Companies facing the coming of International Financial Reporting Standards (IFRS) can save reporting costs and have greater control if they set up a special in-house center that consolidates business processes from multiple units and locations, a consulting firm is advising.

That counsel comes in a report from Deloitte titled "The IFRS Center of Excellence," which discusses how companies can streamline and optimize their IFRS reporting activities by consolidating them into a "Center of Excellence."

A Center of Excellence (CoE), in Deloitte terminology, is a shared services organization (SSO), an in-house organization that consolidates business processes from multiple divisions, subsidiaries, or locations into one or several "shared" centers.

The company said the report aims to offer insights for companies as they move to adapt to what many see as an inevitable global shift to IFRS for better, faster and cheaper financial reporting.

Deloitte said the move to IFRS was recently hastened after the Securities and Exchange Commission announced its decision to issue a proposed "road map" for mandatory transition from GAAP accounting to IFRS.

The consulting firm said "CFOs everywhere are keeping a watchful eye on the global business community's continuing movement to IFRS and the associated implementation costs," and that the "Center of Excellence" strategy offers a method to accomplish the change.

An IFRS CoE, Deloitte said, would be responsible for preparing and distributing or filing all of a company's IFRS reports, and this activity would mirror or replace some of the activities that a company may currently perform in a "corporate reporting" function.

However, the IFRS CoE would be responsible for multiple country filings, not just the corporate office location's filings.

A company that already has a finance SSO is likely to be able to leverage its existing shared services governance and infrastructure to manage an IFRS CoE, said Deloitte.

Benefits of having such a center, the firm said are:

o A reduced headcount because an IFRS CoE could employ fewer people to do the same financial reporting work that would otherwise be done in separate countries.

o Better alignment of reporting responsibilities so highly paid senior executives do not spend time on tasks that could be performed at a more junior level.

o The larger aggregate scale of an IFRS CoE can allow a company to reduce the overall ratio of managers to staff for financial reporting activities.

o Outsourcing costs may be reduced as companies that outsource local country statutory reporting activities may find that an IFRS CoE can do the job at less cost.

o Reduce the IT costs associated with financial reporting by establishing a single platform for storage and retrieval of financial reporting data, which costs less to maintain and upgrade than multiple local-country financial platforms and databases.

Deloitte advised that by setting up an IFRS CoE in a low labor cost country labor saving can be enhanced, but the availability of skilled staff with specialized knowledge when selecting a location should trump labor cost in building any knowledge-based shared organization.

In addition to the cost-saving benefits, Deloitte said an IFRS CoE can help improve the consistency of a company's financial reporting practices by employing the same group of people to apply interpretations to the company's financial data. This, in turn, can help improve comparability and increase the usefulness of financial reports to both internal and external stakeholders.

Deloitte warned that before setting up a Center of Excellence companies should be aware that not every country allows subsidiaries of foreign companies to file statutory financial reports using IFRS standards and, because of this, a company considering setting up an IFRS CoE should take care to determine whether it currently has--or expects to have in the future--enough of a "critical mass" of IFRS reporting activities to make an IFRS CoE worthwhile.

Special Reports /

Central Unit Needed For IFRS Filings, Says Deloitte

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