Importance of Defined IFRS Inclusions into ERP Analytics

Syamantak Saha

In the old days, there were no global accounting standards. In jurisdictions such as India, Australia and US, we had to understand the business requirements from a completely ground-up perspective, with each Site, having its own implementation of such standards. The standards, as still are today, are a view of the companies business operation as per the prescribed regulations that maybe applied. Further, accounting standards were often made for small, medium and large enterprises as per the requirements and economy of each considered jurisdiction.

This provided a particular challenge for an out-of-the-box ERP solution such as Oracle. Often, what is true today, becomes false tomorrow, due to the changing business environment and a largely non-standardized set of accounting standards. This meant, that when a previous accounting standard was interpreted using a particular activity of the business, due to a now changed circumstances, including business practices and regulations, a large amount of effort that had been put into implementing a solution, including any customizations, became a high-risk data output. This is not really a fault finding game, as neither the project team, nor higher management may have expected some such outcomes, that may well be differentiated in a Zero-Based accounting standards and data solution.

Also, with an increasing amount of data being generated, finding a meaningful answer from this data became gradually difficult. I remember once, that a Decision-Champion of a Site, had to injest about 1 Terabyte of processed data, that were previously a few spreadsheets, to make the same business decision, after implementing an ERP solution. Increasingly, the data-risk inherited by such Decision-Champion, has to be assured by some inbuilt features that provides some standard assumptions. For the Decision-Champion to use any human-based effort to collect, assess and assure based on such Terabytes of data, became unreasonable, especially with the growing amount of data, looking forward to become even more in the future.

So, a balanced solution approach, given the high risk of increasing amount of data, has indeed become a positional requirement for ERP products. It vastly reduces a product usability, when Decision-Champions, taking some amount of data from the ERP system and then using a different Accounting Software derives the Balance Sheet, PL Statements and so on. This would really make a sophisticated ERP like Oracle, a repository of unused and unclaimed data. It is indeed a mission of Oracle to provide a full, fair and end-to-end financial accounting solution, where the Decision-Champion does not have to further process or use any other software at all. The system design of existing ERP models, that were mainly based on global accounting practices in the 1980's became therefore, no longer practically applicable, in an all-encompassing and open ended ERP data model - as the volume of data that it would generate becomes humanly incomprehensible.

Indeed, the IFRS Standards were to a large extent developed from such Data consistency issues, as were found during computerization of financial accounting. I remember that in the year 2000, when I had approached a client for installing ERP system for their business, I was told that they would never computerize their systems, because although a large company, but their accounting practices were as per any ordinary small business, and using pen, paper and books of journal. Today, this could not be true, as the force of digitalization is higher and stronger than the Small-Grounding strategy of any business anywhere in the world. Here, IFRS was formed as an answer and a blessing for computerization, and as a practical alternative to any assumed inference based on a few terabytes of data. Companies, who want to compete at a local and a global stage, can now do so with standardized financial accounting. A core objective of IFRS is to be able to provide a set of accounting standards, that can be used by businesses to provide comparable statements, including across jurisdictions. It is like AI, but more exciting for financial accounting! A business can now think that when IFRS is implemented at their Site, they are already ready and capable to expand their business anywhere in the world. The associated financial benefits are immense, for individual businesses and growth of the global economy.

Enough said on this post - this first part was to introduce and provide a background information on the question of development and application of IFRS to Oracle. In further posts, I envisage to provide particular aspects of IFRS that should be applied into the System Solution and beneficial for Clients. Till then, please do think about and discover any accounting practices that you have noticed that is not possible to be adopted into computerization.

Would this not inevitably, lead to an accounting standard violation, be-friending both an ERP system data analytics and IFRS standards?

Cheers!

Syamantak Saha