Interview with SYSTEM TECHNOLOGIES experts

On the same wavelength with banks: realizing opportunities in the transition to IFRS

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In 2022, it became known that from January 1, 2025, banks in Belarus should switch to international financial reporting standards (IFRS). Each bank is fully preparing for the implementation of IFRS and is gradually moving to the appropriate standards. In this connection, the first questions appeared.

To clarify the most pressing issues, we turned to the expert group of our company: Natallya Kostrova, Head of Enterprise Solutions Department, and Marina Tikhonova, Business Analyst of Enterprise Solutions Department. And in this interview we want to reveal one of the most popular topics in the banking sector of the Republic of Belarus today.



Why is it necessary to move to common international standards?

Natallya Kostrova: “First of all, the process of transition to IFRS is necessary for banks to bring accounting to a unified model in accordance with which the world economy operates.

Today, Belarusian banks publish, as a rule, two reports according to different standards: the Belarusian National Standard (NBRS) and the International Financial Reporting Standard (IFRS). Accordingly, this transition will allow banks to optimize their resources for reporting only according to IFRS standards and thereby unify data for the regulator in accordance with international practice.

It is important that the transition to IFRS accounting will allow banks and NCFDs to obtain the necessary reporting on real accounting data, and not through the transformation of national accounting data. Such reporting will increase the confidence of international organizations and investors”.

What difficulties have banks faced today?

Marina Tikhonova: “Currently, one of the most important difficulties is is the lack of clear explanations for banks in terms of a number of operations necessary for the transition to IFRS.

Instructions from the National Bank of the Republic of Belarus (NBRB) on the transition of banks to IFRS are already available for study. They cover a large number of existing operations. Nevertheless, there are so-called “white spots,” unexplained moments that lead to a situation where the bank has very little time left to determine the nuances, share information with the developer, and so that this information is taken into account when finalizing the software in accordance with international standards. At the same time, it is important to understand that it is necessary to allocate time not only for development, but also for testing the system and making the necessary adjustments.

Often, in such a situation, banks may not know exactly how to act. For example, everyone needs to switch from the old chart of accounts to the new chart of accounts, and at the same time correctly transfer all balances. How this transitional balance will be built is also not entirely clear, because explanations on this issue have not yet been fully received.

I summarize that the methodology is generally understandable and clear, there are appropriate instructions from the authorized organization, but there are nuances that require detailed explanation.

Another difficulty faced not only by banks, but also by software developers is the so-called professional judgment.

To clarify this concept, I will give the following example: suppose that different banks have the same process, which can be fixed either in the accounting policy or in local bank acts. Accordingly, one of the banks secured the process according to the first option, and the second bank acted along an alternative path. This difference in the same process was due to professional judgment – a professional assessment, the opinion of the responsible person, which makes it possible to make a decision in conditions of uncertainty. For example, such a person may be the chief accountant who is responsible at the bank for setting accounting.

Due to this fragmentation, today we are faced with a situation where banks work with several IFRS audit consultants, and each of them has their own opinion on the conduct of a particular transaction and accounting in accordance with IFRS. There are situations when the opinion of the involved experts does not coincide with the instructions of the NBRB, while the development companies in this area should be guided by the regulatory documentation. And if banks have different consultants, different opinions, different professional judgment, then when planning the implementation of one operation, we, as a development company, are forced to provide for several possible options. This creates obvious difficulties and time costs (additional hours of development, testing, maintenance, and so on), primarily for the bank”.

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How we, SYSTEM TECHNOLOGIES, can help banks?

Marina Tikhonova:We are actively working towards automating the transition of banks to IFRS, one might even say automating the life of banks with IFRS.

Active work is underway to improve and adapt current operations from the NSFO, according to the international standard, which will be carried out slightly differently from 2025. It is worth noting one of our projects, which was not previously presented as an independent module, but it was thanks to IFRS that it was thought out in detail and implemented from scratch – this is a rental module. Previously, the accounting of lease operations was quite simple in the NSFO, but today, for our part, we offered banks our vision of automating operations already according to the international standard.

At the moment, detailed requirements have been written for a number of developed operations, they have been sent to banks, and many positive responses have been received from customers, including the lease module with a request to implement the functionality in the basic version. Several transactions have already been agreed by banks for implementation.

We also analyzed the process of providing ready-made software to customers. We understand that the updated functionality should be implemented and work efficiently as early as January 1, 2025, therefore, upon the readiness of some part of the systems of a particular module and after receiving the approval of the bank, we propose not to wait for the readiness of the whole module, but to give its individual parts to the test: separately by operations, separately by mode, separately by report, and so on. In this way, the entire module is not tested at once, but its components, which significantly saves the time of each side.

Taking into account the need to set time for the adoption of the test version and understanding by bank employees how to work with the updated system, we aim to implement our developments to customers as quickly as possible”.

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How much time and resources do banks need to make the transition?

Natallya Kostrova: “Despite improvements and some module updates, it will not become more difficult for banks to work with our software. All transactions that were carried out earlier will be adapted and reconfigured already to IFRS accounts, with the correct postings. In some operations, this transition will not even be clearly visible.

The exception will be new modules developed specifically under IFRS. Let me give you an example of a rental module – for immersion and understanding it will be necessary to spend a little more time as earlier the functionality in the offered look was not used by banks in national account. But it should be noted that in order to master the functionality, it is enough to carefully read the provided documentation and carry out several operations in accordance with it.

And we, of course, would like banks to be active with us, give us the necessary installations and feedback. After all, the faster we bring our understanding to a common denominator, the more effective solution we will offer.

To summarize, I would like to note that we remain as flexible as possible for our customers, are always ready for changes and enthusiastically undertake tasks that make the workflow faster, easier and more efficient”.

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