A Catalyst For Improvement: The IFRS Center of Excellence
To help kick-start the transition to International Financial Reporting Standards, companies can set up an IFRS center of excellence — which can also drive cost reduction, help improve internal reporting processes, and serve as a governance body after IFRS adoption.
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Beyond the specific benefits it can deliver to internal financial management, an IFRS center of excellence can also help companies strengthen internal controls over financial information by consolidating data and processes that were formerly performed by separate subsidiaries. A company can leverage center of excellence-enabled improvements to its internal control environment to drive value in at least three areas:
Cost Reduction • By eliminating duplicative financial processes and associated controls in multiple local subsidiaries, an IFRS center of excellence can help make internal controls not only more reliable but also more cost-effective.
Reduced Risk • Improvements in the internal control environment can help reduce the risk of material weaknesses. For example, some companies experience challenges in tax reporting and planning due to internal control weaknesses in the identification and management of financial information. A center of excellence could implement controls to flag nonroutine events, such as issues related to acquisitions or divestitures, on an enterprisewide basis, which would then alert the tax department to issues that may call for closer investigation.
Greater Business Agility • A center of excellence's vigilance for unusual events can also help alert business leaders to issues that might warrant action on their part. For example, a change in IFRS or local reporting standards that affects the characterization of an instrument as debt or equity may have consequences for both tax and treasury planning. Such a change could potentially affect debt covenants, the tax consequences of a particular financial instrument, or the financial statement impact of such an instrument. Timely notice of such events can help a company plan around them to mitigate any detrimental consequences.
