The Enduring Need for Strong  International Standards Jan Engstrom  Sao Paulo September 2009
The Vision <ul><li>  </li></ul><ul><li>… one single set of high </li></ul><ul><li>quality global standards.. </li></ul><ul...
Benefits to Capital Markets <ul><li>Credibility to foreign investors </li></ul><ul><li>More cross-border investment </li><...
IASB structure Standards Advisory Council Operations International  Accounting Standards Board IFRIC Staff:  technical 50 ...
 
The world’s stock markets   (US$ trillion)
 
The Financial Crises <ul><li>Financial Stability Board </li></ul><ul><ul><li>Reasons leading to the crises </li></ul></ul>...
The Financial Crises – IASB actions <ul><li>Guidance – Fair values in illiquid markets </li></ul><ul><li>Financial Crises ...
Replacement financial instruments standard (#39) - timetable 2008 IASC Foundation  |   30 Cannon Street  |   London EC4M 6...
Overview of model 2009 IASC Foundation  |   30 Cannon Street  |   London EC4M 6XH  |   UK  |   www.iasb.org Fair Value (= ...
IASB Focus today <ul><li>The Financial Crises </li></ul><ul><li>2011 </li></ul><ul><li>SME </li></ul><ul><li>Translations ...
Due process Research National Standard Setters Discussion Paper Exposure  Draft Standard Others Comment  analysis Comment ...
Principle-based standards Principles Rules
A principle based standard <ul><li>No exceptions or inconsistencies </li></ul><ul><li>Core principles </li></ul><ul><li>Ti...
The Agenda <ul><li>Conceptual framework </li></ul><ul><li>Revenue recognition </li></ul><ul><li>Financial Statement Presen...
The Agenda  – together with FASB <ul><li>Conceptual framework </li></ul><ul><li>Revenue recognition </li></ul><ul><li>Fina...
After approval of standard <ul><li>> 1 year after publication before implementation </li></ul><ul><li>Review 2 years after...
Roadmap: “ MOU 2006” <ul><li>Short term </li></ul><ul><li>- remove major differences  </li></ul><ul><li>Medium term </li><...
US SEC <ul><li>  Changes: </li></ul><ul><li>-  Regulation: removal of  reconciliation  2007 </li></ul><ul><li>-  Concepts ...
IFRIC Agenda Decisions <ul><li>Submissions considered by staff and recommendation made to IFRIC </li></ul><ul><li>Tentativ...
Annual Improvements  - for non-urgent, minor amendments <ul><li>Purpose—practical expedient </li></ul><ul><ul><li>Resolve ...
Translations <ul><li>The IFRSs are translated to 50 languages </li></ul><ul><li>One translation per language </li></ul><ul...
<ul><li>A codification used to electronically exchange financial information between businesses and users </li></ul><ul><l...
 
IFRS for SMEs <ul><li>< 50 ,000 listed companies in the world </li></ul><ul><li>Millions of SMEs </li></ul><ul><ul><li>Sup...
The Final IFRS for SMEs <ul><li>Good Financial Reporting Made Simple. </li></ul><ul><ul><li>230 pages </li></ul></ul><ul><...
Two general problems for IASB <ul><li>Principles v rules </li></ul><ul><li>Acceptance of Standards </li></ul><ul><ul><li>E...
 
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  • Discussion papers and Eds have at least 90 days for public comments. Research to discussion paper phase variable, but at least 12-24 months. After Standard has been published, usually 6-18 months before Standard becomes mandatory to use.
  • Principles need you to use your brain to apply judgement
  • Jan Engstrom

    1. 1. The Enduring Need for Strong International Standards Jan Engstrom Sao Paulo September 2009
    2. 2. The Vision <ul><li> </li></ul><ul><li>… one single set of high </li></ul><ul><li>quality global standards.. </li></ul><ul><li> </li></ul><ul><li>..used on the global </li></ul><ul><li>capital markets. </li></ul>
    3. 3. Benefits to Capital Markets <ul><li>Credibility to foreign investors </li></ul><ul><li>More cross-border investment </li></ul><ul><li>Efficient capital allocation </li></ul><ul><li>Facilitates global education and training </li></ul><ul><ul><li>… and benefits to companies </li></ul></ul>
    4. 4. IASB structure Standards Advisory Council Operations International Accounting Standards Board IFRIC Staff: technical 50 + admin 30 Working Groups Publications XBRL Education International Accounting Standards Committee Foundation Trustees International Monitoring Board
    5. 6. The world’s stock markets (US$ trillion)
    6. 8. The Financial Crises <ul><li>Financial Stability Board </li></ul><ul><ul><li>Reasons leading to the crises </li></ul></ul><ul><ul><li>Actions needed </li></ul></ul><ul><li>G20 </li></ul><ul><ul><li>Basically same conclusions </li></ul></ul><ul><li>Politician’s and regulator’s supervision failed </li></ul><ul><ul><li>Bonus systems </li></ul></ul><ul><ul><li>Risk acceptance </li></ul></ul><ul><ul><li>Decapitalising </li></ul></ul>
    7. 9. The Financial Crises – IASB actions <ul><li>Guidance – Fair values in illiquid markets </li></ul><ul><li>Financial Crises Advisory Group </li></ul><ul><li>Reclassification of financial instruments </li></ul><ul><li>ED consolidations / ED derecognition </li></ul><ul><li>FASB changed impairment rules </li></ul><ul><li>G20 November 08 / April 09 </li></ul><ul><li>Replacement of financial instruments standard (#39) </li></ul>
    8. 10. Replacement financial instruments standard (#39) - timetable 2008 IASC Foundation  |   30 Cannon Street  |   London EC4M 6XH  |   UK  |   www.iasb.org * The above is in addition to a project on derecognition of financial instruments. ED Derecognition was published in March 2009. Project phase Exposure Draft Finalisation 1. Classification and measurement July 2009 In time for 2009 year end financial statements 2. Impairment methodology October 2009 In 2010 3. Hedge accounting December 2009 In 2010
    9. 11. Overview of model 2009 IASC Foundation  |   30 Cannon Street  |   London EC4M 6XH  |   UK  |   www.iasb.org Fair Value (= no impairment) Amortised cost (one impairment method) Managed on a contractual yield basis Basic loan features + FVO for accounting mismatch (option) <ul><li>All other instruments: </li></ul><ul><li>Equities </li></ul><ul><li>Derivatives </li></ul><ul><li>Some hybrid contracts </li></ul>Equities: OCI presentation available (option)
    10. 12. IASB Focus today <ul><li>The Financial Crises </li></ul><ul><li>2011 </li></ul><ul><li>SME </li></ul><ul><li>Translations </li></ul><ul><li>Constitutional review </li></ul><ul><li>Agenda 2012 and forward </li></ul>
    11. 13. Due process Research National Standard Setters Discussion Paper Exposure Draft Standard Others Comment analysis Comment analysis Effective Date and local approval process!
    12. 14. Principle-based standards Principles Rules
    13. 15. A principle based standard <ul><li>No exceptions or inconsistencies </li></ul><ul><li>Core principles </li></ul><ul><li>Tied to conceptual framework </li></ul><ul><li>Judgement </li></ul><ul><li>Minimum guidance </li></ul><ul><li>Few interpretation </li></ul>
    14. 16. The Agenda <ul><li>Conceptual framework </li></ul><ul><li>Revenue recognition </li></ul><ul><li>Financial Statement Presentation </li></ul><ul><li>Liabilities </li></ul><ul><li>Insurance </li></ul><ul><li>Fair value measurement </li></ul><ul><li>Common control </li></ul><ul><li>Emission rights trading </li></ul><ul><li>Leasing </li></ul><ul><li>Pensions </li></ul><ul><li>Consolidations </li></ul><ul><li>Management Commentary </li></ul><ul><li>Small and Medium sized entities </li></ul><ul><li>Financial instruments </li></ul><ul><li>Short term converg.x 4 </li></ul>
    15. 17. The Agenda – together with FASB <ul><li>Conceptual framework </li></ul><ul><li>Revenue recognition </li></ul><ul><li>Financial Statement Presentation </li></ul><ul><li>Liabilities </li></ul><ul><li>Insurance </li></ul><ul><li>Fair value measurement </li></ul><ul><li>Common control </li></ul><ul><li>Emission rights trading </li></ul><ul><li>Leasing </li></ul><ul><li>Pensions </li></ul><ul><li>Consolidations </li></ul><ul><li>Management Commentary </li></ul><ul><li>Small and Medium sized entities </li></ul><ul><li>Financial instruments </li></ul><ul><li>Short term converg.x 4 </li></ul>
    16. 18. After approval of standard <ul><li>> 1 year after publication before implementation </li></ul><ul><li>Review 2 years after implementation </li></ul>
    17. 19. Roadmap: “ MOU 2006” <ul><li>Short term </li></ul><ul><li>- remove major differences </li></ul><ul><li>Medium term </li></ul><ul><li>- new joint standards where significant improvement required </li></ul>
    18. 20. US SEC <ul><li> Changes: </li></ul><ul><li>- Regulation: removal of reconciliation 2007 </li></ul><ul><li>- Concepts Release: IFRS available to US companies? </li></ul>
    19. 21. IFRIC Agenda Decisions <ul><li>Submissions considered by staff and recommendation made to IFRIC </li></ul><ul><li>Tentative decisions published in IFRIC Update for comment </li></ul><ul><li>Final decisions published and included permanently on website </li></ul>
    20. 22. Annual Improvements - for non-urgent, minor amendments <ul><li>Purpose—practical expedient </li></ul><ul><ul><li>Resolve inconsistencies between standards </li></ul></ul><ul><ul><li>Clarify unclear wording </li></ul></ul><ul><li>Process </li></ul><ul><ul><li>Annual ED </li></ul></ul><ul><ul><li>90 day exposure </li></ul></ul><ul><ul><li>12 month effective date </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Improved use of constituents’ and IASB’s time </li></ul></ul>
    21. 23. Translations <ul><li>The IFRSs are translated to 50 languages </li></ul><ul><li>One translation per language </li></ul><ul><li>Now a special focus on Spanish: </li></ul><ul><ul><li>Improved availability </li></ul></ul><ul><ul><li>All IASB’s documents (=DP, ED, IFRS, IFRIC) </li></ul></ul><ul><ul><li>An enlarged translation committee </li></ul></ul>
    22. 24. <ul><li>A codification used to electronically exchange financial information between businesses and users </li></ul><ul><li>The IASC Foundation develops the IFRS Taxonomy (also for SMEs) which is the XBRL representation of the IFRSs </li></ul>© 2008 IASC Foundation. First Floor | 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
    23. 26. IFRS for SMEs <ul><li>< 50 ,000 listed companies in the world </li></ul><ul><li>Millions of SMEs </li></ul><ul><ul><li>Suppliers, distributors, customers, .. </li></ul></ul>
    24. 27. The Final IFRS for SMEs <ul><li>Good Financial Reporting Made Simple. </li></ul><ul><ul><li>230 pages </li></ul></ul><ul><ul><li>Simplified IFRSs - built on an IFRS foundation </li></ul></ul><ul><ul><li>Suitable for entities that are not listed and not financial institutions </li></ul></ul><ul><ul><li>Standalone product that sits side-by-side with the full set of IFRSs </li></ul></ul>
    25. 28. Two general problems for IASB <ul><li>Principles v rules </li></ul><ul><li>Acceptance of Standards </li></ul><ul><ul><li>EU?! </li></ul></ul><ul><ul><li>SEC! </li></ul></ul><ul><ul><li>Japan? </li></ul></ul><ul><ul><li>Others?? </li></ul></ul>
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