1. IFRS - New Accounting Regulations and What They Mean to Project Managers February 25, 2009 By: SANJAY SHARMA, CA, PMP, SCPM

2. Page 2 2 Agenda ►Presenter’s BIO ►New Accounting Regulations - IFRS? ►IFRS Trends and Benefits ►SEC Roadmap and Timing ►Early Adoption, Comments from CFO roundtables ►Impact on Business and Specifically on IT ►IFRS and Project Management ►New Opportunities and Challenges ►Effect on IT Projects ►Relationship between Complexity and Risk ►Impact on IT applications, e.g. Oracle ►Q & A

3. Page 3 Presenter’s Bio – SANJAY SHARMA, CA, PMP, SCPM Mobile: +1-404-423-1188 | Office: +1-732-516-4158 | sanjay.sharma1@ey.com ► Senior Manager in Application Advisory Services with Ernst & Young, LLP ► More than twenty years of progressive experience in financial systems design and evaluation, program management and strategy and management consulting ► Managed multidisciplinary teams while delivering mission-critical initiatives in the financial services, healthcare, and manufacturing industries ► Successful execution and delivery of initiatives related to IT strategy and planning, ERP package evaluation and implementation, business process reengineering and custom systems development ► Strategic thinker with proven tactical execution experience in different industries and in multiple countries ► Certified Chartered Accountant (CA) from India ► Certified Project Management Professional (PMP) from Project Management Institute ► Stanford Certified Project Manager (SCPM) from Stanford University

4. Page 4 New Accounting Regulations - IFRS? ► International Financial Reporting Standards (IFRS) are a global set of standards for financial accounting and reporting ► At a high level, the biggest difference between IFRS and US GAAP is that IFRS uses a more principles based approach and US GAAP is more prescriptive ► The International Accounting Standards Board has generally avoided issuing interpretations of its standards, leaving more of the implementation of the standards to preparers and auditors

5. Page 5 IFRS reporting trends ► Every major non-US capital market is moving to IFRS ► Adoption of IFRS in the EU in 2005 (8,000 companies) ► Over 100 countries around the world require or permit IFRS ► IFRS quickly picking up share of Global Fortune 500 companies ► IFRS is becoming the predominant accounting framework outside the US Top 10 Global Capital Markets USUS GAAP – moving towards IFRS JapanConvergence to IFRS UKIFRS FranceIFRS CanadaConvergence to IFRS GermanyIFRS Hong KongHKFRS (equivalent to IFRS) SpainIFRS SwitzerlandIFRS or US GAAP AustraliaAIFRS (equivalent to IFRS)

6. Page 6 Benefits of IFRS ► Improved quality of reporting ► Improved transparency and investor confidence ► Reduced accounting complexity ► Potential process and cost efficiencies ► Cost of capital ► Process and Technology optimization

7. Page 7 SEC’s proposed IFRS ‘Roadmap’ ► On August 27 th, 2008 the SEC issued for public comment a proposed "Roadmap" related to the eventual use of International Financial Reporting Standards (IFRS) by US companies ► The proposed Roadmap anticipates mandatory reporting under IFRS beginning in 2014, 2015 or 2016 depending on the size of the issuer and provides for early adoption in 2009 by a small number of very large companies that meet certain criteria ► It is possible that the SEC will later decide to permit early adoptions for other companies ► The roadmap also identifies several milestones that the SEC will consider in making its decision in 2011 about whether to proceed with mandatory adoption of IFRS

8. Page 8 Timing is critical Fiscal 2009 Restate opening balance sheet First year of IFRS reporting 2014 2012 and 2013 statements filed under US standards IFRS statements are published with comparatives for 2012 and 2013 plus quarterly information Fiscal 2010 Fiscal 2011 Fiscal 2012 Fiscal 2013 Fiscal 2014 Run US GAAP and IFRS reporting parallel Design and implementation of process, controls and systems Modification of business operations, tax, regulatory and HR programs Training New IFRS standards Change management, project structure and governance (budget implications, resourcing, etc.) Awareness and knowledge of IFRS Impact assessment Preparation of conversion plan

9. Page 9 Why consider early adoption? ► Systems: An entity that is considering systems conversion, restructuring of shared services network, etc., may want to incorporate IFRS and a new general ledger account system at the same time to reduce parallel reporting ► Organization structure: A company that already has several or significant foreign operations using IFRS may want to make reporting consistent ► Peer group: If the company’s peer group uses IFRS, even if the company is outside largest 20% of that group, they may want to adopt to be consistent with their peers ► IPO: A new public company may want to avoid a costly change from US GAAP to IFRS in the near future

10. Page 10 Comments from CFO Roundtables - IFRS Conversion Lessons Learned ► Management buy-in was one of the biggest initial challenges ► Do not underestimate the amount of work involved ► Need to limit as far as possible double reporting ► Definitely not just a technical (accounting) exercise ► Changes the way performance is measured and basis of incentive schemes ► Interaction with internal controls and systems is key ► Increasing complexity of IFRS and speed of change is requiring more technical resources ► Has increased the volatility of results ► Important to align internal and external reporting ► Consider the effect on investor relations – timing and nature of communication

11. Page 11 What is the impact? On all aspects of my business

12. Page 12 Many areas of information technology may be impacted by IFRS. Examples include: Applications Reports Data IT Systems and Processes Systems Architecture ► What re-work is likely, do we have to upgrade? ► What about Front Office and supporting Applications? ► What changes need to be made to key reports? ► How do we identify new data sources? ► What Interfaces and Middleware components need to be updated? ► What screen changes, training materials need to happen? ► What about the historical data? ► Do we need new security profiles, SOX checks etc? ► What Infrastructure impacts does this have?

13. Page 13 IFRS Issues Reported by Survey Group Key Lessons Learned Nearly 75% of respondents reported unexpected complexity of technical issues Need to develop IFRS knowledge as early as possible to avoid last minute “fire drills” and minimize the risk of missed reporting deadlines Unfamiliarity of numbers arising from changesEducation will be a critical component of the IFRS conversion, especially for business unit heads who may not be familiar with the implications of the changes IFRS will bring. Investor relations will also need a strong educational grounding to communicate the effect to investors. Almost 50% reported that IFRS changes were not fully embedded in back offices and general ledger systems. As a result, “stand alone manual workarounds” were created. EU companies that used manual workarounds to meet short IFRS deadlines are now redesigning processes and augmenting their systems to eliminate the inefficiencies these workarounds created. U.S. firms will benefit from longer lead times to proactively address these changes if they start acting soon. Top side solutions don’t workThis approach fails to cause the organization to adjust, and the Finance group feels “all the pain” 'We have spent £50m on our IFRS convergence plan and our results are more difficult to interpret now than they were before…People underestimated how much work was involved, how much it would cost and the complications of interpreting financial results that have arisen as a consequence' (Barclays CFO Naguib Kheraj) According to CA Magazine (Dec/06) almost 60% of those surveyed felt the challenge of IFRS will require the same or more effort than SOX Conversion effort is costly and complex Source: Institute of Chartered Accountants in England & Wales

14. Page 14 IFRS and Project Management ► So what does this all mean to me as a Project Manager ?

15. Page 15 Future ► ERP Effectiveness – Increased effectiveness from new and consistent versions of the ERP, fewer instances, less complex interfaces, new product features and service-oriented architectures ► Process Effectiveness – Increased effectiveness resulting from improved financial reporting processes, single data entry for global and multiple books, consistent chart of accounts, more effective operational reporting ► Benefits – Costs reduced and benefits received by improving ERP effectiveness and improving processes in conjunction with IFRS conversion IFRS conversion creates opportunity Key considerations: ► Ineffective processes and technology will increase the cost of your IFRS conversion efforts ► Business and technology improvement opportunities should be the primary driver when planning for conversion options. IFRS is just only one of the considerations ► Early adaptors may have the most options and find good resources at reasonable rates Benefits Process Effectiveness ERP Effectiveness

16. Page 16 Key challenges ► Convergence between IFRS and GAAP is likely ► Manual adjustments at consolidation level will not be sustainable. ► Organizations must capture additional data ► Parallel accounting & reporting will be required

17. Page 17 IFRS conversion may also affect current and future IT projects ► IFRS will effect the timing, priority, and resources of other IT activities ► An IFRS conversion could require additional data, configuration, or reporting considerations ► Example types of initiatives / projects affected by an IFRS conversion: ► Shared service center deployment ► Global ERP upgrades and implementations ► Chart of Accounts (COA) redesign ► Global finance transformation (process standardization) ► Global policy and procedure development/deployment ► Tax strategies

18. Page 18 Factors of Complexity: Time Team Size Level of Innovation and Change Team Maturity Team Proximity Number of Internal/External teams Capability Maturity Degree of Learning Rapid dependent deliverables Regulated Requirements Environmental and Safety Security Requirements Risk Complexity Complexity is the key driver of risk Risk as a Function of Complexity As the degree of COMPLEXITY increases, so does the RISK, and hence the need for improved governance, risk management, and program controls Level of Program Governance Required Relationship between Complexity and Risk Complex Projects & Programs Challenge Even Sophisticated, Experienced Organizations

19. Page 19 Representative impact of IFRS on an Oracle applications Minimal ModerateSignificant None Oracle ProductOracle Module Financials Manufacturing – Discrete Projects Human Resources Projects CostingResource ManagementProject ManagementProject Contracts General LedgerFixed AssetsAccts. ReceivableAccts. PayableE-Business Tax Finl Consoldtn. Hub Cash Management Supply Chain Plng. & Procurement Bills Of MaterialCapacity Quality Implementation EngineeringWork In Progress Maintenance & Service Purchasing Inventory Management Demand PlanningiProcurement iSupplier Portal Sourcing Adv. Supply Chain Plng. Time & LaborPayrollLearning ManagementAdvanced Benefits Enterprise Asset Management Spares Management Order Management Order Management Advanced PricingConfiguratorRelease Management Marketing & Sales Marketing Trade Management QuotingProposals Incentive Compensation Projects Billing Manufacturing – Process Process Plng. Quality Management Regulatory Management Cost ManagementScheduling Cost ManagementProcess ExecutionProduct Dev. Tele ServiceService ContractsField ServiceAdv Scheduler ShippingSales ContractsiStore TeleSales Advanced Pricing Partner Management

20. Page 20 Question / Answer Q & A