Proceedings

2.2. Phase 2: Periodic financial statements conversion – technical solutions
The advantages and disadvantages of various methods of financial statements
conversion are relevant especially in case of regular (e.g. monthly) reporting. No
general advice, which solution to adopt, exists. Each entity should have take into
account its specific conditions and chose an approach mixing benefits and cost in the
most favourable manner.
There are three basic approaches how to transform financial statements from one set
of accounting standards to another set of financial statements (Mejzlík, 2006):
• conversion on financial statements level;
• conversion on trial balance level;
• dual accounting system (separate module for each set).
The choice of conversion method appropriate for an entity depends on many factors,
at least labour and ICT costs, number and nature of differences, frequency of and
deadlines for reporting should be taken into consideration.
Conversion on financial statements level
This method uses only the reclassification of items presented in statutory financial
statements. The main advantages of the method are:
• easy and quick to implement;
• no specialised ICT is needed;
• low cost and labour burden;
• easy to check the correctness of adjustments.
The disadvantages are:
• applicable only if the number of differences is very low (no measurement,
recognition, accounting policies issues);
• workable only for those cases when classification is the only one difference.
Conversion on trial balance level
In this case, the list of accounts (trial balance) based on local GAAP is exported from
an accounting software and then adjustments are made in spreadsheets (like Excel).
The following pros can be identified:
• no specialised ICT is needed (data spreadsheets are sufficient),
• applicable even if the number of differences is higher.
The cons of this method are:
• applicable only for differences in recognition of items (provisions, IFRS 3
recognised assets); however not operational for different measurement issues
(work-in progress) and dissimilar accounting policies (depreciation);
• additional accounting expert for the IFRS should be employed => higher
salary expenses;
• conversion system is designed by the expert => his/her substitution in case of
illness or termination of the job is questionable and sometimes even excluded
without additional significant costs;
• testing of the correctness and conclusiveness of the „conversion bridge“ is
complicated and causes additional problems esp. for auditors;
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