The Challenge of Multi-GAAP

Oracle Day – FERNBACH Presents:
The Challenge of Multi-GAAP

A review of the paper presented by Paul Rothenberger, Managing Director of FERNBACH-Software GmbH, at Oracle Day in Vienna.

 In line with the event’s tagline ‘Where Experience Meets Innovation’, well-known Oracle customers, national and international Oracle experts and Oracle partners came together at Oracle Day 2009 in Vienna where presentations were held on new developments, technologies, solutions and field reports. The event was attended by 600 visitors, breaking all records set by previous conferences. In his opening speech, Oracle President Charles Phillips outlined the strategy, in place under his supervision, of buying-up important companies.

During the conference, Paul Rothenberger, Managing Director of FERNBACH-Software GmbH addressed the challenge posed by multi-GAAP, first addressing its beginnings and associated trends. While individual countries define their own regulations for national accounting practices, the EU in particular and the markets in general are calling for international accounting standards. Moreover, groups frequently tend to use domestic standards for their accounting purposes, e.g. US-GAAP, and management requires a numerical basis for internal controls. Each standard has a different purpose (protection of creditors, shareholder value or financial controlling) and serves different addressees. This situation is set to continue in the medium term.

Much of the IT architecture in operation today is still designed to meet the accounting requirements valid at the time of implementation and therefore not always adequate for IFRS reporting, multiple accounting systems, company consolidation and the integration of financial controlling. Although some IFRS valuations are available in banking systems, functions such as hedge fair value, determination of the effective interest rate, effectiveness testing and impairment go beyond those accounting processes. Specific securities position management under IFRS is one example of the fact that parallel accounting requires functions that were executed in operating systems in the past.

Paul Rothenberger then highlighted the most important key IT factors that banks should consider for multi-GAAP capability. In this case, the following questions are crucial:  How many individuals are responsible for the annual statement? Does the fast close run automatically? How much time and effort does the new IAS 39 require in the bank in question? Is a ‘primary’ (old) accounting practice in place and does IFRS play a ‘secondary’ role in the financial institution?

He then went on to illustrate possible courses of action as well as the most important investment traps that can occur when implementing IFRS. In particular, the complications that adjustment accounting entails were illustrated while the advantages of parallel accounting became apparent.

Paul Rothenberger defined the comprehensive FlexFinance Multi-GAAP solution from FERNBACH and Oracle as the best possible alternative, showing how banks can easily prepare parallel statements using different charts of accounts. Annual statements can be drawn up in accordance with several standards and for any number of accounting units. Valuation elements are separately valued and posted. An additional GAAP can be included with little implementation effort. It was shown that FlexFinance fulfils national and international accounting standards while minimising costs and the effort that goes into implementation.

By presenting case studies from FERNBACH customers, Paul Rothenberger was able to illustrate the criteria relevant for successful multi-GAAP introduction.