Hi everyone,
Wanted to have your view on the following topic.
Could the implementation of a new unique ERP (cloud) and its set of interfaced applications across a group that operates internationally be classified as restructuring?
It would take 4 to 5 years to implement and generates savings around IT maintenance costs and personal costs.
Costs would include: contract termination fees for applications/ERPs no longer used, external fees to define implementation strategy and best business processes in the ERP, non capex IT adaptation costs (interfaces between this ERP and applications), training costs specific to this new ERP and applications, retention bonuses specifically linked to this project and redundancy packages after the deployment.
Thank you for your help
Restructuring
Re: Restructuring
For what purpose, provisions?
Re: Restructuring
Both provisions (redundancy packages, retention bonus and termination fees) and P&L classification.
Thank you!
Thank you!
Re: Restructuring
Have you started to implement it or told those affected by it about the detail of the plan?
Re: Restructuring
Global communication has started. But for the first years, impacts are expected mainly at business process and IT levels. Personal costs impact (redundancies) should occur towards the end of the deployment plan.
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Ketan Marwah
- Trusted Expert
- Posts: 308
- Joined: 16 Feb 2023, 18:10
- Location: Germany
Re: Restructuring
Hi,
In my view there is no binary response to your question as the onus is on you to determine it yourself by taking a holistic view of what is it that the entity has set out to achieve from the software implementation. Your judgement should also be based on the materiality standards that is followed in your organization.
As you can note from the definition of restructuring that it is defined as a programme that is planned and controlled by management, and materially changes either the scope of business activities or the manner in which business is conducted (IAS 37.10).
If you therefore think that new unique ERP materially changes either the scope of business activities or the manner in which the business conducted then it could be classified as restructuring cost.
In practice, ‘restructuring’ is often used to describe organisational changes that don’t necessarily constitute a material change to the entity. This is commonly done as labelling expenses as ‘restructuring expenses’ implies they are non-recurring and not related to ongoing business activities.
In my view there is no binary response to your question as the onus is on you to determine it yourself by taking a holistic view of what is it that the entity has set out to achieve from the software implementation. Your judgement should also be based on the materiality standards that is followed in your organization.
As you can note from the definition of restructuring that it is defined as a programme that is planned and controlled by management, and materially changes either the scope of business activities or the manner in which business is conducted (IAS 37.10).
If you therefore think that new unique ERP materially changes either the scope of business activities or the manner in which the business conducted then it could be classified as restructuring cost.
In practice, ‘restructuring’ is often used to describe organisational changes that don’t necessarily constitute a material change to the entity. This is commonly done as labelling expenses as ‘restructuring expenses’ implies they are non-recurring and not related to ongoing business activities.
Senior Compliance & Reporting Manager
Ocean & Logistics Reporting & Accounting
Maersk Group
Ocean & Logistics Reporting & Accounting
Maersk Group
Re: Restructuring
Sticking to the standard definition (i.e. programme that materially changes the scope of activity or the manner business is conducted), not sure how such IT programmes can have this kind of impact, even if it will definitely drive simplification.
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Ketan Marwah
- Trusted Expert
- Posts: 308
- Joined: 16 Feb 2023, 18:10
- Location: Germany
Re: Restructuring
Hi,
IT can drive or facilitate various initiatives such as legal restructuring on the premise of common system landscape or unification of brands/sales practices on the basis of common system landscape etc.
There can be various examples of how an IT set-up could be the stepping stone to redoing the business in an entirely different manner which is why I mentioned to you that you would have to wear the thinking hat yourself and figure out the real benefit of the mass implementation to determine whether you have performed restructuring or not.
IT can drive or facilitate various initiatives such as legal restructuring on the premise of common system landscape or unification of brands/sales practices on the basis of common system landscape etc.
There can be various examples of how an IT set-up could be the stepping stone to redoing the business in an entirely different manner which is why I mentioned to you that you would have to wear the thinking hat yourself and figure out the real benefit of the mass implementation to determine whether you have performed restructuring or not.
Senior Compliance & Reporting Manager
Ocean & Logistics Reporting & Accounting
Maersk Group
Ocean & Logistics Reporting & Accounting
Maersk Group
Re: Restructuring
Unfortunately, we need to adhere to the IAS 37 definition
As Ketan mentioned, an IT overhaul could meet this definition, but it's quite a challenge. Concerning the classification in P/L, you're allowed to present these expenses under a specific line item as per IAS 1.85. Additionally, even if the IAS 37 restructuring definition isn't met, you might still be able to recognise the employee termination expenses now:
https://ifrscommunity.com/knowledge-bas ... n-benefits