Monitoring Board of public regulatory authorities established February 1, 2009. Initial membership comprised of relevant leaders of the European Commissions [not filled as of September 22, 2009], the Commissioner of the Financial Services Agency of Japan, the Chairman of the US SEC, the Chairman of the Emerging Markets Committee of IOSCO, and the Vice-Chairman of the Technical Committee of IOSCO [International Organization of Securities Commissions]. 04/24/10
US GAAP permits consolidated subsidiaries to use accounting policies different from the parent. IFRS requires reporting to reflect consistent accounting policies throughout the consolidated group. 04/24/10
The development of this Standard, over a couple of years, has contained, then dropped, a description of “small and Medium” entities as those with annual revenues under $25 [or$50] Million, assets under $12.5 million, and fewer than 50 employees. 04/24/10
Under US GAAP the terms ‘Statement of Financial Position” and “Balance Sheet” are both acceptable. 04/24/10
ICPAS Fox River Trail Chapter Barrett Peterson, C.P.A. September 24, 2009 Manager, Accounting Standards, Procedures, and Analysis , TTX Full IFRS and IFRS for SMEs
Authoritative interpretations are issued by the International Financial Reporting Interpretations Committee [IFRIC] when approved by the IASB, and the predecessor Standing Interpretations Committee [SIC]
IFRIC has issued 18 interpretations, 15 of which remain in effect
SIC issued 31 interpretations, 11 of which remain in effect
September 24, 2009 ICPAS Fox River Trail Chapter Presentation 13
Selected Differences between full IFRS and US GAAP
LIFO prohibited under IFRS. Inventory write downs can be reversed
No “extraordinary items” and fewer “discontinued operations” under IFRS
Some development costs [R&D] capitalized under IFRS
Advertising costs expensed as incurred – little “prepaid”
Contingency recognition threshold is lower and amount recognized may be higher under IFRS
Securities considered equities in the US with contingent redemption provisions accounted and reported for as debt under IFRS
September 24, 2009 ICPAS Fox River Trail Chapter Presentation 14
Selected Differences between full IFRS and US GAAP, Continued
Revaluation of property, plant, and equipment and intangibles permitted under IFRS
Impairment testing model likely to produce more impairments under IFRS
Option available under IFRS to record benefit plans’ actuarial gains and losses directly to equity and permanently exclude from regular net income – SoRIE required. Return and interest components can be classified as financing costs. Return calculated on actual, not average, asset value.
Component depreciation is required when applicable and appropriate
All deferred income taxes must be classified as non-current
September 24, 2009 ICPAS Fox River Trail Chapter Presentation 15
Selected Differences Between Full IFRS and US GAAP, Continued
Revenue recognition standards are less rules based and may alter timing of revenue recognition under IFRS
Consolidations rules may be very different under IFRS
More entities will be required to be consolidated under the control model. FAS 166 and 167 will reduce the differences.
Proportional consolidation permitted for certain joint venture investments
The timing and amounts recorded for share-based payments will differ under IFRS
The classification of debt on the balance sheet is NOT affected by post balance sheet date refinancing or covenant waiver agreements under IFRS
September 24, 2009 ICPAS Fox River Trail Chapter Presentation 16
The IASB Standard International Financial Reporting for Small and Medium-sized Entities [SMEs] is a separate standard from the “full” IFRS standards and interpretations. Standard is 232 pages vs. 2,700 pages for full IRS. Examples and implementation guide an additional 65 pages.
Small and Medium Size entities is a misleading title. The distinction is based on the absence of public accountability. Entities are SMEs, regardless of size, if they have no publically held debt or equity securities outstanding and do not hold funds for others in a fiduciary capacity as a regular part of their business operations.
IFRS for SMEs differs from full IFRS in that:
Certain full IFRS topics are omitted
Options under full IFRS are replaced with a single, simpler option
Many principles for recognizing assets, liabilities, income, and expenses are simplified.
Required disclosures are significantly fewer and simpler many resulting from the omitted and simplified items.
September 24, 2009 ICPAS Fox River Trail Chapter Presentation 30
Revaluation option not permitted for either property, plant, and equipment, or intangible assets.
Investments in financial securities carried at amortized costs except equities with a readily identifiable market value which are carried at fair value with changes recorded in profit and loss.
Investment property measurement is driven by circumstances rather than a choice between the cost and fair value models.
September 24, 2009 ICPAS Fox River Trail Chapter Presentation 32
IFRS for SMEs – Simplified Recognition and Measurement
Investments in financial instruments meeting certain criteria are measured at cost or amortized costs. All others measured at fair value through profit and loss.
All research and development costs expensed as incurred.
Goodwill and other indefinite life intangibles always amortized over estimated useful life or ten years.
Investments in joint ventures at cost unless there is a published price, in which case fair value is required.
Borrowing costs must be recognized as expenses
Annual review of PPE lives, residual value, and depreciation method NOT required.
For defined benefit post-employment plans:
Recognize all past service costs immediately in profit and loss
Recognize all actuarial gains and losses immediately in profit and loss or other comprehensive income – through SoRIE. No “corridor” amortization option.
September 24, 2009 ICPAS Fox River Trail Chapter Presentation 33
IFRS for SMEs Compared to Full IFRS September 24, 2009 ICPAS Fox River Trail Chapter Presentation 34 Section in the IFRS for SMEs Full IFRS Preface Preface 1. Small and Medium Sized Entities 2. Concepts and Pervasive Principles IASB Framework, IAS 1, Presentation of Financial Statements 3. Financial Statement Presentation IAS 1 4. Statement of Financial Position IAS 1
Statement of Comprehensive Income and Income Statement
Statement of Changes in Equity and Statement of Comprehensive Income and Retained Earnings
Statement of Cash Flows
IAS 7, Statement of Cash Flows 8. Notes to the Financial Statements IAS 1
Consolidated and Separate Financial
IAS 27, Consolidated and Separate Financial Statements 10. Accounting Policies, Estimates and Errors IAS 8, Accounting Polices, Changes in Accounting Estimates and Errors
IFRS for SMEs Compared to Full IFRS September 24, 2009 ICPAS Fox River Trail Chapter Presentation 35 Section in the IFRS for SMEs Full IFRS 11& Basic Financial Instruments and Other 12 Financial Instruments Issues IAS 32, Financial Instruments: Presentation IAS 39, Financial Instruments: Recognition and Measurement IFRS 7, Financial Instruments: Disclosures 13 Inventories IAS 2, Inventories 14 Investments in Associates IAS 28, Investments in Associates 15 Investments in Joint Ventures IAS 31, Investments in Joint Ventures 16 Investment Property IAS 40, Investment Property 17 Property, Plant and Equipment IAS 16, Property, Plant and Equipment 18 Intangible Assets Other than Goodwill IAS 38, Intangible Assets 19 Business Combinations and Goodwill IFRS 3, Business Combinations 20 Leases IAS 17, Leases 21 Provisions and Contingencies IAS 37, Provisions, Contingent Liabilities and Contingent Assets
IFRS for SMEs Compared to Full IFRS September 24, 2009 ICPAS Fox River Trail Chapter Presentation 36 Section in the IFRS for SMEs Full IFRS 22 Liabilities and Equity IAS 1, IAS 32 23 Revenue IAS 11, Construction Contracts IAS 18, Revenue 24 Government Grants IAS 20, Accounting for Government Grants and Disclosure of Government Assistance 25 Borrowing Costs IAS 23, Borrowing Costs 26 Share-based Payment IFRS 2, Share-based Payment 27 Impairment of Assets IAS 2, IAS 36, Impairment of Assets 28 Employee Benefits IAS 19, Employee Benefits 29 Income Tax IAS 12, Income Taxes 30 Foreign Currency Translation IAS 21, The Effects of Changes in Foreign Exchange Rates 31 Hyperinflation IAS 29, Financial Reporting in Hyperinflationary Economies
IFRS for SMEs Compared to Full IFRS September 24, 2009 ICPAS Fox River Trail Chapter Presentation 37 Section in the IFRS for SMEs Full IFRS 32 Events after the End of the Reporting Period IAS 10, Events after the Reporting Period 33 Related Party Disclosures IAS 24, Related Party Disclosures 34 Specialized Activities IAS 41, Agriculture IFRS 6, Exploration for and Evaluation of Mineral Resources 35 Transition to the IFRS for SMEs IFRS 1, First-time Adoption of International Financial Reporting Standards