please refer the attachment
Concerns identified
Re-engineering the finance function, the objectives are:
1. Modify the existing system to adopt the new standard of IFRS 15.
Suggested Solution to the organisation’s management as to how to tackle the identified concerns.
Starting financial year January 2018, Rolls Royce is required to comply with the application of the new accounting standard called, IFRS 15. The effect of the application of the new policy will have impacts on the earnings in 2016. While the cash flow will not be affected under the new policy, revenue cognition will be reported lower. For instance revenue for 2015 would be recognised at 13.3 million instead of 15 million. Although the new revenue standard will improve organisation’s long term visibility, it is essential to educate all the stakeholders to minimize their worries.
Suggestion:
1. Consider the existing accounting process system and its software application whether they are able to satisfy the requirements of the new accounting standard. The new revenue policy may require modification to the IT system to process the additional qualitative and quantitative information related to estimate on revenue recognition.
2. Once have determine project plan for the new accounting information system, the implementation of the new policy and system will involve facilitate training the employees.
3. The management should consider the impact of issuance new accounting policy on the users of financial reports and determine an appropriate interim disclosure to be produce prior to the adoption of the new accounting standard.
4. Educate the key stakeholders by providing the relevant information which the new revenue standard may result in changes in timing of the revenue recognition to explain the difference in their expectation in the financial statement. As well as disclose the additional qualitative and quantitative data use to process the financial reports.
Questions
1. What are the strengths and opportunities of adopting IFRS 15 (about 100 words)
2. What are the Threats and weakness of Adopting IFRS15 (About 100 words)
3. Courses of action you would offer to the management as to how to the issues identified can be tackled (150 words)
4. How the organization concerned of adopting IFRS15 can improve its performance. (About 150 words)
(Assume that you are acting as a consultant to the organisations’ management team.)