As a result of this year’s launch of BankON, Sierra Atlantic was recently named one of the Top 10 Technology Companies to watch by Bank Technology News.   Sierra Atlantic is among the top 10 companies featured on the cover page of the December 2010 issue of the magazine.

John Adams of Bank Technology News refers to Sierra Atlantic’s approach as “right on” when it comes to improving the linkage between corporate Enterprise Resourcing Planning (ERP) systems and bank treasury management operations.  In a recent interview with Sierra Atlantic CEO Raju Reddy, John and Raju discussed the complexities of payments processing and the need for a turnkey solution that benefits both the banks and their corporate customers. 

BankON offers a standardized integration that enables corporates to automate payables, receivables and account reconciliation activities in order to streamline operations and reduce costs.  Banks are able to reduce the time-to-connect with their corporate customers and reduce costs related to the development and ongoing support of one-off integrations.  Both banks and their corporate customers realize a very quick return on their investment. 

You can access the Bank Technology News article directly at: http://www.americanbanker.com/btn_issues/

Yes, I am back again this time keeping up my promise for a deep dive (shall I say neck deep!) into specific areas for IFRS transition. Just thought it would perhaps interest the readers (if any!) if some ‘hot’ topics laced with factors behind formulating  policies falling in ‘Accounting’ / ‘Information Systems’ (our narrow interest is Enterprise Applications!) are provided.

With the above background, let me get into ‘Segmental Reporting’ – a very common area (even without IFRS!). At the outset, it is good to note that IAS 14 deals with this subject and  AS17 – is the corresponding Indian Accounting Standard already  in force for certain companies.  Also, much to the relief of  ‘Accountants’ broadly there are no major variances between IAS14 and AS17 –  On the lighter side, feel – if one reads through the accounting standards – hardly 10% will be understood in the first few readings! (10 times taxing to first understand and xx??[God knows how many?] Times for implementation!!). However at the end, there is a larger intent to analyze financials to proactively assess if the health or intended moves of an enterprise are in the right direction adding investor value.

Now here is what IAS14 mandates – Looks pretty simple, till one has to implement!

• An entity reports information for ‘Business Segments’ and for ‘Geographical Segments’, indicating the types of products and services included in each reported business segment and the composition of each reported geographical segment. (One of these segments will be ‘Primary’ and the other ‘Secondary’)

• A set of reporting requirements – listed below for ‘Primary’ / ‘Secondary’ Segments so identified.

Already panting? Ok! Understand – here are a few breathers:

• Standard (mercifully!) applies only to entities whose shares are listed in Stock Exchange(s) or which are in the process of issuing the same for eventual listing:

• Don’t be overjoyed!! – Indian Accounting Standard is much more extensive in its coverage as it prescribes some additional class of companies or criteria for coverage (Ex. Banks and Insurance Companies, Entities having a Turnover of more than Rs. 50 Crores – (Approx. $10 Million). Borrowings in excess of Rs. 10 Crores (Approx. $2 Million), Holding / Subsidiary of any of the companies covered by AS17.

• Disclosure requirements arise only when the segment revenues earned from external customers are in excess of the prescribed threshold limit of 10% of the Total Revenue (Both internal and external).  – A minimum of 75% of the total revenue should be covered by segment reporting failing which additional segmental classification needs to be included until this limit is met!

I can already hear a few loud voices – how to identify ‘Business Segments’ or ‘Geographical Segment’ –

• IAS14 in my view lacks clarity [“The source and nature of the entity’s risks and rates of return determine whether the primary reporting format is business segments or geographical segments. This is usually identified by the entity’s internal organizational and management structure and its system of internal financial reporting to senior management.]

• AS17  provides some more guidelines for ‘Business’ classification based on Nature of Products and Services, Production Process, Type of Customers, Distribution Channels, Regulatory Environment  and for ‘Geography’ based on Similarity of Economic and Political Conditions, Relationship between Geographies, Proximity, Specific risks associated with a Region, Exchange control regulations etc.,

I am aware that this article has probably crossed reasonable limits. However, all the erudite readers will be quick to realize:

1. Aspects related to classification of ‘Business’ / ‘Geography’ segments (and possibly additional segments!), how to deal with financial elements that can’t be directly ascribed to specific segments (what kind of allocation rules etc., can be logically followed)   are all matters which are internal to any organization in which Professional Audit and Accounting Firms   are best positioned to assist in formulation of proper accounting framework for transition and then to ongoing compliance.
2. IT Service providers like Sierra Atlantic Inc., – on the other hand can consider the inputs for ongoing compliance arrived in Step 1 , evaluate gaps in the existing ‘Enterprise Applications’  configurations and come up with a sequence of steps for best possible fulfillment – i.e.:

• Upgrade to Release 12 Vs Re implement – Examine the flexible ‘Sub Ledger Accounting’ [SLA’ framework provided], other options [Ex. Multiple transaction types, Capturing mandatory additional information during transactions, organization structuring etc.]

Hopefully, readers now see the difference that I briefly dwelt upon in my first dialogue on the subject!  Before I conclude, here is another  compliance rider of IAS14  – Once a segment is reportable, in the next year even if it goes below the threshold limit it continues to be reported  and likewise if you have new reportable segment information that emerges in one year then you better provide previous year comparison as well !! – Accountants always on the receiving side! Icing on the cake, I suppose??

By for now, and hope to be back soon with insights into yet another topic.

I’ve just returned from Amsterdam, home of the Sibos 2010 conference. It was truly an exciting week: we debuted BankON™ in conjunction with a new partnership between Sierra Atlantic, Oracle, and Fundtech surrounding Seamless STP™ . This one-of-a-kind solution drew international interest from 40 banks; from South Africa to Australia – and nations in between – and emerged as one of the most successful products ever introduced at Sibos!

Stateside, we’re headed to San Antonio, Texas next for the AFP Annual Conference. Billed as ‘The Most Important Event for Treasury and Finance’, we are looking forward to exhibiting amongst the 200+ cutting-edge service providers in attendance.

Don’t forget that you can always check in on the latest BankON™ news at the Sierra Atlantic website!

Let me start the dialogue with a brief on a contemporary topic of widespread interest, from regulators to organizations, accountants, product vendors and finally IT service providers ie. ‘International Financial Reporting Standards’ – commonly referred as IFRS, administered by “International Accounting Standards Board” – IASB.

Not to delve too much into the history, most of us are aware  IFRS in general,  through various ‘Accounting Standards’  mandates a set of principles, practices  and disclosure requirements that organizations are required to follow with a general intent to promote uniform adoption of accounting practices, laying the foundation for significantly enhanced financial data quality, thereby enabling all stakeholders in improving the quality of analysis and reflecting  a truly ‘Fair’ view of the financial statements. It is pertinent to note that most of the advanced (USA, UK, Canada) and developing economies (India, China) are either in a stage of transition or in the first stages of active implementation of this ‘convergence’.  Over the years accounting bodies around the world, have prescribed and administered a set of (Local) Accounting Standards for adherence by entities  operating within their respective jurisdiction which,  in most cases ,vary with the  IFRS standards  requiring ‘convergence’  during IFRS adoption.

With the above backdrop, as I see, every IFRS ‘convergence’ needs to address the following aspects i.e. :

1. 1. ‘Accounting’  – analyzing the impact of IFRS standards vis-a-vis the local standards –  to account for the net financial  impact of the variations, if any,  in the financial statements of the first  period in which such convergence is mandated. – Ex. In India, organizations moving over to IFRS standards in March, 2011 will have to undergo this exercise as on the first reporting date – i.e. 31^st March, 2011 and also for the previous  year(s) comparative financial data required to be provided.  [Significant impact areas are – Recognition of all assets / liabilities arising out of financial derivatives, recognition of liability on defined benefit plans,  warranties, guarantees etc.,]   In my view, this is largely a ‘one time’ exercise which will set the base for new/ changed  accounting requirements.

1. ‘Information Systems’ –  Essentially this is a byproduct of the previous step and presents a need to assess the landscape of ‘Enterprise Applications’ to devise strategies for continued compliance.  (in Oracle eBS parlance, options for changes to accounting structures, recording of transactions in General Ledger,  examining edge applications in Oracle – E.g. Financial consolidations using  tools like Hyperion)  are examined.

• Here is where IT service providers with deep insights into specific Enterprise Applications, can provide sound counsel and present workable strategies for a seamless transition in  double quick time!

Before it gets any longer, bye for now! As I close, I wish to mention all such ‘convergence’  stem out of the increased thrust on the overall ‘Governance, Risk and Compliance’ [GRC] as ‘accounting innovations’ are on the rise?? (any guess??)

In the forthcoming editions, I will cover insights into specific areas of IFRS and then extend reach to GRC.