March 2010

Technology Considerations for Converting to IFRS

From Journal of Accountancy.

Lewis A. Dulitz, vice president of accounting policies and research at Covidien—a $10.7 billion health care products company with 42,000 employees in more than 60 countries—was part of a team that implemented the necessary technology changes in Europe to help Covidien convert to IFRS and led a similar team in the U.S. He answered questions from the JofA about the experience and provided advice for other companies to consider.

Systems considerations for fixed assets include:

• Does your system limit the total number of fixed-asset records?
• Will you be able to systemically calculate incremental depreciation expense for your opening balance sheet assets that you componentize, or will you use Excel?
• How will you reflect your adjusted carrying value in subsequent years?
• Do you plan on embedding controls in your system to prevent data input errors (for example, components being assigned a useful life of a composite asset)?
• How will you ensure that all components to an asset that is impaired are properly derecognized?
• How will you account for impairment reversals?

Process considerations include:

• If you have multiple fixed-asset systems, how do you achieve conformity?
• How will you align useful lives and definitions of components?
• How does componentization affect your repairs and maintenance policies?

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