GAAP Conversion

GAAP Conversion

1.What is GAAP Conversion?

Converting from one GAAP to another GAAP. It often means changing more than just the numbers; there are often wider business or reporting implications to manage. It also requires change in strategic and operational procedures or policies.

2.Why is GAAP Conversion required?

The need for GAAP conversions arises for a variety of reasons:

  • Local regulatory change? particularly when an old GAAP is being replaced by a new one in a jurisdiction (this new GAAP could be a new local standard or one aligned to IFRS)
  • In the due diligence phase of an acquisition? where it is important to understand how the accounting of a target will change or be adapted as a result of being consolidated into a new group
  • Preparation of shareholder information pack, where financial reporting of a potential target needs to be included under the same accounting policies as the acquirer.
  • An initial public offering (IPO) ? when a company must prepare its financial statements under new rules for a listed company (most commonly under IFRS for listings cross border), which it did not have to apply as a private company.

3.What is process of performing GAAP Conversion?

Phase Objective and Process
Identify potential differences between reporting GAAPs under consideration
  • Read financial statements to determine applicable technical areas in scope
  • Read accounting manuals, existing white papers, key contracts and gather relevant information
  • Perform initial GAAP analysisand identify areas requiring in-depth research.
  • Prepare a conversion project plan
Measurement Objective:
Analyze differences to determine any adjustments, or prove that no adjustment is required and compute the adjustment amount.
  • Quantify new GAAP adjustments
  • Develop a reconciliation model to factor in the effects of the conversion
  • Revise KPIs and budgets based on updated measurements
Presentation and Disclosure Objective:
Skeleton accounts, including disclosures and accounting policies
  • Draft skeleton financial statements including footnotes
  • Create spreadsheet based reporting packages and supporting bridge analysis
  • Prepare opening balance sheet/group reporting template
  • Draft significant accounting policies and financial statement footnotes
Sustain Objective:
Embed new reporting framework into current processes
  • Assess the need to update systems and processes
  • Assess impact on tax, distributable reserves and other areas
  • Revise accounting policy and procedure manuals
  • Assess any staff training needs

Accorp Partners Pvt. Ltd.
All Rights Reserved. © 2019.