ifrs ebs final

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Features in Oracle E-Business Suite for International Financial Reporting Standards

Presenter NamePresenter TitleOracle Corporation


Agenda

• IFRS Update• Planning to Adopt IFRS• IFRS – GAAP Convergence in 2011• Deep Dive into EBS and IFRS

1. Subledger Data Capture

2. IFRS Accounting

3. IFRS Financial Reporting

• Conclusions

IFRS: Around the world alreadyA common standard seems inevitable

Impact of GAAP Convergence & IFRS Take-upProposed Implementation Timeline from FASB & the SEC

2009:

2008 Roadmap To be reviewedBy December ‘09

2011:

SEC evaluates achievement of

roadmap milestones and decides whether to adopt a mandatory

approach for IFRS

2014: IFRS

Large accelerated filers begin filing in IFRS

2015: IFRS Accelerated filers to begin filing in IFRS

2016: IFRS

Non-accelerated filers begin filing in IFRS

Sources: SEC Announcement, Aug 2008; FASB and IFRS published projects

2011: Convergence

US GAAP and IFRS both plan to adopt converged and new Revenue Recognition, Lease Accounting and Financial Statement standards

2012: Convergence

US GAAP Filers file with SEC using new thenew commonRevenue Recognition,Lease Accounting &Financial Statementstandards

You arehere

SimilaritiesSimilarities

ApproachApproach(Some Examples)(Some Examples)

IFRSIFRS US US GAAPGAAP

Revenue Recognition Fair Market (e.g. AR or Inventory Valuation)

Detailed Disclosure

Segment Reporting

Chart of Accounts Not Mandated Distinction Between Tax and External Reporting

DifferencesDifferences

ApproachApproach(Some Examples)(Some Examples)

IFRSIFRS US US GAAPGAAP

Fair Market Revaluation

Fixed Assets &

Investments

Only Certain Fixed

Assets

Extraordinary Items None Rare

Consolidation Control 2 Models

Joint Ventures Proportional OK

Only Equity

“Development” Capitalized Expensed

Fixed Assets Components Unitary

Leasing Financing Cap vs. Op

Inventory No LIFO LIFO OK

Impairment 1 Step, Reversible

2 Step, No Reversal

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


Agenda



2. IFRS Accounting


• Conclusions

ProcurementProcurement

Customer &Customer &Master DataMaster DataManagementManagement

HumanHumanCapitalCapital

Supply Supply ChainChain

Data Capture:Data Capture:TopsideTopsideDetailedDetailed

Re-ConfigureRe-Configureby locationby locationby processby process

CountryCountryCompliance:Compliance:

USAUSA30 non IFRS30 non IFRS

60 IFRS60 IFRSBusinessBusiness

ModelModelChangesChanges

SEC Filing:SEC Filing:ConvergeConverge

Adopt Adopt

AccountingAccountingChangesChanges

IFRSEPM, ERP

& GRCProcess

Dimensions to an IFRS Plan

ProcurementProcurement

Customer &Customer &Master DataMaster DataManagementManagement

HumanHumanCapitalCapital

Supply Supply ChainChain

Data CaptureData CaptureTopsideTopsideDetailedDetailed

Re-ConfigureRe-Configureby locationby locationby processby process

CountryCountryCompliance:Compliance:

USAUSA30 non IFRS30 non IFRS

60 IFRS60 IFRSBusinessBusiness

ModelModelChangesChanges

SEC FilingSEC FilingConvergeConverge

Adopt Adopt IFRSEPM ERP

& GRCProcess

AccountingAccountingChangesChanges

Dimensions to an IFRS Plan

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

Determine impact on accounting in

subsystems

Configure accounting rules

and set up ledgers

Process and report using dual

accounting

Milestone 3Transactions Recorded

in Multiple GAAPs

Stage 3Stage 3

Record Record Transactions Transactions

in both GAAPSin both GAAPS

Milestone 1Completed Preliminary

Study

Stage 1Stage 1

Study Impact & Study Impact & Determine StrategyDetermine Strategy

Perform Preliminary

Study

Assess Impact

Determine Strategy

Determine changes to

business model

Transform operations using

IFRS results

Report IFRS results, increase

shareholder value

Stage 4Stage 4

Transform Transform Your Business Your Business

& Win with & Win with IFRSIFRS

Milestone 4Business Model

Optimized

Collect GAAP financial results

Adjust and consolidate under

GAAP & IFRS

Report, reconcile and audit results

Milestone 2IFRS Reports Produced

Stage 2Stage 2

Enable Top Enable Top End ReportsEnd Reports

Your Convergence & IFRS Action PlanAchieve “early mover” Advantage


Agenda



2. IFRS Accounting


• Conclusions

• Joint FASB-IASB project impacting ERP Systems• Currently undergoing development & “General Acceptance”

– Replaces “Revenue Recognition” with “Performance Obligation?– Proposing 2 Revenue Lines on Income Statement?

• We are monitoring, will wait for final standards

Now Public GAProcess

US GAAP2011/2

IFRS 2014No further change?US GAAP:US GAAP:

Detailed GuidanceDetailed GuidanceVSOE, etc.VSOE, etc.

IFRS:IFRS:

General GuidanceGeneral GuidanceIAS 18IAS 18

Converged:

Performance Obligation?

Converged:

Performance Obligation?

RevenueRecognition

GAAP-IFRS Convergence, 2011: Revenue Recognition - Not yet finalized as a standard


– “Operating Leases” to go away?



US GAAP2011/2


Detailed GuidanceDetailed GuidanceCap. Vs. OperatingCap. Vs. Operating

IFRS:IFRS:

General GuidanceGeneral GuidanceIAS 17IAS 17

Converged:

Gross up theBalance Sheet?

Converged:

Gross up theBalance Sheet?

LeaseAccounting

GAAP-IFRS Convergence, 2011: Lease Accounting - Not yet finalized as a standard


– Moving the page break between the income statement and equity



US GAAP2011/2


Certain expenses Certain expenses reported in equityreported in equity

IFRS:IFRS:

Different expenses Different expenses reported in equityreported in equity

Converged:

No or some expenses reported

in equity?

Converged:

No or some expenses reported

in equity?

LeaseAccounting

GAAP-IFRS Convergence, 2011: Financial Statements - Not yet finalized as a standard


Agenda



2. IFRS Accounting


• Conclusions

Oracle’s History with the IASB

• Monitoring IFRS standards since 2000• Active member of IASB “IT Company Discussion Group”– Attend the Standards Advisory Council (SAC) meeting three

times a year– Provide input on practicality– Get a heads up on features needed

• National domain experts monitor Local GAAP

International Accounting Standards

Board®

Customers Using IFRS in ERP

• E-Business Suite– Emirates Airlines (since 2001)– Hilton Hotels PLC– Michelin– Reuters (since 2002)– Societe National De Chemin De Fer Francais– Westpac

• PeopleSoft– AXA International– Carrefour– European Bank of Investment – John Lewis PLC– Societe Generale

• JD Edwards– Chevron– Juken New Zealand Ltd– LaFarge– Pernod Ricard

Supporting IFRS since Release Xe for E1 and Release A7.3 for World

Supporting IFRS since Release 8.4

Supporting IFRS since Release 10.7

Stage 2Stage 2

Enable Top End Enable Top End ReportsReports

Stage 3Stage 3

Record Record Transactions Transactions

in both GAAPSin both GAAPS

Stage 1Stage 1

Study Impact & Study Impact & Determine StrategyDetermine Strategy

Stage 4Stage 4

Transform Transform Your Business Your Business

& Win with & Win with IFRSIFRS

Oracle Enterprise Performance ManagementOracle Enterprise Performance Management

Oracle ERP Financials

Oracle ERP Financials

Other ERP FinancialsOther ERP Financials

Oracle Industry Specific

Applications

Oracle Industry Specific

Applications

Oracle Governance, Risk, & Compliance SuiteOracle Governance, Risk, & Compliance Suite

Custom, Legacy,

Competitor

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

Oracle Enables Key Stages in IFRS Action Plan

IAS/IFRS SUPPORT SINCE 2000Thousands of customers overseas

reporting under IFRS

SPECIFIC IFRS FEATURESSpecific functionality developed for IFRS

IFRS MIGRATION PATHMultiple Ledgers or Multi-GAAP

IAS 2 Inventory Inventory, Costing

IAS 16 Property, Plant FA, ALM

IAS 18 Revenue Rec. OM, AR, BI, CA

IAS 21 Currency Multibook, MRC,GL

More…

Segments, etc.…

Flex / ChartFields…

• Asset Componentization Parent & Child Assets Child Depreciation rates differ

• Impairment Processing Impairment identification Unplanned depreciation

Ledger Set:

DifferencesDifferences

Expanded COAExpanded COA

CalendarCalendar

USDUSD

US PrinciplesExpanded COACalendarUSD

DUAL GAAP ACCOUNTING

GAAP

ERP Products Designed for IFRSE-Business Suite

Approaching IFRS Compliance in ERPExample: IAS 21, Foreign Currency

• IAS 21 Summary (Converged with FAS 52)– Two routes from local accounting to shareholder currency:

“remeasurement” @ historic rates, “translation” @ current rates– Depending on the company’s circumstances and IAS 21 tests

• Product Support– R12 “Reporting Currencies” and “Revaluation” together designed to do both

IAS 21 and FAS 52 Remeasurement and Translation– The company chooses, at each overseas location:

• Transaction Level, if they need to manage the detail in home currency• GL Activity Level, if they populate a “fat GL” or analytic cube• GL Balance level, for a traditional statement oriented approach

– HFM also includes IAS 21 and FAS 52 capability

That is: 8 IFRS Compliant options at each location There are many ways to comply with IFRS in all product areas


Agenda



2. IFRS Accounting


• Conclusions

Relevant IAS & IFRSPrinciples

•IAS 02 Inventories•IAS 11 Construction Projects•IAS 16 PP&E•IAS 17 Leases•IAS 18 Revenue•IAS 19 Employee Benefits•IAS 23 Borrowing Costs•IAS 41 Agriculture•IAS 32 & 39, IFRS 07 & 09 Financial Instruments•IFRS 04 Insurance Contracts

• Product Support Standard Features in EBS

GL & Subledgers• Specific features in sub

ledgers and industry offerings– Inventory

– Receivables

– Assets

– Projects, HCM, et cetera

• General support through the data model and with features like Subledger Accounting

IFRS Standards that require transaction level data tracking either in generic ERP or in Industry Specific products

1: IFRS Sub-ledger Data Capture in EBS

24

Key IFRS-GAAP Differences E-Business Suite Approach

Inventory Costing

• U.S. GAAP - Allowable costing methods include LIFO, FIFO and Average Cost

• IFRS - LIFO not allowed

Inventory Valuation

• U.S. GAAP - Inventory is valued at the lower of cost or market, and cannot be written up at a subsequent date

• IFRS - Inventory is valued at the lower of cost or net realizable value; if the net realizable value of an item that has been written down increases subsequently, then the write-down is reversed under IFRS

SCM products like Oracle Inventory handle Inventory, Costing

They do all the IFRS optionsActual with flavors: landed, period actual, etc.

Standard with flavors: process, BOM, semiconductors

And variances to actual

Rev dates & Inventory AgingReconfigure LIFO to standard or actual

Use a second IO for dual costing

Copyright (c) 2007, Oracle and/or its affiliates. All rights reserved.

InventoriesIAS 02

25


• U.S. GAAP - Component accounting is permitted; usually assets are depreciated as a whole

• IFRS - Component accounting is required

Assets Componentized assets with different

useful lives• Parent Child features• Grouping Features

API to import the real estate & assessor’s valuations

Asset revaluation


Asset ComponentizationIAS 16


Agenda



2. IFRS Accounting


• Conclusions

2: Corporate Accounting for IFRS in EBS

Relevant IAS & IFRS Principles

•IAS 10 Post balance sheet •IAS 20 Government Grants•IAS 21 Foreign Currency•IAS 29 Hyperinflation•IAS 36 Impairment•IAS 37 Provisions, Contingent•IAS 38 Intangibles•IAS 40 Investment Property•IFRS 01 First Time Adoption•IFRS 05 Discont’d, For Sale•IFRS 06 Mineral resources•IFRS 08 Operating segments

• Product Support In EPM

• Model corporate adjustments

Standard Features in EBS GL & Subledgers• Flexfields, segments and other

chart of accounts features

• Reporting Currencies & Revaluation for translation or remeasurement

• Multiple Ledgers

• Centralized Accounting Engine (SLA)

Specifies the handling of major transactions & situations: work done by CPAs in General Ledger or in Consolidation products

28


Development Costs

• U.S. GAAP - Development costs are generally expensed as incurred

• IFRS - Development costs (directly attributable expenditure) are capitalized when certain criteria are met

GL and Projects features deploy for Capitalized Development

GL Cost Centers with Balance Sheet accounts capture the costs

Allocate to P&L when time to release

or

Project Accounting stores Projects on the Balance Sheet

Release to P&L via BOM & inventory

• Integration with costing

Direct release to P&L via Project Accounting

Project Time & Costs features


Intangible AssetsIAS 38

29


Identifying Operating Segments

• US GAAP – Segments are based on actual Management Reporting. Excludes intangible assets

• IFRS – Operating segments are identified by Risk and Reward. Includes intangible assets

General and Sub Ledger

Use our very flexible chart of accounts design to tracks and identify different operating segments

Reporting features like FSG with BI Publisher


Operating SegmentsIFRS 08

30


Impairment, specifically Fixed Assets

• U.S. GAAP • Based on fair value • non-reversible

• IFRS• Based on the recoverable amount (the

higher of the asset's value-in-use and fair value less costs to sell)

• Reversible

Assets API to accumulate and contrast

recoverable values API processes losses automatically and

executes all immediate and long-term accounting

Automated comparison & impairment accounting:

Automatically process the losses Automatically execute all the immediate

and long-term accounting


ImpairmentIAS 36


Agenda



2. IFRS Accounting


• Conclusions

3: IFRS Financial Statement Preparation in EBS

Relevant IAS & IFRS Principles

• IAS 01 Financial statements • IAS 27 Consolidate / Separate• IAS 28 Associates• IAS 31 Joint Ventures• IAS 33 Interims• IAS 34 EPS• IAS 07 Cash Flow Statements• IFRS 01 First Time Adoption• IFRS 03 Business Combin’tns• SEC IFRS Regulations under

discussion

• Product Support In EPM

• Hyperion Financial Management

• E-Business Suite OFA

Standard Features EBS GL & Subledgers• E-Business Suite General

Ledger

– Consolidation features like GCS

– Reporting features like FSG with BI Publisher

– Multiple Ledgers & Ledger Sets

Defines what’s included on Financial Statements, and how they should be presented; work done by CPAs in EPM or

GL

33

Key GAAP–IFRS Differences E-Business Suite Approach

IFRS and GAAP Determine Functional Currency using different emphasis

•US GAAP – Cash Flow Based

•IFRS – Factors based with more emphasis on pricing factors.

•Both FAS 52 and IAS 21 specify:

• Remeasurement (Historic Rate Conversion) from Accounting to Functional Currency,

• and Translation (Current Rate Conversion) from Functional to Reporting Currency.

General and Sub Ledgers

Reporting Currencies and Revaluation work together to provide both Remeasurement or Translation

Chose the level of detail per your business needs:

• Subledger Transaction Level

• General Ledger Activity Level

• General Ledger Balance Level

Can also be done in HFM


Foreign CurrencyIAS 21

Dual Reporting periodBase Reporting per US GAAP

Preparing 2 years comparativesfor 2015 reporting

IFRS primary GAAP

IFRS adoption year(annual 10K)

(8Qs: US GAAP?)

January 1, 2013

Transition dateOpening

balance sheet

December 31, 2016

1st annual IFRSFinancialStatements

20122012

Amended from © 2008 PricewaterhouseCoopers LLP

20132013 20142014US GAAP for Q1, Q2, Q3

IFRS for all 2015IFRS for all 2015January 1, 2015

Adoption dateGo liveUS GAAP

IFRS

Companies are still “US GAAP” structured businesses until cut-over day, but must value the results using IFRS principles in preparation for thetwo year comparatives they must file with their first IFRS statements.

After the cut-over, they will optimize to the IFRS principles

2012 Convergence:Rev. Rec., Leases

Financial Statements

Legend

20112011

Financial Statements - Dual GAAP ReportingIFRS 01 Adoption, Proposed SEC Regulations

Approaching Dual GAAP ReportingIAS 01 Financial Statements, IAS 27 Consolidate or Separate, IFRS 01, Adoption

• Depends on the customer’s circumstances vis-à-vis IFRS & US GAAP– Top Down approach in EPM Products– Bottom Up approach in ERP Products

• EPM Solutions– Ask if the legacy supports the IFRS functionality in Hyperion– Specific IFRS Dimensionality, IFRS rules engine, etc.– See our EPM show!

• ERP Solutions– EBS: SLA, Ledgers, Multiple Ledgers, Ledger Sets– PeopleSoft: Book Code, Multiple Ledgers, Multi-Book– JDE: Multiple Ledger Types

Dual Reporting System Strategies

Yo

ur IF

RS

Situ

atio

n

System Choices

1 GL Onlyminor differences

GL & Adjustingeasy reconciliation

2 Distinct GLsover 50% different

New GLMajor difference

Re-implementNew ballgame

Structured for GAAP, not IFRS

IFRS facilitates WW system stratification

Many IFRS:US GAAP differences

Limited IFRS:US GAAP differences

GL for National or Regulatory compliance

Valuation different in IFRS

Complexity

Typical Considerations

System Choices:From “Top-down” through Multi-GAAP ledgers and subledger reconfiguration, to the possibility of a do-over

= Companies migrating

HFM OnlyNon sub-ledger

Balancing SegmentValue example: 99

• Semi-Automatic Adjustment

• Adjustment from general ledger balances

• Recurring and Reversing Adjustment

All other segments Ledger Total

Other R11 Multiple

Compliance Tools

• AX, the Accounting Engine

• MRC Ledgers at FX rate = 1

• GCS Ledgers

Release 11i Dual Reporting exampleRelease 11 : Balancing Segment

Release 12 Dual Reporting : What’s different to 11iRelease 12: Subledger Accounting, Multiple Ledgers, Ledger Sets

SubledgSubledger er

AccountiAccountingng

SubledgSubledger er

AccountiAccountingng

DrDr CrCr

Operating UnitOperating UnitOperating UnitOperating Unit

Can choose to use:• A (full) Secondary Ledger• Complete alternative accounting

or • An Adjusting Ledger, (or Segment)

• Automatic business reconciliation• Fewer adjusting entries• Easier feed to Hyperion

Can choose to use:• A (full) Secondary Ledger• Complete alternative accounting

or • An Adjusting Ledger, (or Segment)

• Automatic business reconciliation• Fewer adjusting entries• Easier feed to Hyperion

Account Balance Debit Credit US GAAPDevelopment Expense 500,000 1,500 501,500 Employee Payables (100,000) 1,500 (101,500)

Adjusting Ledger AdjustmentCapitalized Development 500,000 1,500 501,500 Development Expense (500,000) 1,500 (501,500)

Ledger Set IFRSDevelopment Expense - 1,500 1,500 - Employee Payables (100,000) - 1,500 (101,500) Capitalized Deveopment 500,000 1,500 - 501,500

Primary Ledger

US PrinciplesExpanded COA

CalendarUSD

DifferencesDifferencesExpanded COAExpanded COA

CalendarCalendarUSDUSD

Ledger Set:

GAAP

AccountingAccounting

PrimaryPrimaryPrimaryPrimary AdjustingAdjustingAdjustingAdjusting

Release 12 Dual Reporting ExampleRelease 12 : Adjusting Ledger in a Ledger Set

Adjusting Ledger• Automatic Adjustment • From subledger data• SLA Driven

Adjustments

Base Ledger Total Ledger Set Total

Ledger SetLedger 1 = BaseLedger 2 = Adjusting

Endgame: Adopting IFRS, walking away from GAAPA Function of your Dual Reporting Choices

1. Many subsidiaries will retain GL and subsystems in compliance with either• Statutory requirements (foreign subsidiaries)

• Regulatory legislation (utilities, financial services, etc.)

2. Some will find that their existing GL is quite appropriate, but that they have a few subsystem areas that will require adjustment

3. Others will require that they need to do something more substantial, for example restructuring their business, up to the point of reimplementing

Hyperion

ERP GL Multi-GAAP Features

ERP Subledgers

DifferencesDifferencesExpanded COAExpanded COACalendarCalendarUSDUSD

IFRS PrinciplesIFRS PrinciplesExpanded COAExpanded COACalendarCalendarUSDUSD

Ledger Set :

US PrinciplesUS PrinciplesExpanded COAExpanded COACalendarCalendarUSDUSD

GAAP

DifferencesDifferencesExpanded COAExpanded COACalendarCalendarUSDUSD

Ledger Set:

You are a US GAAP company with IFRS comparatives

You are an IFRS company with US GAAP history

GAAP

• Update Primary ledger with TB from Adjusting ledger so it ties to IFRS

• Complete subsystem configuration adjustments

AdjustingAdjustingPrimaryPrimary

AdjustingAdjustingPrimaryPrimary Optional:

drop when no longer needed

Dual Reporting Period IFRS from now on Period

Endgame: Adopting IFRS, walking away from GAAP

An IFRS Migration Path


Agenda



2. IFRS Accounting


• Conclusions

Summary : EBS is designed for IFRS

• Thousand of EMEA & APAC Customers using EBS for IFRS today, since 2005• IFRS Compliance built into our Strategic practice• Many regular “external reporting” features are IFRS

configurable – and you may need to reconfigure• Special IFRS features are in the products• Migrations process fits your situation– Can do on Release 11, automated transactions in Release 12

– Configurations for easy, typical, & difficult reporting cases

• EBS is ready for IFRS now. So are HFM and GRC.

IFRS Change Potential for Business Transformation

IFRS OK for SEC and for 60+ countries’ statutories

• Improve dramatically your reporting process, consistency, and management vision

• Consider instance, ledger, data consolidation

• Consider shared service accounting & reporting centers

IFRS book leases as liabilities

• Consider buying that fleet of planes you use

• Evolve your leasing revenue business to an equipment sales business

Capitalize R&D • Move those 2009 Development expenses to the Balance Sheet – recognize in P&L, matched to Revenue, in 2010- 2011

Transform Your Business with IFRS Going Beyond Compliance

Companies are required to retrospectively apply IFRS to all periods presented as if they had always been in effect.

Cumulative Reporting Requirements

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

Don’t Know 9%

Within 3 years55%

Within 7 years

8%

Within 5 years26%

Growing awareness of complex requirements…

…drives preference for early planning and assessment

Sources: European Financial Reporting Research Group; Deloitte Touche Tomatsu

More than 7 years

2%

““ 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

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

Source: Deloitte, 2007

Impact on US CompaniesThe Value of Starting Early

Key Takeaways

To Learn More

Oracle Financials Product Marketing BlogOracle Financials Product Marketing Blog

Oracle Financials Product Marketing Blog: http://www.blogs.oracle.com/FinancialsMkting/

Oracle IFRS page (White Papers, News, Events)Oracle IFRS page (White Papers, News, Events)

IFRS Page on Oracle.com:

http://www.oracle.com/applications/ifrs/index.html

Oracle EBS IFRS WhitepaperOracle EBS IFRS Whitepaper

Oracle E-Business Suite IFRS Whitepaper:

http://www.oracle.com/applications/financials/preparing-us-companies-for-the-transition-to-ifrs-white-paper.pdf

ifrs ebs final

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