Every project comes in stages of progress and costs representing human and other resources. Projects of whatever kind, particularly the larger and more com- plex, can only be completed to any degree of satisfaction ifthey are directed and controlled with specific goals in mind. This is true of both the:
● Technical content constituting the project’s work, and
● Ways in which all specialist fields are brought together to produce a satis- factory result.
Every project needs to be coordinated, starting with its goals, and adequacy of resources put in motion to reach these goals. On one side of the project’s balance sheet are benefit(s) from its execution; on the other are possible disadvantages compared to the current method. Both need to be brought in perspective.
For a multinational company, one of the major opportunities for the institution of a project connected to IFRS rules of accounting and reporting is that there will be, more or less, one single financial reporting regulation facilitating greater access to the markets. Therefore, other things being equal, there will be a lower cost of capital. Common standards should also facilitate improved communications with analysts, investors, regulators, and other users of finan- cial statements.
In regard to the IFRS project itself, advantages from a well-planned and con- trolled management effort include the fact that the conversion process will be condensed into a short, more intensive timeframe, with better control over cost and quality. The disadvantage is that there may be a certain rush to fulfil require- ments. A prerequisite to proper project management, however, is not only to assess the scope of the conversion, but to appreciate that:
● For large or complex organizations, this will be a major project
● A comprehensive evaluation of its financial impact must be made, and
● The longer the project lasts the more difficult and expensive it is likely to become, while the chances of success are lessened.
As most, if not all, of the decisions taken in advancing a project involve cost, the institution must study which sort of manageable timetable and what kind of leadership can achieve the best value for money. This relatively better method must be aimed at the analysis of:
● Implementation decisions, and
● Actions that have cost consequences.
Therefore, time, quality, and cost forecasts must be valid and accurate; it must be possible to cost alternatives so that the best one is chosen; and there must be con- sistency within the base of deliverables. There should be cost categories with a relationship to each successive stage of the project and of the functionality which it delivers.
In terms of aftermath, senior management should be aware that the introduction of IFRS will change the reported results and financial position of the company,
with the effect that the perception of stakeholders, and of the market, is likely to be affected. Moreover, conversion to IFRS will most likely have repercussions for each jurisdiction the company operates, depending on how each current accounting standard differs from IFRS and its rules. Quite likely, the greater these differences are, the more they will add to:
● Costs, and
● Human resources.
On the other hand, failure to comply with the new accounting rules and regula- tions will probably result in qualified audit reports, potentially leading to reduced shareholder confidence, poorer market perception, a lower share value, and maybe penalties applied by supervisory authorities. In short, there is really no option to implementing IFRS in the most successful manner possible.
The fact that there is no option to the method of implementing IFRS resembles the case of the Year 2000 problems (Y2K) of the late 1990s. Then, as now, poorly man- aged institutions tried to do patchwork, like windowing. By contrast, well-managed entities saw the Y2K compliance process as appropriate time to re-engineer:
● Information technology systems
● Internal management reporting, and
● Internal and external performance measures.
Both IFRS and Y2K represented an excellent opportunity to assure that financial information is obtained in the most effective way, and that any dark areas at the edges of the company’s financial reporting system – whether for procedural or IT reasons – are cleared out, and their input/output is restructured.
These advantages of course will not come of their own free will, which brings us back to discussion of the issue of project management, and its prerequisites:
planning the conversion project, studying the budgeting of costs, establishing timetables, elaborating personal responsibilities, analysing the impact of changes on accounting results and financial position, and determining how the imple- mentation strategy may become most cost-effective.
Project management should work hard in identifying any resource constraints, providing appropriate liaison with Finance, IT, Risk Management, Human Resources and other departments which must contribute to, or are affected by IFRS.
Steady communication of project progress, both internally and externally to the market, is also a ‘must’.
Another crucial requirement is that of regularly reviewing progress, including the assurance that the project is on time and to budget (more on this in section 5, when we discuss about design reviews). There is a clear need to maintain a con- tinuity of progress data. This is a requirement which marks all projects that are worth the money spent on them.
Long years of experience in project management have taught me that the best approach is to proactively identify problems, assure they are visible to all stake- holders (secrecy never pays), and show that they can be resolved quickly and effec- tively. Successful project managers plan for an integrated team approach, with:
● Well thought-out project structure
● Clearly defined individual roles and responsibilities.
A rapid implementation timetable requires detailed planning of milestones showing the status of the project and highlighting any possible roadblocks.
Another helpful tactic is the ability to identify and document degree of involve- ment in changing accounting procedures. Preferably, this should be done in a structured way which can be best described in discrete steps:
● Identification of each step’s functionality and consistence
● ‘Then’ and ‘now’ differences and similarities
● Analysis of the range and scope of what is necessary to meet defined functionality
● Synthesis of discrete tasks, and evaluation of resources necessary to com- plete those tasks
● Evaluation of feedback of project experience, to carry the work further on.
These are the general guidelines. It goes without saying that the chosen project management solution should be tailored to meet the institution’s specific re- quirements. Generalizations are hopeless. There will be many factors to be consi- dered when assessing project management requirements for IFRS conversion, depending on the size and the company, its goals and project objectives, skills available to do the job, and history of management ability to deliver:
● On budget, and
● On time.
Quality of project deliverables relates to functional requirements that must find satisfactory answers. Quality characterizing previous projects can be a guide for corrective action. Another very important consideration is whether the IFRS
project has full support of the CEO and of the board, as well as whether other members of senior management understand, appreciate, and support IFRS requirements and objectives.