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The Current State of IFRS. The Current State of IFRS Objectives & Agenda. Objectives. Agenda. What is IFRS? Convergence Resources. Recognize what IFRS is and when it will become important. What is IFRS? IASB Structure. Trustee Appointments Advisory Group. IASC Foundation. advises.

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The Current State of IFRSObjectives & Agenda

Objectives

Agenda

  • What is IFRS?

  • Convergence

  • Resources

  • Recognize what IFRS is and when it will become important


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What is IFRS?IASB Structure

Trustee

Appointments

Advisory

Group

IASC

Foundation

advises

appoints

oversees

funds

appoints

appoints

reports

reports

SAC

IASB

IFRIC

interprets

advises

creates

IFRS

high quality, enforceable and global


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What is IFRS?IASB Standards and History

1973 International Accounting Standards (IAS)

2001 SIC Interpretations (SIC)

2001 International Financial Reporting Standards (IFRS)

Present IFRIC Interpretations (IFRIC)


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IASB Standards

RESEARCH

Agenda Decision

DiscussionPaper (DP)

(Optional)

PROPOSALS

PROPOSALS

  • Input from:

  • Advisory Council

  • Working Group

  • International Groups;Analysts; Preparers;Audit technical partners

  • Special interest groups

  • Local standard-setters

  • Regulators

  • Political groups

Public Consultation

ExposureDraft (ED)

Public Consultation

FeedbackStatement

Published IFRS

Jurisdictional adoption process

IASB two year post-implementation review


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What is IFRS?8 IFRSs in effect at 1 January 2008


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What is IFRS?29 IASs in effect at 1 January 2008


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What is IFRS?29 IASs in effect at 1 January 2008, continued


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What is IFRS?29 IASs in effect at 1 January 2008, continued


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What is IFRS?24 Interpretations of the IFRIC and its predecessor, the SIC, in effect at 1 January 2008


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What is IFRS?24 Interpretations of the IFRIC and its predecessor, the SIC, in effect at 1 January 2008, continued


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What is IFRS?24 Interpretations of the IFRIC and its predecessor, the SIC, in effect at 1 January 2008, continued


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What is IFRS?Current State

Countries that require or permit IFRSs for domestic entities

Countries seeking convergence with, or pursuing adoption of, IFRSs

Source: Deloitte – www.iasplus.com


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Take 5 minutes to complete

Activity 1Principles vs. Rules

Discuss the advantages for a more or less principles-based standard for each category.


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Group check

IFRS are pure principles-based standards

True

False


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Group check Debrief

IFRS are pure principles-based standards

True

False


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Group check

U.S. GAAP are not based on sound, accepted accounting principles

True

False


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Group checkDebrief

U.S. GAAP are not based on sound, accepted accounting principles

True

False


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What is IFRS?Principles vs. Rules

Rules Only

Principles Only

U.S.

GAAP

IFRS


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Balance sheet

Income statement

A statement showing either:

All changes in equity; or

Changes in equity other than those arising from capital transactions with owners and distributions to owners (called a Statement of Recognised Income and Expense (SORIE))

Cash flow statement (no exemptions)

Accounting policies and explanatory notes (IAS 1.8)

Balance sheet

Income statement

Statement of comprehensive income. This statement may be combined with the income statement or the statement of changes in stockholders’ equity (SFAS130.22)

Statement of changes in stockholders’ equity.

Alternatively, disclosure of changes in the separate accounts comprising stockholders' equity (in addition to retained earnings) could be made in the notes to financial statements (APB 12.10)

Statement of cash flows (limited exemptions; see Section 2.5)

Notes to financial statements

Financial Statement Comprise: IFRS GAAP


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A finance lease is not determined by a bright lines test. Instead, IAS 17 lists factors normally indicating a finance lease, including any of the following (IAS 17.10):

Transfer of ownership by end of lease term

Lessee has option to purchase asset on such favourable terms such that option exercise is reasonably certain at inception

Lease is for major part of asset's life, even if no purchase option exists

Present value of minimum lease payments at inception amounts to at least substantially all of the fair value of the leased asset

Leased assets are specialised such that only the lessee can use them without major modification

A capital lease is one that meets one or more of the following criteria (SFAS 13.7):

Lease transfers ownership of the property to the lessee by the end of the lease term

Lease contains a bargain purchase option

Lease term is equal to 75 percent or more of the estimated economic life of the leased property.*

Present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at the inception of the lease over any related investment tax credit retained by the lessor and expected to be realized by the lessor.*

For the lessor to classify a lease as a capital lease, the following additional criteria must also be met (SFAS 13.8):

Comparison of IFRS and US GAAP IFRS GAAP


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What is IFRS?Principles vs. Rules

  • Industry accounting not adequately addressed

    • Insurance contracts

    • Extractive activities

  • No IFRS equivalent

    • In absence of a standard that specifically applies,

      • Management should use judgment

      • Should not conflict with IFRS

      • May also consider other GAAP


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The Current State of IFRSObjectives & Agenda

Objectives

Agenda

  • What is IFRS?

  • Convergence

  • Resources

  • Recognize what IFRS is and when it will become important

  • Communicate key points about IFRS to your clients


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ConvergenceDefinition

Where transactions or events are the same or similar, the accounting should be the same, or there should be enough transparency in the disclosures to allow the reader to understand the differences.

(Plus a continuing effort by standard setters to

reduce differences between systems over time.)


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Lower risk premium

Lower cost of capital

ConvergenceMovement toward one set of standards - benefits

Investor confidence and understanding


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Greater credibility

Greater comparability between companies wherever they are

Greater cross-border capital flows

Most efficient allocation of capital

Thriving economies

ConvergenceMovement toward one set of standards - benefits

Greater transparency


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ConvergenceMovement toward one set of standards - obstacles

  • National pride

  • Endorsement process

  • Legal issues

  • Standard setters

  • Language


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Group check

Which of the following is most correct?

  • U.S. GAAP and IFRS are already converged

  • U.S. GAAP and IFRS are not converged but will be eventually

  • U.S. GAAP and IFRS will never be converged

  • U.S. GAAP and IFRS are sufficiently converged to be acceptable in the U.S. capital markets


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Group checkDebrief

Which of the following is most correct?

  • U.S. GAAP and IFRS are already converged

  • U.S. GAAP and IFRS are not converged but will be eventually

  • U.S. GAAP and IFRS will never be converged

  • U.S. GAAP and IFRS are sufficiently converged to be acceptable in the U.S. capital markets


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ConvergenceU.S. Convergence – FASB/IASB

  • 2002 Norwalk Agreement

  • 2006 Memorandum of Understanding (MOU)

  • 2008 Memorandum of Understanding (MOU)


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ConvergenceU.S. Convergence – FASB/IASB

  • FASB adopts IASB standard

    • Fair value option (SFAS 159)

    • Research and development assets acquired in a business combination (SFAS 141 – revised 2007)

  • IASB adopts FASB standard

    • Borrowing costs (IAS 23 – revised 2007)

    • Segment disclosures (IFRS 8)


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ConvergenceU.S. Convergence - FASB/IASB

Short–term convergence

Short-term projects deferred

  • Government grants

  • Impairment


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ConvergenceU.S. Convergence – FASB/IASB

Major joint projects

  • Consolidations

  • Derecognition

  • Fair value measurement

  • Financial instruments

  • Financial statement presentation

  • Leases

  • Liabilities and equity distinctions

  • Post-employment benefits (including pensions)

  • Revenue recognition


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ConvergenceU.S. Convergence – FASB/IASB

Conceptual Framework – joint project

  • Mentioned in the 2008 MOU; however no specific timetable

  • Major joint projects will take account of ongoing Conceptual Framework projects


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ConvergenceU.S. Convergence - SEC

Roadmap – 7 milestones

  • Improvements in accounting standards

  • Funding and accountability of IASCF

  • Improved ability to use XBRL for IFRS

  • Education and training on IFRS in the U.S.

  • Limited early use by select few

  • Anticipated future rulemaking

  • Potential implementation sequence – FYE on or after 15 December

    • Large Accelerated Filers 2014

    • Accelerated Filers 2015

    • Non-Accelerated Filers 2016


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What’s your opinion?

Within the next few years the FASB will be irrelevant and should disband

True

False


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ConvergenceU.S. Convergence - SEC

  • Policy issues

  • International Organization of Securities Commissions (IOSCO)

August2007

ProposingRelease

2000Concept Release

April2005Roadmap

December2007Final Rule

March 2007

Roundtables

July 2007ProposingRelease

December2007Roundtables


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ConvergenceRest of the world


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ConvergenceRest of the world, continued


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ConvergenceApplication

  • Jurisdictional variations

  • Different interpretations

  • Small and Medium-sized Entities (SMEs)


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What’s your opinion?

Choose either View A or View B


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Take 2 minutes to complete

Activity 2Are companies ready for IFRS?

Discuss the characteristics of a company that is unprepared to adopt IFRS and one that is prepared.


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Activity 2Debrief


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Next StepsWhat you need to know

  • Whether and when to switch to IFRS

  • Required

  • Competition

  • Cost / benefit

  • Future developments


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How will movement to IFRS impact Financial Reporting?Concerns:

  • Data collection

  • Potential impact on tax liability

  • Potential increased volatility in reporting

  • Potential change in patter of earnings

  • Potential increased financial disclosures


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How will movement to IFRS impact Financial Reporting?Benefits:

  • Potential cost savings

  • Opportunity to review and improve process

  • Potential impact on tax liability

  • Increased access to funds and markets


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Top Twenty Issues to Consider

1 IAS 1 Presentation issues: judgments and estimates

2 IAS 1 Presentation issues: primary statement formats

3 IAS 36 Impairment disclosures

4 IFRS 3 Goodwill justification disclosure

5 IFRS 3 Other business combination issues and disclosures

6 IFRS 7 Financial instruments: disclosures

7 IAS 12 Deferred tax accounting and disclosure

8 Accounting policies general messages

9 Accounting policies specific problems: revenue

10 Accounting policies specific problems: financial instruments

11 IFRS 1 Explanation of transition to IFRS

12 IFRS 5 Non-current assets held for sale and discontinued operations

13 IAS 14 Segment information

14 IAS 37 Provisions disclosure

15 IAS 39 Financial instruments: recognition and measurement

16 Standards in issue not yet effective

17 Operating items and exceptional items

18 Comparative information

19 IAS 19 Employee Benefit Disclosures

20 Detail counts don't forget


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The Current State of IFRS

Objectives

Agenda

  • What is IFRS?

  • Convergence

  • Resources

  • Recognize what IFRS is and when it will become important

  • Communicate key points about IFRS to your clients


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Grant Thornton Resources

  • IFRS Resource Center

    http://www.grantthornton.com/portal/site/gtcom/menuitem.91c078ed5c0ef4ca80cd8710033841ca/index561b974be30c92e309882716712c24c3.html?vgnextoid=bb444cfadd5d3110VgnVCM1000003a8314acRCRD


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For additional information, visit these Web sites:

AICPA

  • International Financial Reporting Standards (IFRS) – An AICPA Backgrounder at www.ifrs.com

  • For the latest information on the status of IFRS and educational opportunities visit www.ifrs.com

    IASB

  • Memorandum of Understanding with the FASB:

    http://www.iasb.org/Current+Projects/Memorandum+of+Understanding+with+the+FASB.htm

  • IFRS summaries:

    http://www.iasb.org/IFRS+Summaries/IFRS+and+IAS+Summaries+English+2008/IFRS+and+IAS+Summaries+English.htm

    FASB

  • Overview of International Activities: http://www.fasb.org/intl/

    SEC

  • International Financial Reporting Standards Road Map: http://www.sec.gov/spotlight/ifrsroadmap.htm


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