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Preparing U.S. Companies for the Transition to International Financial Reporting Standards (IFRS)
Presenters Name Presenters Title

Agenda

IFRS Overview Oracle and IFRS Summary Q&A

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Global Momentum Towards IFRS

Countries that require or permit IFRSs Countries seeking convergence with the IASB or pursuing adoption of IFRSs

Source: IASB, Dec 2007

Expected Benefits from IFRS Convergence

A single standard for global business

More efficient access to capital

Reduced cost of financial reporting

Improved transparency for investors

Its Not About Accounting; Its About Capital Markets

Impact on US Companies
Proposed implementation timeline from the SEC

2009: Limited group of large US firms are permitted to use IFRS on an optional basis for fiscal periods ending on or after Dec 15, 2009

2014: Large accelerated filers begin filing in IFRS

2016: Nonaccelerated filers begin filing in IFRS

2009

2010

2011

2012

2013

2014

2015

2016

2011: SEC evaluates achievement of roadmap milestones and decides whether to adopt a mandatory approach for IFRS

2015: Accelerated filers to begin filing in IFRS

Source: SEC Announcement, Aug 2008

Impact on US Companies
The value of starting early
Growing awareness of complex requirements Cumulative Reporting Requirements
Companies are required to retrospectively apply IFRS to all periods presented as if they had always been in effect.

drives preference for early planning and assessment

Within what timeframe would your company adopt IFRS if given a choice?
More than 7 years 2% Within 7 years 8% Dont Know 9%

Multi-GAAP During Transition

During the transition period from US GAAP to IFRS, firms must continue to report in US GAAP and any local statutories, as well as begin tracking IFRS equivalents.

Within 3 years 55%

Within 5 years 26%

Source: Deloitte, 2007

Potential Impact on Bottom Line

A study comparing of the impact of IFRS adoption in the UK reveals that net income generally rose by 39% while equity declined by 23%. UK GAAP is considered close to US GAAP in most areas.

No one anticipated how big it was going to be. Every company was too late and too slow in preparing even the good ones.
Ken Wild, Global IFRS Leader, Deloitte

Sources: European Financial Reporting Research Group; Deloitte Touche Tomatsu

Impact on US Companies
Start early for transition period with multi-GAAP

2009: Limited group of large US firms are permitted to use IFRS on an optional basis for fiscal periods ending on or after Dec 15, 2009

Transition Date? While IFRS requires 2 years of 2014: Large comparatives, best practice accelerated recommends 5 filers begin
filing in IFRS

2016: Nonaccelerated filers begin filing in IFRS

2009

2010

2011

2012

2013

2014

2015

2016

2011: SEC evaluates achievement of roadmap milestones and decides whether to adopt a mandatory approach for IFRS

2015: Accelerated filers to begin filing in IFRS

Source: SEC Announcement, Aug 2008

US GAAP vs IFRS: Whats Different?

You can make a living cataloging the differences

US GAAP: 25,000 Pages

IFRS: 2,500 Pages

Much is the Same

Approach (Some Examples)
Revenue Recognition

IFRS

US GAAP

Fair Market (e.g. AR or Inventory Valuation) Detailed Disclosure

Segment Reporting

Chart of Accounts Not Mandated

Distinction Between Tax and External Reporting

But There are Differences

US GAAP is always more specific, plus: Approach (Some Examples)
Fair Market Revaluation Extraordinary Items Consolidation Joint Ventures Research & Development Inventory Impairment

IFRS
Fixed Assets & Investments None Control Proportional OK Capitalized No LIFO 1 Step, Reversible

US GAAP
Only Certain Fixed Assets Rare (Negative Goodwill) 2 Models Only Equity Expensed LIFO OK 2 Step, No Reversal

Industry-specific Considerations
Areas of Potential Concern IFRS Change Area: Financial Services High Tech Retail Communications Utilities CPG Life Sciences
PPE = Property, Plant, & Equipment R&D = Research & Development FV =Fair Market Revaluation INV = Inventory IMPAIR = Impairment M&A = Mergers & Acquisitions

PPE

R&D

FV

INV

IMPAIR

M&A

Agenda

IFRS Overview Oracle and IFRS Summary Q&A

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Oracles History with the IASB

International Accounting Standards Board

Monitoring IFRS standards since 2000 Active member of IASB IT Company Discussion Group
Attend the Standards Advisory Council (SAC) meeting three times a year Provide input on practicality Get a heads up on features needed

National domain experts monitor Local GAAP

Select Oracle Financial Management Customers

12,000+ worldwide, with 25% in Europe
Communications Media Financial Services Consumer Technology

Energy

Industrial

Retail

Life Sciences

Services/Other

Your IFRS Action Plan

Achieve early mover advantage
Stage 1 Study Impact & Determine Strategy Stage 2 Enable Top End Reports Stage 3 Record Transactions in both GAAPS Determine impact on accounting in subsystems Configure accounting rules and set up ledgers Process and report using dual accounting Stage 4 Transform Your Business & Win with IFRS Determine changes to business model Transform operations using IFRS results Report IFRS results, increase shareholder value

Perform Preliminary Study

Collect GAAP financial results

Assess Impact

Adjust and consolidate under GAAP & IFRS

Determine Strategy

Report, reconcile and audit results

All Stages: Apply Policy and Control Management

Milestone 1 Completed Preliminary Study Milestone 2 IFRS Reports Produced Milestone 3 Transactions Recorded in Multiple GAAPs Milestone 4 Business Model Optimized

Oracle Enables Key Stages in IFRS Action Plan

Stage 1 Study Impact & Determine Strategy Stage 2 Enable Top End Reports Stage 3 Record Transactions in both GAAPS Stage 4 Transform Your Business & Win with IFRS

Oracle Enterprise Performance Management Oracle ERP Financials Other ERP Financials
Custom or Legacy

Oracle Industry Specific Applications

Oracle Governance, Risk, & Compliance Suite

All Stages: Apply Policy and Control Management

Oracle Enterprise Performance Management

Enable Top End IFRS Reporting
CORE CONSOLIDATION FEATURES Multiple reporting standards in a single solution GAAP IFRS CUSTOM DIMENSIONS Enables tracking of GAAP vs. IFRS adjustments

Flexible Rules Engine Journal Entries and Audit

DOCUMENT ATTACHMENTS Creates Electronic Binder of all adjustments

FLEXIBLE REPORTING Easy to reconcile and trend GAAP vs. IFRS results

ERP Products Designed for IFRS

E-Business Suite, PeopleSoft, JD Edwards
IAS/IFRS SUPPORT SINCE 2000 Thousands of customers overseas reporting under IFRS IAS 2 IAS 16 IAS 18 IAS 21 More Inventory Property, Plant Revenue Rec. Currency Segments, etc. Inventory, Costing FA, ALM OM, AR, BI, CA Multibook, MRC,GL Flex / ChartFields SPECIFIC IFRS FEATURES Specific functionality developed for IFRS Asset Componentization
Parent & Child Assets Child Depreciation rates differ

Impairment Processing
Impairment identification Unplanned depreciation

DUAL GAAP ACCOUNTING Ledger Set/Code:

GAAP

IFRS MIGRATION PATH Multiple Ledgers or Multi-GAAP

US Principles Expanded COA Calendar USD

Differences Expanded COA Calendar USD

Oracle Governance, Risk, and Compliance Suite

Manage changes to policies and controls
GRC DOCUMENTATION REPOSITORY
Record changes to business process due to IFRS

COMPLIANCE WORKFLOW

Automate steps to audit IFRS compliance

APPLICATION CONTROLS MONITORING Single subledger transaction creates multiple accounting representations
Control changes to ERP applications

COMPLIANCE DASHBOARDS
Monitor status of testing and exceptions

Transform Your Business & Win with IFRS

Going beyond compliance IFRS Change
IFRS OK for SEC and for 60+ countries statutories IFRS book leases as liabilities

Potential for Business Transformation

Improve dramatically your reporting process, consistency, and management vision Consider instance, ledger, data consolidation Consider shared service accounting & reporting centers Consider buying that fleet of planes you use Evolve your leasing revenue business to an equipment sales business

Capitalize R&D Move those 2009 Development expenses to the Balance Sheet recognize in P&L, matched to Revenue, in 20102011

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Andrew Midgley Head of Financial Reporting Pearson

There were fewer adjustments at the reporting unit level than we had expected and they tended to be relatively minor. They mainly related to acquisitions, intangibles, leases, and joint ventures. Adjustments at headquarters were more significant and more complex and related to pensions, share option expenses, deferred tax, and financial instruments. Given this relatively straightforward framework, the group was able to quickly establish a unified chart of accounts in Hyperion Financial Management covering UK GAAP, U.S. GAAP, and IFRS. It was then a simple matter to post the adjustments against these accounts as required. We had total visibility of the process and could instantly see the effect of changes posted anywhere in the group. Also, if we needed to maintain the central modelfor example, to collect more datawe could effect the change, and it was immediately available throughout the group. We could not have managed this so easily using our old business consolidation system.

Agenda

IFRS Overview Oracle and IFRS Summary Q&A

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Key Takeaways
Use the benefit of a realistic implementation timeline dont wait for the pressure of mandatory deadlines IFRS resources are scarce start planning and education sooner rather than later

Start Early

Report using IFRS principles with Oracle EPM

Leverage Technology

Push changes into general accounting with Oracle ERP Financials Document and test IFRS controls with Oracle GRC

Optimize Your Business

Consider how to optimize your business and gain competitive advantage through IFRS Align your business model with the new capital market model

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To Learn More
In Person Events
IFRS Briefings with PwC and Oracle: http://www.meetpwc.com/IFRSNorCal

Webcasts
Upcoming PwC-Oracle IFRS webcasts (Dec 2008 - March 2009) : www.meetpwc.com/OracleIFRS Dec. 9th on CFO.com with customer Pearson, publisher of Financial Times: http://www.cfo.com/webcast.cfm?webcast=12500164&pcode=ORA120908_Oracle

Whitepapers
Preparing US Companies for the Transition to IFRS Managing the Transition to IFRS