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International Accounting and Financial Reporting Winter 2010 William F. O’Brien, MBA, CPA Session V IFRS versus U.S. GAAP Session V Objectives IFRS versus U.S. GAAP IFRS Adoption Business Issues A View from 40,000 Feet F/S Presentation Revenue recognition Expenses Inventories

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international accounting and financial reporting winter 2010 william f o brien mba cpa
International Accounting

and Financial Reporting

Winter 2010

William F. O’Brien, MBA, CPA

session v

Session V

IFRS versus U.S. GAAP

session v objectives
Session V Objectives
  • IFRS versus U.S. GAAP
  • IFRS Adoption Business Issues

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

a view from 40 000 feet
A View from 40,000 Feet

F/S Presentation

Revenue recognition

Expenses

Inventories

Capital assets

Intangibles

Research and development

Income taxes

Contingencies

Pensions

Segment reporting

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

4

ten critical business issues
Ten Critical Business Issues

Reporting systems overhaul

User education

Revised tax strategies

New operating metric adoption

Compensation and benefit program modification

Lending agreement renegotiations

Employee training

Attentiveness to change management techniques

Worldwide auditing and enforcement consistency

Accounting professional availability and certification

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

5

reporting system overhauls
Reporting System Overhauls

Much more than Y2K

Numerous resources exist since IFRS is widely in use elsewhere

Integration and implementation will be time consuming, distracting and costly

Software, hardware, documentation and training

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

6

user education
User Education

Financial statements will have a new look

And contain new terminology

Financial concepts will change

The task will be similar to learning a new language

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

7

revised tax strategies
Revised Tax Strategies

Just one word: LIFO

IRS congruence will be needed

Other changes in earnings will drive a reassessment of your tax strategies

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

8

new operating metric adoption
New Operating Metric Adoption

Changes will occur in revenue and earnings

Traditional metrics will also change

New operational drivers may be required to achieve desired financial results

New operational decisions will surface, i.e.:

Impairment risk

Revenue recognition

Inventory valuation

Fair value focus

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

9

compensation and benefit program effects
Compensation and Benefit Program Effects

Changes in financial outcomes will drive changes in the terms of compensation and benefit plans

Revenue and earnings will be the primary drivers of these changes

Potential union implications

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

10

lending agreement renegotiation
Lending Agreement Renegotiation

A major red-flag

Lenders have used accounting changes as an excuse for calling loans in the past

Pay close attention to loan covenants

Get your providers of capital involved early

No surprises is the name of the game

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

11

employee training
Employee Training

The success of IFRS education is a key milestone in the SEC’s 2011 decision

The better your global roll-out, the easier your adoption will be

Be attentive to the input of your employees

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

12

attentiveness to change management techniques
Attentiveness to Change Management Techniques

Communicate and listen

Recall the six steps for successful change management

Gain consensus on the problem

Provide the vision of the solution

Pay attention to detail

Listen to your people

Select change facilitators carefully

Communicate, communicate, communicate

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

13

worldwide auditing and enforcement consistency
Worldwide Auditing and Enforcement Consistency

The adoption of IFRS is not the only issue

What about auditing consistency?

What about enforcement consistency?

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

14

accounting professionals availability and certification
Accounting Professionals Availability and Certification

Colleges and universities have to shoulder their share of the load

Can they facilitate the shift from rules to principles?

Can they teach students to think?

CPA firms will have to step up their internal training

A principles based approach will be a challenging change

Executive Education, Inc. © William F. O’Brien, 2009

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

15

key points session v
Key Points-Session V
  • IFRS and U.S. GAAP are different
  • Adoption is more than an accounting exercise

INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010