Finance and Controlling

Parallel Accounting and Segmented Reporting

International Financial Reporting Standards (IFRS) force the integration of external accounting with internal management reporting, directly influencing financial processes, design and content of both financial reporting and the underlying financial and controlling systems.

Segment reporting

IFRS can be considered an example of this increasing convergence, according to which the definition of segments as well as the presentation of business unit information must be made on the basis of management reporting, whereas previously a (top-down) distribution of balance sheet positions on individual segments was considered sufficient. As a consequence – in the course of providing balance sheet information – companies must make enhanced use of information generated in controlling application and integrate it in external financial reporting.

Parallel Accounting

Today publicly trading companies are obliged to align their accounting according to international regulations (IFRS). In addition, local topics such as the Accounting Law Modernization Act (BilMoG) in Germany pave the way for convergence of local accounting law towards international methods of accounting. Although the HGB balance sheet still remains the basis for the calculation of dividends and the determination of taxable income, the commercial and tax balance sheets differ more from each other. This leads to the regular creation of deferred tax positions and ‘complicates’ the corresponding reconciliation between the two accounting systems. Given this background it becomes more important to consider a dedicated ledger for the tax balance sheet but in the same system, from which is reported in accordance with IFRS and HGB.

Cost of Sales

The international dominance of the cost of sales – and thus the structure of the profit and loss account by function areas of a company – requires close integration of internal and external accounting in order to ensure the derivation of functional areas for the presentation in the income statement from the cost accounting objects.

Talk to us…

…about your challenges with the architecture and design possibilities of your accounting system, with the aim of IFRS compliance. We are happy to advise and guide you through design and implementation.