Presents

An Overview of IFRS
A Webinar Hosted By Deloitte

March 25, 2009 1:00 PM

An Overview of IFRS

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An Overview of IFRS

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An Overview of IFRS

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An Overview of IFRS

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An Overview of IFRS

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CMAs & CFMs can report 1-hour of CMA-approved CPE for todays event if you: Have registered for this event Participate in Live Inside IFRS Webinar Respond to all polling questions Complete evaluation during Q & A Certificate of Completion will be emailed within 3-5 business days; please print for your records Record credit in Your CPE on IMAs website in Members Only section or report credit to your Chapter Representative Allow 24 hours for the event to appear in your record

An Overview of IFRS

Asking Questions Attendee lines are muted Questions may be submitted using the Q&A icon on the right hand panel Questions will be answered after the formal presentation

An Overview of IFRS

Welcome & Introduction

Dr. Raef Lawson
VP of Research and Professor-in-Residence Institute of Management Accountants

An Overview of IFRS

Featured Presenter
D.J. Gannon Partner, Audit and Enterprise Risk Services Deloitte & Touche LLP

An Overview of IFRS

D.J. Gannon - Bio

In July 2000, D.J. Gannon joined Deloitte & Touche LLP as a partner where he specializes in international accounting and financial reporting, as well as global regulatory and professional issues. Mr. Gannon is the leader of the International Financial Reporting Standards (IFRS) Centre of Excellence for the Americas region. Prior to that he was the leader of International Financial Accounting Services, a group within the organizations Global IFRS and Offerings Services Group that assists companies in implementing or converting to International Financial Reporting Standards (IFRS). Mr. Gannon is chairman of the American Institute of Certified Public Accountants International Practices Task Force and the AICPAs Accounting Standards Executive Committees Short-Term International Convergence Task Force. He is a Certified Public Accountant in the District of Columbia and a member of the American Institute of Certified Public Accountants. He is active in speaking and writing on a variety of global financial reporting topics.
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An Overview of IFRS

Featured Presenter
Randall Sogoloff Partner, Audit and Enterprise Risk Services Deloitte & Touche LLP

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An Overview of IFRS

Randall Sogoloff - Bio

Randall Sogoloff is a partner in the National Office of Deloitte & Touche LLP in Wilton, Connecticut (USA). His role involves developing firm accounting guidance, responding to standard-setting proposals, and providing accounting consultation services. Randall is also a participant in Deloittes Global IFRS Leadership Team and part of Deloittes IFRS Centre of Excellence for the Americas region. He specializes in the accounting for leases, consolidation, and income taxes under both International Financial Reporting Standards and U.S. GAAP. Randall is also a member of the AICPAs Accounting Standards Executive Committee (AcSEC). Randall is Certified Public Accountant (CPA) in the States of Florida and Connecticut. Randall has been a frequent speaker at seminars, conferences, and executive-level meetings and has authored articles in accountancy and finance periodicals, including Journal of Accountancy, Derivatives Financial Products Report, and Deloitte Heads Up.
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An Overview of IFRS

Agenda
Background and Regulatory Developments Global move towards IFRS Recent SEC activity Early adoption provisions IFRS for non publicly accountable entities IFRS Implementation Considerations Key impacts of IFRS implementation IFRS 1 considerations Key benefits of IFRS adoption Lessons learned Wrap-up

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Copyright 2009 Deloitte Development LLC. All rights reserved.

An Overview of IFRS

Learning Objectives
Upon completing this webinar, you will be able to: Describe the global momentum toward IFRS identify the regulatory background of IFRS and recent SEC activity Follow the proposed timelines for transition and early adoption options Discuss the First Time Adoption considerations of IFRS Summarize the IASBs project on IFRS for Private Entities Understand key benefits of IFRS adoption and lessons learned to date
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An Overview of IFRS

Background and Regulatory Developments

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Copyright 2009 Deloitte Development LLC. All rights reserved.

An Overview of IFRS

The Global Move Towards IFRS

Canada 2009/11 Europe 2005 United States (2009-14?) China 2007 Mexico 2008/12 India 2011 Brazil 2010 Chile 2009 South Africa 2005 Australia 2005 Japan (?)

Current or anticipated requirement or option to use IFRS (or equivalent)

Copyright 2009 Deloitte Development LLC. All rights reserved.

An Overview of IFRS

IFRS Today and Tomorrow

Today, IFRS is used in more than 100 countries:
Required for all listed companies in EU countries, starting in 2005 Argentina, Brazil, Canada, Chile, India, Korea, and Mexico all have announced mandated use Japan currently considering allowing IFRS beginning 2010, with a requirement in 2015 FPIs can now use IFRS in the U.S. SEC Roadmap contemplates use of IFRS beginning in 2014
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Accounting Standards Used by Global Fortune 500

200

196

188

150

116
100

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By 2011, it is expected that:

All major countries will have adopted IFRS to some extent Certain U.S. public companies will have the option to use IFRS SEC decision on IFRS mandate for all U.S. public companies
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0 2007

U.S GAAP

IFRS

Other

About 40% of the Global Fortune 500 Companies currently use IFRS. That number is expected to grow as more countries adopt IFRS over the next few years.

An Overview of IFRS

What is IFRS?
IFRS is a set of established accounting standards that is rapidly gaining worldwide acceptance Standards are promulgated by the London-based International Accounting Standards Board (IASB) IASB includes representatives from major countries, including the U.S. Generally more focused on objectives and principles and less reliant on detailed rules and interpretations than U.S. GAAP IFRS currently consists of a single volume of approximately 40 standards and 25 interpretations Standards include IASs and IFRSs Interpretations include SICs and IFRICs

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Copyright 2009 Deloitte Development LLC. All rights reserved.

An Overview of IFRS

Poll Question #1 Principles-based judgments should play a more important role in the application of accounting and financial reporting standards than adherence to bright-line rules. A. Strongly agree B. Agree C. Neither agree nor disagree D. Disagree E. Dont know/Not applicable
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An Overview of IFRS

SEC Developments
Recent SEC developments
December 2007 Foreign private issuers can file under IFRS without a reconciliation to U.S. GAAP November 2008 SEC issues proposed roadmap and rule changes (comments on roadmap due on April 20, 2009) Roadmap describes milestones for the mandatory transition to IFRS starting in 2014 Proposed rule change permits the largest U.S. companies (by market cap) in IFRS predominant industries an option to adopt IFRS starting in 2009 December 2008 The G-20 adopted, as a medium-term priority, the implementation of a globally consistent set of accounting standards January 2009 Paul Volker, chairman of the Economic Recovery Advisory Board under President Obama, former IASC foundation chairman, reiterated his support for IFRS in January 2009 Mary Schapiro, SEC Chairman, in her Senate confirmation hearing, responded to questions from Senator Jack Reed, stating that she would carefully review the existing IFRS roadmap and proposed rule and would consider various factors, including the cost of implementation and independence of the IASB February 2009 SEC extends comment period on the proposed roadmap to April 20, 2009 20
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An Overview of IFRS

Summary of Proposed Rule on Early Use of IFRS

Provides information on how to assess eligibility Instructs issuers to submit their criteria for eligibility to the Division of Corporate Finance and receive a letter of no objection permitting the use of IFRS Must prepare financial statements using IFRS, as issued by the IASB Must provide three years of financials in the year of adoption Proposes alternatives on providing additional U.S. GAAP financial information Proposes amendments to the rules and regulations Establishes a new class of issuer an IFRS Issuer Proposed new Article 13 of Regulation S-X Addresses other disclosure issues such as Guide information May not use IFRS for the first time in quarterly reports, IPOs, proxy or information statements Not impact filing dates
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An Overview of IFRS

Poll Question #2 By 2014, what percentage of total eligible U.S. public companies do you believe will have used the early adoption option? A. Less than 10% B. Between 10% and 25% C. Between 26% and 50% D. Between 51% and 75% E. Between 76% and 90% F. Substantially all
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An Overview of IFRS

IFRS for Non Publicly Accountable Entities

Background Overview of Exposure Draft

IASB issued an Exposure Draft of IFRS for NPAEs in Feb.07 and proposed to issue the final standard in the 2009 Any entity that publishes general purpose financial statements for external users and does not have public accountability can use the IFRS for NPAEs.

Modifies the full set of IFRS Self-contained principles based standard Topics irrelevant to private entities omitted Simplifies the recognition and measurement principles Less fair value measurement Simplifies policy alternatives Simplifies transition from US GAAP

Reduces financial reporting burden for small and medium enterprises

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An Overview of IFRS

IFRS Implementation Considerations

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An Overview of IFRS

Illustrative Adoption Timeline

Reporting date 2014 Transition date 2012 2013 2010 2011 2009 2010 2009 Statutory Implementation Select Exemptions Targeted Prepare IFRS Statutory Implementation Opening BS Dry Runs System & Process redesign

IFRS competence

Transition to IFRS Quarterly Reporting U.S. GAAP & IFRS Investor Communication opening balance s Investor Communications Audit Procedures Change Standards

Awareness Assessment Planning Initial Training Roadmap

Alignment with other initiatives and training for appropriate personnel Rationalization and standardization of statutory reporting

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An Overview of IFRS

First-time Adoption of IFRS Overview

General Requirements Primary standard IFRS 1 Applicable when an entity makes its first explicit and unreserved reference to IFRS Guidance addresses the process around adopting IFRS for the first-time; generally apply all IFRS effective at the reporting date retrospectively Provides certain elective exemptions from retrospective application; some exceptions from retrospective application must be followed, including use of estimates, hedging and derecognition of financial assets Only requires one year of comparative financial information Effect of transition adjustments is recognized in retained earnings Requires a reconciliation of equity and income; narrative discussion of transition adjustments Exemptions from Retrospective Application Business combinations Fair value as deemed cost Employee benefits reset of corridor Cumulative translation adjustments Compound financial instruments Subsidiary, associate and joint venture reporting Designation of previously recognized financial instruments Share-based payment transactions Insurance contracts Decommissioning, restoration and similar liabilities Leases may follow IFRIC 4 Implementation Considerations Key dates such as the reporting date of the companys first IFRS financial statements, and the transition date to IFRS The overall approach to IFRS implementation Differences between existing accounting policies and IFRS Areas where extensive disclosures will be required Election and application of optional exemptions; application of mandatory exceptions Processes and data capture around first-time adoption will need to be developed

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Key Questions to Ask What are the reporting and transition dates? What voluntary elections from retrospective application have we made? Are the current information systems capable of capturing the information necessary for first-time adoption of IFRS?
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An Overview of IFRS

Poll Question #3
To what extent have you been involved in IFRS scoping and planning discussions? A. Scoping and planning activities have not been initiated B. No involvement C. Participate in a passive role D. Actively participate, looked upon as subject matter expert

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Copyright 2009 Deloitte Development LLC. All rights reserved.

An Overview of IFRS

Key Benefits of IFRS Adoption

Reduced Complexity Streamlining financial reporting process throughout global operation eliminates divergent accounting system, enables greater consistency resulting in reduced costs & increased operational effectiveness Companies also may need to convert to IFRS if they are a subsidiary of a foreign company that must use IFRS, or if they have a foreign investor that must use IFRS

Improved Transparency

Enhanced Comparability

Presentation of financial statements on the same basis as its foreign competitors making comparisons easier Greater market efficiencies can be realized. IFRS encourages both companies and investors to have easier access to multiple/foreign markets thus stimulating investment and cross border capital flow Companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide

Increased Efficiency

Greater Consistency 28

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An Overview of IFRS

Lessons Learned The Rear View Mirror

Views of preparers, users, and auditors Views of CFO/CIO organizations Most EU investors believe IFRS has improved the quality of consolidated financial statements Large multinational companies that rely more heavily upon equity financing perceive the benefits of IFRS to be greater than other companies Larger companies in the EU converted earlier and devoted considerable resources to educating and training their boards, staff, and investors Systems impacts of IFRS conversions were underestimated Its not just about accounting, its about the Process, People, Controls and Technology Primary lesson learned is not to treat IFRS as a purely technical accounting exercise Effort to convert was often underestimated Lead time from announcement to reporting date was short Late start to converting often resulted in escalation of costs, especially after transition date Many companies did not achieve a stable state for IFRS reporting Often companies neglected to take a holistic approach towards IFRS conversion resulting in an imperfect conversion effort In the EU, there is widespread agreement that IFRS has made financial statements easier to compare across countries and competitors

Lessons learned from IFRS conversions

Reaction of securities markets 29

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An Overview of IFRS

Wrap-up

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An Overview of IFRS

Poll Question # 4
Which of the following do you think would be the most significant area in IFRS for management accountants?
A. Analyzing the impact of IFRS on financial reporting B. Assessing the impact of IFRS on working capital, ratios and capital budgeting decisions C. Discussion on accounting policy choices with management D. Focus on technical accounting differences E. Technology changes due to IFRS implementation F. All of the above G. None of the above

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An Overview of IFRS

Suggested Near-Term Action Steps

Action Step Develop and analyze statutory reporting baseline Immediate Benefits Immediate understanding on statutory reporting requirements, processes, and related resources, and the existing implications of IFRS Immediate high-level understanding of the impact of IFRS adoption on your financial statements Immediate high-level understanding of the impact of IFRS adoption on your significant US and foreign tax positions Immediate high-level understanding of specific IFRS impacts on your processes, technologies, and other business activities Increase exposure and knowledge of key finance resources or IFRS standards High-level assessment of IFRS implications on company-wide finance or major system initiatives Long Term Benefits Reduced costs due to increased standardization and centralization of statutory reporting Reduced risk of error or surprises in the ultimate conversion to IFRS Identification of significant tax issues important in planning for conversion and developing a roadmap to readiness Provide realistic estimate regarding longterm effort of IFRS implementation Increased executive consensus and reduced risk of surprises Increased knowledge and familiarity of team regarding IFRS requirements Reduced risk of IFRS-related surprises as long-term financial initiatives are completed

Analysis of initial accounting implications of IFRS Preliminary analysis of significant IFRS tax provision and planning implications High level impact analysis (process, systems) and related workshops

Technical training sessions

Consideration of IFRS impact on specific long-term finance initiatives

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An Overview of IFRS

Use the Q & A Panel to send your questions to our panelists

Questions & Answers

D.J. Gannon
Partner, Audit and Enterprise Risk Services Deloitte & Touche LLP 33

Randall Sogoloff
Partner, Audit and Enterprise Risk Services Deloitte & Touche LLP

Dr. Raef Lawson

VP of Research and Professor-in-Residence Institute of Management Accountants

An Overview of IFRS

Thank You to Our Featured Presenters

D.J. Gannon
Partner, Audit and Enterprise Risk Services Deloitte & Touche LLP dgannon@deloitte.com 34

Randall Sogoloff
Partner, Audit and Enterprise Risk Services Deloitte & Touche LLP rsogoloff@deloitte.com

An Overview of IFRS

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An Overview of IFRS

Inside IFRS 2009 Calendar of Events!

May 20, 2009 August 13, 2009 September 23, 2009 November 2009 (tentative)

IFRS Financial Reporting Presentation Considerations IFRS Financial Reporting Entities IFRS Financial Reporting Assets and Revenue IFRS Financial Reporting Liabilities

New IFRS Course Package

IMA IFRS Series: Embracing IFRS: A Background Primer 2 NASBA-approved CPE Credits www.imanet.org/cpe
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An Overview of IFRS

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