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IFRS Compliance

Meet IFRS 15, IFRS 16 and IFRS 17 with SAP, using SAP RAR, SAP RE-FX and SAP FPSL.

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At a glance

  • IFRS 15: revenue recognition with SAP RAR
  • IFRS 16: leases with SAP RE-FX
  • IFRS 17: insurance contracts with SAP FPSL
  • Implemented by Tecxed

IFRS 15: revenue recognition

In May 2014, the International Financial Reporting Standards (IFRS) Board introduced a new revenue recognition standard, IFRS 15, which changed how companies recognize revenue in their financial statements. It has been effective since January 1, 2018, and requires entities to recognize revenue when the performance obligation is fulfilled. In other words, revenue can be recognized once all benefits are received, and the receiving entity gains control of the asset and can use it.

The standard does not apply to leases, insurance contracts, financial instruments, guarantees and certain non-monetary exchanges. The industries most affected include telecommunications, high-tech, media, automotive and construction.

To help with compliance, SAP launched the SAP Revenue Accounting and Reporting (RAR) application in 2015 as an add-on. If you use SAP ERP Financials with an active maintenance agreement, you can access it at no additional cost. It automates revenue recognition and accounting, and simplifies related tasks. The minimum release to install RAR is ERP 6.05 and above. To enhance the standard billing process, SAP RAR brings in additional data for revenue calculation, so audit compliance is supported by enriched and normalized data.

IFRS 16: leases with SAP RE-FX

In 2016, the International Accounting Standards Board (IASB) issued IFRS 16, replacing the earlier IAS 17 leasing rules, as well as IFRIC 4, SIC 15 and SIC 27. IFRS 16 applies to annual reporting periods beginning on or after January 1, 2019, with earlier application permitted if IFRS 15 is also applied.

Under IFRS 16, financial and operational leases are no longer treated differently in accounting. The standard removes nearly all "off-balance sheet" accounting for leases. The main goal is more transparency, so users of financial statements can judge the effect of an organization's leases on its financial position and cash flow directly from its balance sheet. Lessees must now recognize both assets and liabilities arising from leases.

See SAP RE-FX

IFRS 17: insurance companies

IFRS 17 took effect from July 1, 2022. Insurance companies have a limited window to implement SAP FPSL (Financial Products Subledger), and the timeline is tighter because comparative data has to be run before the deadline. SAP customers in financial services should start their implementation projects as early as possible to stay compliant.

SAP FPSL: a multi-GAAP solution

SAP FPSL is a multi-GAAP solution for the financial services industry. It includes:

  • Financial Service Data PlatformA central data foundation for financial services.
  • Smart Accounting for Financial InstrumentsAccounting for financial instruments built into the solution.
  • Profitability & Performance ManagementInsight into profitability and performance.

As a central hub, SAP FPSL manages data between operational and finance streams and supports compliance with multiple GAAPs. It is deployed as an add-on to SAP S/4HANA, built to handle large data volumes with a simplified core, and delivered through the streamlined SAP Fiori interface.

FPSL is not limited to insurance companies. It also supports the wider financial services sector, including banks, fintech companies and reinsurance firms. Tecxed helps ensure IFRS 17 compliance by implementing SAP FPSL to meet regulatory requirements efficiently.

Frequently asked questions

Is SAP IFRS compliant?

Yes. SAP software is designed to be IFRS (International Financial Reporting Standards) compliant. SAP has developed solutions and functions that help organizations meet IFRS requirements for financial reporting.

What is SAP IFRS?

SAP IFRS refers to the capabilities in SAP software that let organizations comply with the International Financial Reporting Standards. It includes features that support accurate financial reporting, consolidation and compliance with IFRS guidelines.

What are the four principles of IFRS?
  • Fair presentation: Financial statements must give accurate and reliable information about an entity's financial position and performance.
  • Substance over form: The economic reality of transactions comes before their legal form.
  • Prudence: Be cautious under uncertainty: assets and income should not be overstated, and liabilities and expenses should not be understated.
  • Comparability: Financial statements should be consistent across periods and entities, so comparisons are meaningful.
What does IFRS stand for?

IFRS stands for "International Financial Reporting Standards". It is a set of accounting principles and guidelines developed by the International Accounting Standards Board (IASB), giving a globally recognized framework for financial reporting.

Does SAP use IFRS?

Yes. SAP supports the use of International Financial Reporting Standards, with functions and tools that let organizations run IFRS-compliant financial accounting, reporting, consolidation and disclosure processes.

Talk to us about IFRS compliance

Tell us which standards affect your business and we will show you how SAP can support them.

Email sales@tecxed.com

More solutions

SAP S/4HANA SAP RE-FX IFRS 16 Lease Management Financial Assets
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