Change management and stakeholder communication: people at the heart of the IFRS 18 transformation

The stakeholders in the IFRS 18 transformation

Internal stakeholders

Employees in the finance function: they have to learn new processes, operate new systems and adapt the way they work. They often have concerns about their job security and their ability to meet the new requirements.

Senior management: they have to approve, fund and oversee the transformation. They have concerns about the costs, the time required and the impact on business operations.

IT department: they have to adapt systems, implement new systems and support the technical infrastructure. They have concerns about the technical complexity and the resources involved.

Other functions: functions such as Investor Relations, Treasury and Controlling have different requirements and must be involved in the transformation.

External stakeholders

Auditors: they have to understand the new standards, audit the implementation and ensure compliance. They have concerns about the correctness of the implementation.

Investors and analysts: they have to understand the new financial reports and may have questions about comparability with previous years.

Regulators: they have to ensure that companies comply with the new standards.

Lenders: they have to understand the impact on loan agreements and covenants

A comprehensive change management strategy

A successful IFRS 18 transformation requires a comprehensive change management strategy that includes the following elements:

Element 1: clear communication of the “why”

The first step is to communicate clearly why the transition to IFRS 18 is necessary. This should mention not only the compliance requirement, but also the strategic benefits:

• Improved comparability: the new structure enables better comparisons between companies.

• Greater transparency: the new structure offers more transparency about operating performance.

• Modernisation of the finance function: the transformation is an opportunity to modernise the finance function.

• Competitive advantage: companies that act early gain a competitive advantage.

These messages should be communicated regularly and consistently.

Element 2: structured communication

A structured communication strategy should use a range of channels and formats:

Kick-off event: an event at which the transformation is presented and questions are answered.

Regular updates: regular updates on the progress of the transformation (e.g. monthly or quarterly).

FAQ documents: documentation of frequently asked questions and answers.

Intranet page: a central information platform with all relevant information.

Town hall meetings: regular meetings with the entire finance function.

One-on-one conversations: conversations with individual employees to address their concerns.

Element 3: education and training

A comprehensive education and training strategy is crucial:

General training: training for all employees that explains the new standards and their impact.

Role-specific training: training for specific roles (e.g. controllers, accountants, analysts) tailored to their specific requirements.

System training: training on the new or adapted systems.

Train-the-trainer: training of internal trainers who later train others.

Ongoing support: ongoing support after training, to answer questions and resolve issues.

Element 4: identifying change agents

Change agents are employees who support the transformation and motivate others. They should:

• Be respected and trusted

• Understand the new standards

• Be able to motivate others

• Be open to questions and concerns

These change agents should be identified and supported so that they can fulfil their role successfully.

Element 5: managing resistance

Resistance to the transformation is normal and should be expected. Good change management should:

• Understand resistance and take it seriously

• Hold open dialogues to address concerns

• Offer solutions that address the concerns

• Share success stories to build trust

Element 6: measurement and monitoring

The effectiveness of the change management strategy should be measured and monitored:

• Training completion rates: how many employees have completed the training?

• Employee satisfaction: how satisfied are employees with the transformation?

• Acceptance rates: how many employees accept the new processes?

• Error rates: how many errors occur during implementation?

These metrics should be reviewed regularly, and the change management strategy should be adapted where necessary.

Communication with external stakeholders

Communication with external stakeholders is also important:

Communication with auditors

Work closely with your auditors to ensure that they understand and approve the implementation. This should include regular meetings and documentation.

Communication with investors and analysts

Communicate the impact of the transition to IFRS 18 clearly to investors and analysts. This should include:

• An explanation of the new structure

• A reconciliation of prior-year results to the new structure

• An explanation of the impact on key figures

• Answers to questions

Communication with lenders

If your company has loan agreements with covenants, you must communicate with your lenders to ensure that the covenants are still met under IFRS 18.

Impact on roles and responsibilities

The IFRS 18 transformation can have an impact on roles and responsibilities:

New or changed roles

New roles may need to be created to meet the new requirements:

• IFRS 18 Project Manager: leads the implementation

• IFRS 18 Compliance Manager: oversees compliance

• IFRS 18 Data Steward: manages data quality

• IFRS 18 Trainer: trains employees

Changed responsibilities

Existing roles may have changed responsibilities:

• Controllers: they must understand the new categories and ensure that data are classified correctly.

• Accountants: they must understand and apply the new classification rules.

• Analysts: they must understand the new structures and produce reports.

Communicating roles and responsibilities

It is important to communicate clearly how roles and responsibilities are changing. This helps to avoid confusion and to prepare employees for their new tasks.

Best practices in change management

Best practice 1: executive sponsorship

Senior management should actively support the transformation and make this clear. This creates credibility and urgency.

Best practice 2: early involvement

Involve employees in the transformation early on. This creates ownership and acceptance.

Best practice 3: transparent communication

Communicate transparently about the transformation, including challenges and setbacks. This builds trust.

Best practice 4: continuous support

Provide continuous support during and after implementation. This helps to resolve problems quickly.

Best practice 5: celebrating successes

Celebrate successes and milestones. This motivates employees and shows progress.

Conclusion: people are the key to success

The IFRS 18 transformation is ultimately a transformation of people. Technology and processes are important, but success depends on how well companies guide their employees and stakeholders through the transformation.

Companies that implement a comprehensive change management strategy and actively involve their stakeholders will carry out the transformation more successfully and realise the benefits sooner.