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You are here: Home / Finance and Accounting / Are spreadsheets part of your IFRS conversion plan?

By Adam Gorley | 2 Minutes Read August 3, 2010

Are spreadsheets part of your IFRS conversion plan?

itac-cicaI bet more than a few of our readers use spreadsheets in their accounting, payroll and HR processes. You might even be thinking of (or currently) using them in your efforts to convert from GAAP to IFRS. And why wouldn’t you?

“Spreadsheets are dynamic tools that can provide a wide variety of functionality at minimal cost. Consequently, in an environment of stringent deadlines and temporary data processing needs, they are used to fill the gaps in functionality within the computing environment”, says the CICA’s Information Technology Advisory Committee (ITAC).

Nonetheless, the committee notes in IFRS and Spreadsheets: A High-Risk Combination that the use of spreadsheets can cause problems. They are prone to error, burdensome to maintain and generally subject to less control and security than dedicated applications, which have controls built in. Without controls, the slightest mistake can lead to incorrect results, which a system with controls would catch at the outset.

“Anything more than a simple spreadsheet has a high likelihood of error and can have a significant impact on the organization … An analysis of seven spreadsheet-error studies … found an average error rate of 88%.”

Indeed, even the simplest errors can lead to excessive (and unnecessary) payments and exorbitant fines. (See the committee’s guide for examples.)
Remarkably, given the risks, the technology committee doesn’t simply recommend not using spreadsheets, but instead offers suggestions on managing the risk:

  • Familiarize yourself with the risks
  • Ask yourself if spreadsheets are the best tool for the job
  • If you decide to use spreadsheets, determine whether they will be a temporary or permanent solution (hint: make them temporary)
  • Make your spreadsheets as simple as possible; e.g., avoid using macros, pivot tables and linking documents
  • Extend the control environment to your spreadsheets

See IFRS and Spreadsheets: A High-Risk Combination for the details.
We’ve just updated Chapter 7 — Accounting and Reporting in Volume I of Finance & Accounting PolicyPro. The chapter includes valuable information on the transition from GAAP to IFRS.
Adam Gorley
First Reference Human Resources and Internal Controls Compliance Editor

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Adam Gorley
Editor at First Reference Inc.
Adam Gorley is a copywriter, editor and researcher at First Reference. He contributes regularly to First Reference Talks, Inside Internal Controls and other First Reference publications. He writes about general HR issues, accessibility, privacy, technology in the workplace, accommodation, violence and harassment, internal controls and more.
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Article by Adam Gorley / Finance and Accounting / accounting, CICA, FAPP, Finance and Accounting PolicyPro, GAAP, IFRS, IFRS conversion plan, Reporting, spreadsheet error, spreadsheets

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About Adam Gorley

Adam Gorley is a copywriter, editor and researcher at First Reference. He contributes regularly to First Reference Talks, Inside Internal Controls and other First Reference publications. He writes about general HR issues, accessibility, privacy, technology in the workplace, accommodation, violence and harassment, internal controls and more.

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Comments

  1. Jeffrey Sherman says

    August 3, 2010 at 3:50 pm

    Thank you Adam, great summary of the ITAC report.
    Chapter 7 of Finance and Accounting Policy Pro which you referred to also has a section on how to make sure that your spreadsheets are properly controlled. It suggests that the following controls should be considered for important spreadsheets:
    1. Documentation
    2. Access control
    3. Input control
    4. Testing
    5. Change control and version control
    6. Backup and recovery
    Full details are available in section 7.06 of Finance and Accounting Policy Pro.
    (Jeffrey Sherman – co-author, Finance and Accounting PolicyPro.)

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