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Corporate Governance Revisited IFRS The World Scenario Challenges in Forward Path Key Questions from Audit Committee and Board of Directors
The Big Question - Is Good Corporate Governance GAAP Agnostic? Incorporate new changes from Deloittes views File: CFO collection : Risk Delloite on Audit Committee Questionnaire
http://www.corpgov.deloitte.com/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/USEn g/Documents/Audit%20Committee/Audit%20Committee%20Resource%20Guide/audit%20committee%20perfor mance%20evaluation.pdf
Pinnacle
Entity Division
Frequency
Reporting to
Frameworks
Functions
Corporate Governance
Sustainability *
Oriented towards Tripple P Bottom Line * To be directly or indirectly impacted more by IFRS / IND AS
Protect Existing + Enable Growth = More Results for Stake Holders
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Countries that have already adopted IFRS are shaded with blue Countries in the process of adoption of IFRS are shaded in grey (Source. www.iasb.org)
No blackout period expected from IASB in transition course up to 2014 Substantial changes expected in Standards - Revenue, Consolidation Deferred Tax, Lease, Financial Liabilities Uncertainties about schedule in the USA albeit expected by 2014 / 15 Implementation challenges Scarce resources and IT solution Change in mindset of all concerned - Substance over Form
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Findings
European firms with strong CG engage in higher financial reporting quality Firms with more independent and active Boards and especially with more effective Audit Committees disclose substantially more information about the impact of IFRS A corporate with strong governance Disclose more extensive on specific Standards Use the timing adoption flexibility in a conservative fashion while Weak ones tend to use this option in an opportunistic fashion.
Arnt Verriest, Tilburg University , Netherlands
Ann Gaeremynck Catholic University of Leuven, Belgium Daniel B. Thornton Queen's University, Canada November, 2009
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1266698
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Mandatory tests and measurements Covenant compliance Classification of Current liabilities Test of Going concern
Socio Economic Impacts of IFRS Some researched out thoughts . Introduction of IFRS should be re-examined from at least two distinct perspectives: 1. the use, misuse, and abuse of principle-based Fair Value Accounting (FVA) in the wider arena of socio-economies . FVA should be re-examined as a specific mode of information that changes the epistemic, operational and control frameworks of various organisations 2.The long term consequence of adoption or convergence which would affect the Sovereign Right and National Strategy to control Indias socio-economy for the sake of sustainable growth . The mode of international standards should be reexamined for whether it will affect the power balance between Indian Government and international organizations (Page 3) We are not concerned with isolated corporate scandals. . concerned about the indirect , long term, mental impacts of the new accounting on the socio-economies in India. (Page 114) Contd. ..
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Once the global accounting standards are implemented, the performance of Indian companies and industries is likely to be compared with that of other countries without taking social needs and context into account. (Page 115) Convergence is a carefully crafted although it may not be commonly understood definition or the one desired by IASB. (Page 115) Chinese political leaders have treated accounting as a matter of national strategy . Converted accounting as a governmental tool to transform communist business organisations into modern economic entities. (Page 121) Source: Socio-Economic Impacts of IFRS on Wider Stakeholders in India
Tomo Sujuki and Jaypal Jain, Said Business School, University of 18 Oxford, 2010 [v.2.3.2]
Key Questions to be Answered For The Audit Committee and Board of Directors
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Business Combinations Effects on transactions planned for future Impacts of changes due to fair valuations of assets and liabilities Future exit strategies Investments in Associates and Joint Ventures Changes in number of entities under Equity Accounting method Modifications required in Joint Venture agreements Alignment of policies and procedures for measurement and accounting Taxes Deferred Tax Balance Sheet based approach Overall impact on Current IncomeTaxes Effect on Indirect Taxes due to changes in Revenue accounting Contingent Liabilities Reassessment and categorise into Remote, Possible, or Probable Provision requirement for probable cases Transparent disclosures after detailed review
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Analyses of Contingent Liabilities - Probable, Possible and Remote Analysts to exercise caution while using and comparing such disclosures
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Further Thoughts
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Thank You
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