IFRS UpdatePresented by: www.decosimo.comRenee B. Ford, CPA, Assurance PrincipalJoseph Decosimo and Company, PLLC
Worldwide use of IFRS Approximately 120 nations and reporting jurisdictions permit or require IFRS for listed companies. Of those, 90 have fully conformed with IFRS as promulgated by the IASB. EU member nations require IFRS for listed companies. Japan allows use of IFRS for certain entities but still working through convergence and adoption. China is using mostly converged local GAAP.
US GAAP – IFRS Convergence History FASB and IASB commit to 2002 “Norwalk Agreement” compaEble accounEng standards; joint eﬀort FASB and IASB develop 2006 “Memorandum of roadmap for convergence; Understanding” speciﬁc milestones by 2008 SEC accepts IFRS statements Result of European Union 2007 from foreign issuers requiring its listed companies to use IFRS. 2008 -‐ 2009 Ongoing GAAP-‐IFRS FASB and IASB reaﬃrm convergence projects; update commitment to converge all to MoU major standards by 2011. 2010 SEC announces Work Plan for 2011 decision on if/when consideraEon of IFRS IFRS will be mandatory for US adopEon for public cos. issuers 2011 SEC issues 3 Staﬀ Papers SEC studies IFRS in pracEce and inventories areas where IFRS guidance < GAAP
Some of the diﬀerences remaining… • Inventories • Fixed assets • Income taxes • Measurement of conEngencies • Financial instrument risk disclosures • PresentaEon of basic ﬁnancial statements
Latest SEC AcEviEes re: IFRS • Staﬀ Paper – May 2011 – Gradual approach via convergence – Endorsement of new IFRS on case-‐by-‐case basis – SEC to conEnue oversight of FASB – FASB would provide input/support to IASB • Two Staﬀ Papers – November 2011 – Comparison of US GAAP and IFRS – An Analysis of IFRS in PracEce
Comparison of US GAAP and IFRS • ObjecEve – to evaluate if IFRS is suﬃciently developed • Inventory areas where IFRS doesn’t provide guidance or provides less than US GAAP • Excluded areas undergoing convergence • Findings – – US GAAP – more consistency within industries – IFRS – more consistency across industries
Analysis of IFRS in PracEce • Financial statements of 183 companies • Findings – – Transparency and clarity could be enhanced – Diversity in applicaEon of IFRS across countries and industries • OpEons provided by IFRS • Tendency to carry over country guidance – Diminishes comparability on a global level
December 2011 • SEC indicates decision is sEll “at least a few months away.” • FASB Chair announces that side-‐by-‐side convergence is “not the opEmal model in the long run.” • FAF recommends FASB (and other naEonal bodies) be engaged in internaEonal standard sehng, “U.S. GAAP” be retained.
AICPA RecommendaEon “Whether or not the SEC decides to incorporate IFRS into the U.S. ﬁnancial reporEng system through an endorsement/convergence approach, we believe U.S. issuers should be given the opEon to adopt IFRS as issued by the IASB,” Paul V. Stahlin, AICPA chairman, and Barry C. Melancon, AICPA president and CEO, said in a four-‐page leker to the SEC.
Private Company Scenarios • Conversion to IFRS or IFRS for SMEs • Private company US GAAP (“Blue Ribbon Panel” report in early 2011 recommended U.S. GAAP with excepEons and modiﬁcaEons for private companies, with separate board.) – FAF rejected recommendaEon in October 2011 • ExisEng US GAAP maintained/updated for non-‐public enEEes.
Short-‐term Concerns • Increased awareness of and readiness for standards changes resulEng from convergence • Monitoring and managing subsidiaries’ adopEon of IFRS • Awareness of how/if use of IFRS by non-‐US counterparEes could aﬀect structure of deals and transacEons
CONTACT INFORMATION Renee B. Ford, CPA Assurance Principal Joseph Decosimo and Company, PLLC email@example.com (423) 756-7100