differences. That initial analysis must be followed by determining the effect of those accounting gaps on internal information systems and internal controls. What telecoms must determine is which systems will need to change and translate accounting differences into technical system specifications, KPMG said.

Understanding how information flows from the source systems to the general ledger, even extending up to the consolidation and reporting systems can add to the burdens telecom companies may carry in making technical specifications, KPMG added.

Furthermore, KPMG also notes the need for parallel accounting when converting from GAAP to IFRS as in the case of SAP, Oracle, and PeopleSoft. Telecom firms can use parallel accounting, which will happen at least for one year while GAAP is officially in use while IFRS is waiting for actual implementation, to collect information in real-time through accounting source systems to the general ledger or through topside adjustments posted as an overlay to GAAP.

Source: http://inaudit.com/reports/kpmg-ifrs-compliance-increases-burden-on-telecoms-4269/