International Financial Reporting Standards IFRS AGN North American Regional Meeting Asheville NC 18 May 2010

1. International Financial Reporting Standards (IFRS)AGN North American Regional Meeting Asheville NC18 May 2010 A Practical Outlook Liam McQuaid Managing Partner

2. Page 2 Introducing Liam McQuaid Managing Partner - Duignan Carthy O�Neill Chairman AGN Europe Director AGN International Member of ASB CASE Committee Member of Accounting Committee � Chartered Accountants Ireland

3. Page 3 Introducing Duignan Carthy O�Neill, Chartered Accountants, Dublin, Ireland Established over 40 years, Chartered Accountants Services Include: - Audit & Accounting - Tax & Liquidations - Corporate Finance - Foreign direct Investment Partners - Extensive Experience & International Work through AGN PCAOB Registered to undertake audits in Ireland and U.K. of US Public Company Subsidiaries

4. Page 4 IFRS � A Practical OutlookOverview of Issues IASB /FASB US GAAP & IFRS : Differences in Practice  IFRS for SMEs : Application in Practice IFRS Conversion in Practice Foreign Direct Investment to Ireland 

5. Page 5  IASB / FASB

6. Page 6  What is the IASB?

7. Page 7 IASB / FASBIASB: International Accounting Standards Board Independent, private-sector body formed in 2001 Develops and approves International Financial Reporting Standards Under the oversight of the International Accounting Standards Committee Foundation IASCF: International Accounting Standards Committee Foundation Independent, non-profit foundation created in 2000 to oversee the IASB 

8. Page 8  What are IASB�s Objectives?

9. Page 9 IASB / FASBIASB�s Objectives To develop in the public interest, a single set of high quality, global accounting standards to help participants in the world�s capital markets and other users make economic decisions To promote the use of those standards To take account of the needs of small and medium-sized entities and emerging economies To bring about convergence of national accounting standards and International Financial Reporting Standards to high quality solutions 

10. Page 10  What is the IASB�s Structure ?

11. Page 11 IASB Structure 

12. Page 12 IASB / FASBIASB Structure International Accounting Standards Board (IASB) � has sole responsibility for establishing International Financial Reporting Standards (IFRSs) IASC Foundation (IASCF) � oversees the work, structure and strategy of the IASB, and has fundraising responsibility IASCF Monitoring Board � overseas the IASCF Trustees, participates in the Trustee nomination process, and approves appointments to the Trustees

13. Page 13 IASB / FASBIASB Structure International Financial Reporting Interpretations Committee (IFRIC) � develops interpretations for approval by the IASB Standards Advisory Council (SAC) � advises the IASB and the IASCF Working Group � expert task forces for individual agenda projects

14. Page 14  What is Composition of IASB Boards?

15. Page 15 IASB / FASBWhat is Composition of IASB Boards? Monitoring Board Relevant Leaders of the European Commission The Japanese Financial Services Agency The US Securities and Exchange Commission The Emerging Markets Committee of IOSC, and the Technical Committee of IOSCO The Chairman of the Basel Committee on Banking Supervision will be a non-voting observer 

16. Page 16 IASB / FASBTrustees of the IASC Foundation 22 Trustees Geographical balance of Trustees Six : North America  Six : Europe Six : the Asia/Oceania region Four : from any area, subject to overall geographical balance 

17. Page 17 IASB / FASB International Accounting Standards Board Geographical mix of IASB members Four : Asia/Oceania region Four : Europe Four : North America One : Africa One : South America Two : From any area, subject to overall geographical balance 

18. Page 18 IASB / FASBStandards Advisory Council (SAC) SAC has 30 or more members Diverse geographic and functional backgrounds International Financial Reporting Interpretations Committee (IFRIC) 14 Members 

19. Page 19  What is IASB Funding?

20. Page 20 IASB / FASB IASC Foundation � Funding 

21. Page 21  What is IASB Foundation Financial Position?

22. Page 22 IASB / FASBIASC Financial Position � 2008 �Stg Million Income 19.8 Expenses (19.2) ____ Profit 0.6 ==== Assets 16.4 Liabilities (7.4) ____ Net Assets 9.0 ==== 

23. Page 23  What is IASB Standard Setting Process?

24. Page 24 IASB / FASBStandard Setting Process Identify issues Study national accounting requirements Consult the Standards Advisory Council Form an advisory group Publish for public comment a discussion document Publish for public comment an exposure draft

25. Page 25 IASB / FASBStandard Setting Process 7. Publish within an exposure draft a basis for conclusions 8. Consider all comments received 9. Consider public hearing and field tests 10. Approve a standard by votes of at least nine IASB members 11. Publish within a standard a basis for conclusions �Quality means doing it right when no one is looking� Henry Ford 

26. Page 26 IASB / FASB Major Economies Using IFRS For Listed Entities

27. Page 27 IASB / FASB Major Economies Using IFRSfor Listed Entities

28. Page 28 IASB / FASB Major Economies Using IFRSfor Listed Entities

29. Page 29 IASB / FASB Major Economies Using IFRSfor Listed Entities

30. Page 30 What is FASB?

31. Page 31 IASB / FASBFASB - FACTS Since 1973 FASB has been the designated organization in the private sector for establishing standards of financial accounting SEC approved Mission is to establish and improve standards for financial accounting and reporting for private sector, not-for-profit, and state and local government entities

32. Page 32 IASB / FASB

33. Page 33 IASB / FASB FASB � Standard Setting Process

34. Page 34 IASB / FASB FASB � FINANCES 2009 US$ Million Revenues 38 Expenses (36) ___ Operating Profit 2 ==== US$ Million Assets 70 Liabilities (11) ____ Net Assets 59 ===

35. Page 35 IASB / FASB CONCLUSION IFRS FASB - Robust Structure Yes Yes - Sound Finances Yes Yes - Strong Standard Setting Process Yes Yes - Independent Yes Yes - Global Outlook Yes No 

36. Page 36 Chronology of Key Events for IASB

37. Page 37 IASB / FASBChronology of the Key Events for IASB 2001 Trustees appoint the initial 14 members of the IASB European Commission presents legislation to require use of IASC standards for all listed companies no later than 2005 2002 Europe adopts regulation requiring all listed companies, to prepare their consolidated accounts in accordance with IAS starting 2005 FASB and IASB hold a joint meeting and issue a memorandum of understanding 

38. Page 38 IASB / FASB Chronology of the Key Events for IASB 2003 European Commission endorses all existing IAS (except IAS 32 and 39) for use in Europe 2004 European Commission endorses all IAS and IFRS for use in Europe except two sections of IAS39 2005 SEC published �roadmap� to eliminating reconciliation from IFRS to US GAAP 

39. Page 39 IASB / FASB Chronology of the Key Events for IASB 2008 SEC proposed �roadmap� for use of IFRS by US domestic registrants 2009 IASB and FASB agree to meet monthly to achieve the goal of converging IFRSs and US GAAP by June 2011 2010 IASB and FASB issue quarterly report showing progress toward convergence goal �To climb steep hills requires slow pace at first� William Shakespeare � Henry VIII 

40. Page 40  IFRS is coming to the USBe Prepared !!

41. Page 41 US GAAP & IFRS Differences in Practice

42. Page 42 US GAAP and IFRS Differences in Practice

43. Page 43 US GAAP and IFRS Differences in Practice

44. Page 44 US GAAP and IFRS Differences in Practice

45. Page 45 US GAAP and IFRS Differences in Practice

46. Page 46 US GAAP and IFRS Differences in Practice

47. Page 47 US GAAP and IFRSDifferences in Practice

48. Page 48 US GAAP and IFRS Differences in Practice

49. Page 49 US GAAP and IFRSDifferences in Practice

50. Page 50 US GAAP and IFRSDifferences in Practice

51. Page 51 IFRS for SMEsApplication in Practice

52. Page 52 IFRS for SMEs  Application in Practice Overview of Issues History What Companies will IFRS for SMEs apply to? Characteristics E.U. Perspective Stage of Adoption �IFRS for SMEs� in Practice � Recognition � At Date of Transition Training Modules

53. Page 53 History

54. Page 54 IFRS for SMEs � History June 2004 : Discussion Paper (117 comments) Oct 2005 : Roundtable Discussions  Feb 2007 : Exposure Draft (162 comments) Nov 2007 : Field tests (116 real SMEs) June 2009 : Ballot draft sent to the Board (13 in favour � 1 dissented) July 2009 : Final IFRS for SMEs issued 

55. Page 55 IFRS for SMEs � History Some �firsts� for the IFRS for SMEs: First discussion paper ever from IASB First exposure draft published in other than English First field testing Largest IASB Working Group ever First full set of model financial statements First presentation and disclosure checklist

56. Page 56 What Companies will  IFRS for SMEs apply to ?

57. Page 57 What Companies Will IFRS for SMEs apply To ? IFRS for SMEs is appropriate for an entity with no public accountability: - Not publicly traded: and - Not a financial institution Entity whose securities are publicly traded has public accountability - Need for full IFRS for investor protection - Even if small in size No quantified size test Standard could be used by over 95% of Companies in U.K. and Ireland 

58. Page 58  Characteristics

59. Page 59 Characteristics It is short Topics not relevant to target user omitted Recognition and Measurement Simplifications Layout Reduced Disclosures User Friendly Basis of Conclusions Stand Alone Document

60. Page 60 CharacteristicsIt Is Short

61. Page 61 CharacteristicsTopics not relevant to target user omitted Special accounting for assets held for sale OUT Interim financial reporting OUT Earnings per share OUT Segment Reporting OUT

62. Page 62 Characteristics Recognition and Measurement Simplifications Financial Instruments Simplified R & D costs Simplified Associates & Joint Ventures Simplified Income Taxes Simplified Employee benefit - DB plans Simplified �All the great things are simple� Winston Churchill

63. Page 63  Characteristics Recognition & Measurement Simplifications Financial instruments: - Measured at cost or fair value - Drop �continuing involvement� and �pass through� tests for derecognition - Much simplified hedge accounting Expense all R & D Cost, equity or fair value method for associates and JVs Income taxes � exceptions eliminated, simplified explanations

64. Page 64 Characteristics Recognition & Measurement Simplifications Defined benefit plans - All actuarial gains and losses must be recognised in profit and loss or other comprehensive income - Use projected unit credit method if no �undue cost or effort� Less fair value for agriculture � only if �readily determinable without undue cost or effort� First-time adoption - less prior data Goodwill impairment � Amortise over useful life (10 years if no estimate possible)

65. Page 65 CharacteristicsRecognition and Measurement Simplification Fewer options than in full IFRS are included. Cost for property, plant, equipment and tangibles Expense all borrowing costs One method for all grants Cost for investment property (unless fair value can be measured without undue cost) �Life is not complex. We are complex. Life is simple and the simple thing is the right thing� Oscar Wilde

66. Page 66 CharacteristicsLayout Asset / Liability category Measurement rules Disclosures

67. Page 67 Characteristics Reduced Disclosures Full IFRS � more than 3,000 items in disclosure checklist IFRS for SMEs � fewer than 400 Simplifications based on users� needs and cost-benefit: - Dropped: public capital market disclosures and those relating to topics or options not covered in IFRS for SMEs

68. Page 68 Characteristics User Friendly Implementation guidance in addition to the IFRS for SMEs Pro forma financial statements included Disclosure check list included

69. Page 69 Characteristics Basis of Conclusions IASB gives reasons for its decisions in a separate document Transparency of the highest order �Simplicity is the Ultimate Sophistication� Leonardo Da Vinci

70. Page 70 Characteristics Stand-alone Document Find answers in the IFRS for SMEs: - By analogy, and - By using pervasive principles in first section of IFRS for SMEs No mandatory fallback to full IFRSs IASB Update every 2 years if needed

71. Page 71 E.U. Perspective

72. Page 72 E.U. Perspective Full IFRSs: E.U. mandatory for PLCs IFRS for SMEs � May also be E.U. approved EU Commission to consider IFRS for SME�s as part of European Accounting Directive Review

73. Page 73 Stage of Adoption of IFRS for SMEs

74. Page 74 Stage of Adoption of IFRS for SMEs Plan to require Plan to permit Plan to require or Permit Bahamas Argentina Australia Brazil Austria Hong Kong Cyprus Chile New Zealand Ireland Denmark Norway Portugal United States Romania Singapore Iceland South Africa Netherlands Turkey Slovakia United Kingdom Sweden

75. Page 75 IFRS for SMEs In Practice - Recognition - At date of Transition

76. Page 76 IFRS for SMEs in Practice � Recognition Recognition Property Plant & Equipment - At cost less depreciation less impairment Investment Property - As above Inventories - Lower of cost and estimated selling price less costs to complete and sell - Recognise impairment if applies

77. Page 77 IFRS for SMEs in Practice - Recognition Recognition Receivables � Short term - Undiscounted Cash Receivable � Long term - Discounted Cash Receivable Payables � Short term - Undiscounted amount owed Intangible Assets - Probable future benefits (Excluding goodwill) + Cost measured reliably + Not internally generated Goodwill - At cost less amortisation less impairment - Assume 10 year life

78. Page 78 IFRS for SMEs in Practice - Recognition Recognition Borrowing Costs � Expense all Sale of Goods � Risks transferred to buyer and No managerial involvement and Revenue measured reliably and Probable benefits and Costs measured reliably Post Employment Benefits Defined Contribution � Expense Contribution

79. Page 79 IFRS for SMEs in Practice at Date of Transition An entity may use the following exemptions: Business combinations Share-based payments transactions (c) Fair value as deemed cost (d) Revaluation as deemed cost Cumulative translation differences Separate financial statements

80. Page 80 IFRS for SMEs in Practice at Date of Transition An entity may use the following exemptions: (g) Compound financial instruments (h) Deferred Income Tax Service concession arrangements (j) Extractive activities (k) Arrangements containing a lease (l) Decommissioning liabilities included in the cost of property, plant and equipment

81. Page 81 IFRS for SMEs in Practice  at Date of Transition An entity shall not retrospectively change accounting for the following: (a) Derecognition of financial assets and financial liabilities (b) Hedge accounting (c) Accounting estimates (d) Discontinued operations  (e) Measuring non-controlling interests

82. Page 82 IFRS for SMEs in Practice at Date of Transition Impractible If it is impractcaible for an entity to restate the opening financial position the entity shall apply such adjustments in the earliest period for which it is practicable to do so  Shall identify the data presented for prior periods that are not comparable If it is impracticable to provide prior period disclosures required the omission shall be disclosed

83. Page 83 Training Modules Published by the IASB See website www.iasb.org or www.iasplus.com  

84. Page 84 IFRS Conversion in Practice - Role of CPAs - Lessons Learned - Ethical Issues - Project Planning

85. Page 85 Role of CPAs

86. Page 86 IFRS Conversion in Practice Role of CPAs Conversion Costs 0.1% to 0.7% of Turnover - 40% Technology - 40% Processes - 20% Accounting Work Costs = Fees for CPAs Costs vary depending on - Industry - Size - Complexity - Staff Abilities - Accounting policies C PA Involvement - Firm Size - Partner/Staff Abilities

87. Page 87 IFRS Conversion in Practice Role of CPAs DCON Experience Educate / Advise Clients Do 1st Conversion Solve Problem Issues Nominate IFRS Partner Training - Partners / Staff - IFRS Diploma �Education is not the filling of a bucket, but the lighting of a fire� W. B. Yeats

88. Page 88 IFRS Conversion in Practice Role of CPAs DCON Experience IFRS Tools - Disclosure Checklist / Audit Programme - Standard Financial Statements Advise Client on Future Changes �Rule No. 1 - Don�t Lose Money Rule No. 2 - Don�t forget Rule No. 1 Rule No. 3 - Don�t go into debt � Warren Buffet

89. Page 89 Lessons Learned

90. Page 90 IFRS Conversion in Practice Lessons Learned  General Start Early  Identify GAAP Differences that affect clients  Invest Appropriate Time Plan Project Provide Resources Manage the Process Be Focused Tailor Training Remember your Stakeholders �The secret of all victory lies in the organisation of the non-obvious� Marcus Aurelius 

91. Page 91 IFRS Conversion in Practice Lessons Learned  DCON Experience Plan the project - Nominate IFRS Partner - Identify Problems Early Training - Partners / Staff Disclosures - Time Consuming - Check Lists - Reporting Pack Financial Instruments - Major Issues Derivatives are �Time Bombs� - �Financial weapons of mass destruction� Warren Buffet 

92. Page 92 IFRS Conversion in Practice Lessons Learned DCON Experience Time Commitment - Not all Recovered Simple Company - No Major Issues Avail of IFRS Exemptions - IFRS 1 Parallel Running Reconcile IFRS to Local GAAP Companies only move to IFRS when they have to: - Legislation - Fund Raising - Benefit IFRS will generate fees 

93. Page 93 Ethical Issues

94. Page 94 IFRS in Practice Ethical Issues Listed Entity Independence Opportunity for Fees �A reputation is like fine china � expensive to acquire and easily broken� Mr. Kiemt / Warren Buffet Prototype 

95. Page 95 Project Planning

96. Page 96 IFRS for SMEs in Practice  Key question our clients must ask: What are the major differences between IFRS and US GAAP for our organization? What will be the likely impact on our financial statements, including disclosures How will our financial reporting system be able to capture the data required by IFRS? What is the estimated directional impact on profit and equity if our financial statements were presented under IFRS? What other impacts might the transition to IFRS have?

97. Page 97 IFRS for SMEs in Practice  Key question our clients must ask: Do we have adequate resources to manage the transition efficiently? What is the impact on new and existing internal controls over financial reporting for certification purposes? What are the training needs of our finance and other personnel? �There are two forces that unite men � fear and interest� Napolean Bonaparte

98. Page 98 IFRS Conversion in PracticeKey elements of Change over Plan The key elements of a changeover plan would include addressing the impact of IFRS on: Accounting policies and implementation decisions. Information technology and data systems Internal controls over financial reporting Disclosure controls and procedures, including investor relations and external communications plans Sufficiency of financial reporting expertise, including training requirements Business activities, such as foreign currency and hedging, debt covenants, capital requirements and compensation arrangements.

99. Page 99 IFRS Conversion in PracticeManaging your IFRS Changeover Engage stakeholders early Share vision of project with stakeholders Select qualified project manager Establish project management disciplines and governance structures including: Appropriate project sponsorship. Clearly defined roles and responsibilities. Detailed budget and resource plan. Issues resolutions process. Regular and informative communications to the project team, the audit committee, and other key stakeholders.

100. Page 100 IFRS for SMEs in Practice Project Actions Required Accounting and Reporting Identify GAAP differences Identify additional IFRS disclosure requirements Update accounting policies and procedures Access impact on tax and regulatory reporting Modify financial statements presentation Revise and/or design and implementation templates for data gathering

101. Page 101 IFRS for SMEs in Practice Project Actions Required Systems & Processes Identify information �gaps� for conversion Assess impact on internal controls and certification processes Identify current system functionality/suitability, related new IT system needs, and period-end-close contingency plans Tailor chart of accounts considering regulatory and IFRS accounting needs

102. Page 102 IFRS for SMEs in Practice Project Actions Required Business Develop communication plans for all stakeholders, including: Audit Committee/Board Corporate units and lines of business Regulators Shareholders/debt holders/analysts External auditors Assess internal reporting and key performance indicators Assess impact on general business issues, such as contractual terms, treasury practices, risk management practices

103. Page 103 IFRS for SMEs in Practice Project Actions Required People Develop and execute training plans for all corporate units and lines of business: IFRS technical topics New accounting policies and reporting procedures Changes in processes and controls Revise performance evaluation targets and measures, and communicate to affected personnel Consider impact on incentive compensation programs �Common sense is not so common� Voltaire

104. Page 104 Foreign Direct Investment to Ireland

105. Page 105 Ireland in Summary Population � Est. 4.4 million Total at work 2009 � 1.85 million Unemployment 2009 � 11.75% GDP per capita �41,115 � I am Irish. We think sideways� Spike Milligan

106. Page 106

107. Page 107 Pharmaceutical Companies in Ireland

108. Page 108 Medical Technologies in Ireland Europe�s leading location for the medical device industry 88 Foreign companies exporting over �3bn Employing 23,500 people in IDA supported companies 17 of the World�s top 25 companies present in Ireland Integrated manufacturing, R&D, customer support and value added services �All I ask is a chance to prove that money can�t make me happy� Spike Milligan

109. Page 109 Overseas ICT Investment in Ireland

110. Page 110 Financial Services Companies

111. Page 111 Consumer, Content and Business Services in Ireland

112. Page 112

113. Page 113 �Be sincere, be brief; be seated� Franklin D Roosevelt

114. Page 114 Duignan Carthy O�Neill, Chartered Accountants 84 Northumberland Road, Dublin 4, Ireland Contact: Liam McQuaid + 353 1 668 2404 liammcquaid@dcon.ie Web Site: www.dcon.ie