CaseWare enables clients to benefit from new IFRS 9 and 15 standards
Two important standards issued by the International Accounting Standards Board (IASB), IFRS 9 and 15, come into effect this year. Jannie Marais, Product Manager at Adapt IT, says both have considerable benefits to offer, but could be challenging for organisations to implement.
"CaseWare, as always, has put its team of developers to work in order to integrate the new standards into our automated processes," he says. "That means that clients can comply with both standards with minimum effort, and realise the substantial benefits that each has to offer."
Although both standards were available in 2014, they only became mandatory for annual periods beginning on or after 1 January 2018.
IFRS 9 addresses accounting for financial instruments. Its final version is essentially the IASB's response to the 2008 financial crisis. It revises accounting standards for financial instruments whose apparent deficiencies seem to have contributed to the scale of the crisis. A key reform wanted by the IASB was a logical model for classification and measurement of financial instruments using a single, forward-looking "expected loss" impairment model. It also wanted to reform hedge accounting substantially.
The standard will confer a number of benefits, including reduced profit and loss volatility. IFRS 9 will also offer an enhanced risk management toolbox that reflects more accurately how an entity manages risk; that considers time value as a cost of hedging and treats it as a separate element of equity; and that better aligns hedge accounting and risk management strategies.
IFRS 15 is intended to provide guidance on how to account for revenue from contracts with customers. Among its many advantages is that it will provide a single global standard for recognising revenue. Although the United States has not adopted IFRS, this standard goes some way towards standardising with US GAAP. This is expected to facilitate global investing and borrowing, and generally support a more efficient global financial system.
In addition, IFRS 15 will improve the consistency of reporting across financial statements for multinationals, and will also make budgeting, planning and performance management more effective.
"Recognising revenue across multiple jurisdictions is always going to be an extremely complex business, but once companies have implemented IFRS 15, it will make things easier for them," says Marais. "For CaseWare clients, transitioning to IFRS 15 and then using it will be that much simpler, and the benefits will be realised more quickly."