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SOCPA conversion to IFRS. Consult us, respond promptly to challenges faced in the process of convergence. www.gadlang.com Do you know where you are in the journey?
SOCPA conversion to IFRS.
Consult us, respond promptly to challenges faced in the process of convergence.
www.gadlang.com
Do you know where you are in the journey?
With SOCPA’s deadline of 2017 closing in for listed entities,
companies are starting to assess the implications of adopting the
requirements of International Financial Reporting Standards (“IFRS”). The effects still being
behind the closed doors, some business owners are uncertain
others believe it will carry a surprise factor.
Why IFRS from SOCPA?
Given that most of the countries in the world have adopted or are in process of adopting IFRS,
SOCPA decided to converge into IFRS in a phased manner
Comparability: Accounting standards bring universality to financial record keeping. Given that most of the countries in the world have adopted or in process of adopting IFRS, SOCPA decided to converge into IFRS in a phased manner. Major revision was imminent: More and more complex nature of transactions and business models meant that SOCPA had to keep updating its existing standards to cope with the rapid changes in the business world. IFRS provided a framework which continuously evolves and modifies itself to suit the current needs to the businesses.
Is it a full convergence? Comparison of standards: IFRS has many more new standards compared to SOCPA and certain modifications were made to the IFRS to ensure the standards meets the sharia and local regulatory requirements. Adoption: IFRS has been adopted in a phased manner for listed and non listed companies with certain exemptions available to some industries.
Impact of timing:
Interim Reporting Current GAAP Comparative Period
Opening Balance Sheet Previous GAAP Reporting
31 Dec 2014 Date of transition 31 Dec 2015 / 1
Jan 2016
31 Dec 2016 / 1 Jan
2017 First Interim Reporting
Date 31 Mar 2017
First Annual Reporting
date 31 Dec 2017 LISTED
Do you know where you are in the journey?
Interim Reporting Current GAAP Comparative Period
Opening Balance Sheet Previous GAAP Reporting
31 Dec 2014 Date of transition 31 Dec 2016 / 1
Jan 2017
31 Dec 2017 / 1 Jan
2018 First Interim Reporting
Date 31 Mar 2018
First Annual Reporting
date 31 Dec 2018 NON-LISTED
2015 2016 2017 2018
Awesome if you started already Most businesses are here You don’t want to be here
Enough time to: Still manageable: Better to avoid this
• Plan review and document policies
• Educate cross-functional teams
• Make process and system changes
• Upgrade existing system for automation
• Process and analyse data in various ways to see how the new rules impact the revenue
• Hastily review policies • Identify methods to capture
required data points for new and existing transactions
• May not have enough time to implement upstream system process changes
• May have to start processing new transactions under new guidance and catch up on old transactions later
• Internal and external resource constraints
• Disconnected automation or manual processing will be the only options
• Risk of delayed Q1 close • Risk of misstating revenue
Impact of timing:
The impact of IFRS is wide ranging and in addition to the presentation of the financial information it can have a direct impact on: • Credit ratings • Borrowing costs • Dividend payment policies • Performance of shares on the exchange • Key performance indicators against which management are assessed • Liquidity ratios • Taxes and Zakat calculation Understanding these changes ahead of the adoption date will allow entities to manage the impact of IFRS and adjust practices in advance to negate any adverse effects.
Impact of convergence to IFRS
Understanding the changes ahead of the adoption date will allow entities to manage the
impact of IFRS and adjust practices in advance to negate any adverse effects
IFRS Key differences between SOCPA and IFRS
PROPERTY, PLANT AND EQUIPMENT Only cost less depreciation model allowed
Two models allowed: 1) cost less accumulated depreciation and impairment losses (if any); or 2) fair values (changes in fair values are recognised in a separate revaluation reserve under equity of the entity
INVENTORIES Although weighted average is recommended but FIFO and LIFO methods are also allowed as alternative
Choice available between FIFO or weighted average cost method. LIFO is prohibited
Impairment of assets Fairly straightforward rule based assessment of gross undiscounted cashflows compared to the carrying value to compute impairment
This is a major change - Entities are required to assess at the end of each reporting period whether there is any indication of impairment. If there is an indication that an asset may be impaired, then the asset's recoverable amount is calculated – which is higher of fair value less costs of disposal or value in use.
Investment properties Only cost model allowed with disclosure of fair value allowance
IFRS allows accounting policy choice for subsequent measurement to carry investment property at either cost or fair value.
Financial Instruments General guidance available and mostly IFRS is applied to a certain extent
Detailed guidance and literature on initial recognition, subsequent measurement, derecognition and impairment. A separate standard covers disclosure requirements. IFRS 9 is also issued and will be effective in due course which will significantly alter the way financial instruments are accounted for with early adaption permitted.
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IFRS 1 transitional rules to be applied and there are a number of other large and subtle differences which need to be analysed carefully to ensure proper compliance with IFRS.
Gadlang will support entities by devising a convergence engine with a comprehensive plan so
that fully following IFRS standards in 2017/2018 is not as
challenging as a bitter pill to swallow.
IFRS What do you gain from Gadlang IFRS Expert’s Support?
Identify major differences in financial accounting and reporting between International Financial Reporting Standards (IFRS) and accounting standards generally accepted in the Kingdom of Saudi Arabia (Saudi GAAP)
Recognize the effect of the transition from Saudi GAAP to IFRS on their company’s financial statements and identify mandatory exceptions and optional exemptions from this transition
Prepare financial statements for entities adopting international financial reporting standards for the first time
Apply the different accounting methods allowed under IFRS and Saudi GAAP to multiple situations
Ensure that the existing accounting and related systems are suitable modified / upgraded to assist in compliance with IFRS
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What will be Gadlang IFRS expert’s workflow?
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IMPACT REVIEW TRANSITION IMPLEMENTATION
• Understand the environment
• Assess accounting & reporting impacts and requirements
• Assess data, systems, processes and control impacts
• Assess people and change impacts
• Conduct planning workshop and develop conversion work plan
• Train the relevant staff from procurement, IT, finance and marketing
• Present the entire process to the senior management
• Revise the contracts, policy papers, hold meetings and advisory sessions
• Present revised financial statements
• Feed flags in the system to record transactions
• Set up steering committee to make decisions in terms of accounting choices
• Review changes in the way information will be disclosed in terms of form and content and test controls
• Gap analysis for the entire process
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POST IMPLEMENTATION
• Ongoing compliance review and IFRS support including project management and training
• Ad hoc advisory assistance
• Review selected sample transactions
• Highlight potential areas of improvement in terms of IFRS compliance
How does Gadlang IFRS expertise help
achieve greater credibility?
Gadlang’s team of Chartered Accountants have bagged intensive experience in:
IFRS support, for over a decade Implementing IFRS for small, medium and large enterprises Convergence to IFRS standards or first time adoption Auditing interim reports and financial statements IFRS prep training and specialized workshops focused on standards
We speak to the user not the regulator!
Companies will be reporting their first IFRS compliant balance sheet as of 31
December 2017. As KSA moves to reduce its dependency on
oil, quality, transparent information, comparable to
other preparers of IFRS reporting, will serve to attract
direct foreign investment to the country
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