Every project needs to be established on a firm basis – and that means elaborat- ing a plan beyond setting goals, identifying problems and resolving the most pressing issues. Project management should, from the outset, track all matters needing attention, resources needed to concentrate on them, as well as type and
frequency of controls. This means making transparent the status of all issues, maintaining a history of whatthey were, howthey have been approached, and howthey have been resolved.
● Management and technical issues need to be openly discussed in search of a solution
● After a solution is found, the issues that were in question must be closed so that implementation begins.
As with every project a crucial query is: ‘Whereto start?’ The approach widely followed, and one which sounds reasonable enough, is ‘at the beginning’. As far as project planning is concerned, that’s wrong! A much better method for project planningis to start at the end – the final deliverables, the goal we want to reach.
This approach has been developed by Jean Monnet, former banker and father of the European Union. What Monnet did was to divide project planningfrom proj- ect execution. As shown in Figure 6.2:
● Planning should start at the final milestone, and move milestone-by- milestone towards the beginning.
● Execution, by contrast, follows the normal path from beginning to end of the project, again milestone-by-milestone.
PLANNING
EXECUTION
TIME
FINAL MILESTONE
SECOND MILESTONE
FIRST MILESTONE
FINAL MILESTONE AND INTERMEDIATE RESULTS
Figure 6.2 Backwards simulation of a plan designed to meet specific objectives
This is essentially a backwards simulation of goals, resources, costs, time sched- ules, and quality of deliverables. Since project management is confronted with so many challenges, it should definitely benefit from proper methodology. That is why I suggest the Monnet method. Whether the IFRS implementation is done fully in-house or it is partly outsourced, the best way to plan is to start, not at the beginning, but at the end of it.
The backwards simulation of an execution plan is designed to meet not only budg- etary requirements but also human factors, which are dominating the successful completion of projects. Emphasis is placed on end results. Behind this inverse walk- through, which starts at the projected end of the project, lies the fact that very often project managers do not put on the table all the necessary resources, including those to be kept as reserves. The backwards walk-through will make evident whether:
● The project’s scope has been ill-defined
● The project lacks people with appropriate skills
● The chosen technology is substandard
● The project’s progress is managed poorly
● Managers ignore best practices and lessons learned
● Users are resistant to change, and
● Top management sponsorship is lost from sight.
Mid-way fire brigade approaches do not help. Fred Brooks has been the Project 360coordinator and right hand of Thomas Watson Jr, IBM’s CEO in the 1960s. In his excellent book The Mythical Man-Month, Brooks conveys an important mes- sage which can be summed up in a short sentence: ‘Nine women will not make a baby in one month.’
Starting the planning process at the last milestone is a technical methodology which helps to assure that the company’s accounting system will be converted to IFRS in a disciplined, consistent, and comprehensive manner. It is also a pro- cedure that allows high-level impact assessment of differences between current accounting and IFRS, including disclosure requirements. A key advantage of such ‘end results’ assessment is that in the execution phase it will act as an ini- tial project scoping step because of having identified the major accounting areas that will be impacted. Such a focus can be of significant assistance to IFRS accounts conversion, because it permits a better understanding of the changes necessary in accounting policies and procedures.
Talking from the viewpoint of personal experience with a good number of big projects, the backward simulation method has demonstrated that moving in this
way corrects many of the ills that may otherwise exist in a crucial changeover, because it:
● Obliges people to think in terms of intermediate goals and resources needed to meet them, and
● Makes it mandatory to conduct design reviews at pre-identified mile- stones, after the project starts and goes forward (more on this in section 5).
Also at planning stage, both senior management and project management need to consider the IFRS options, and then agree and approve new policies that will be adopted. The role of the task force (see Chapter 7) cannot be emphasized in better terms. It is important to recognize that, in addition to deciding what these new accounting policies will be, the company should evaluate the present accounting policies to determine whether the current approach should be:
● Simply modified, or
● Thoroughly revamped.
By means of an integrative plan for IFRS implementation, Figure 6.3 brings all of the notions presented in the preceding paragraphs into perspective. First it iden- tifies eight channels which will be co-involved in the IFRS effort. While four of them have to do with accounting and auditing (including hedge accounting), the scope of the other four ranges from business requirements to risk management.
Each of these eight channels is an integral part of IFRS implementation – as a contributor to it, or because of being affected by it. Also, each of these channels has lots of preliminary work to do. Completion of this preliminary work should be followed by the first major design review which:
● Approves, rejects, or asks for changes.
● In short, if it approves, it puts the project on its tracks.
After all eight channels concerned with the design review (see section 5), as well as top management, have approved the development project and agreed on IFRS accounting policies and practices up to that point, the required work by channel, in terms of conversion work, starts. All issues of interdependencies such as impact on other financial areas, systems solutions, subsidiary reporting, and so on, should be squarely faced.
Throughout the project, many issues will need to be identified and resolved.
Training is the cornerstone, and the same is true of the design of IFRS financial statements to be produced after conversion. This should be made a priori, to assure all necessary information will be reported in compliance with IFRS. A
IFRS, Fair Value and Corporate Governance INTERDEPARTMENTAL
COORDINATION TECHNOLOGY &
SYSTEM REVIEW PRE-IMPLEMENTATION
IDENTIFICATION INITIAL
REVIEW INITIAL REVIEW INITIAL REVIEW
FULLY ON-LINE SUPPORT NEW HW & SW
IAS 39 DEEP STUDY
TRAINING IN NEW RULES
GUIDELINES
AUDITING CHANGES TRAINING IN NEW REPORTING
INTEGRATION OF NEW MODULES
NEW RULES CONVERSION
TO IFRS NEW RULES
NEW RULES COMPARATIVE
STUDIES
PROBLEM RESOLUTION, DATAMINING STEADY MONITORING
OF DELIVERABLES SYSTEM
TEST AS 39 & OTHER
PROCEDURES THOROUGH
TESTING PRACTICAL APPLICATIONS
AUDIT OF DELIVERABLES
NEW IAMIS PARALLEL USE DOCUMENTATION
AND MONITORING BUSINESS REQUIREMENTS INFORMATION TECHNOLOGY RISK
MANAGEMENT GENERAL ACCOUNTING HEDGE ACCOUNTING MANAGEMENT ACCOUNTING
FIRST MAJOR DESIGN REVIEW LAUNCH OF IMPLEMENTATION PROJECT LAST MAJOR DESIGN REVIEW ACCEPTANCE OF NEW SYSTEM
ACCOUNTING COORDINATION
TIME INTEGRATIVE
STUDY REQUIREMENTS
DATABASES, EXPERT SYSTEMS
Figure 6.3 Project management planning for IFRS implementation
brief description of IFRS conversion steps is shown in Box 6.1. All the issues that arise should be identified and resolved in a timely and definite manner.