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2011 Alt Inv Summit V7

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IFRS Overview and timeline for pot adoption/convergence in U.S.

IFRS Overview and timeline for pot adoption/convergence in U.S.

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  • 1. Third Annual Alternative Investment SummitInternational Financial Reporting Standards (IFRS)
    Markus Veith
    Partner, Financial Institutions
  • 2. Table of Content
    Introduction
    Overview of IFRS
    Expected Roadmap to Adoption in the U.S.
    Impact of IFRS on Financial Services Companies
    1
  • 3. Introduction
    2
    IfrsE = E Tk2
    IfrsE = IFRS excellence
    E = expertise
    Tk = technical accounting knowledge
  • 4. Introduction
    3
    The US GAAP Literature
    Over 2,000 pronouncements
    Over 6,500 pages – FASB material alone
    Some 25,000 pages of standards and guidance in total
    The IFRS Literature
    55 pronouncements
    Some 2,500 pages (all pronouncements)
  • 5. Overview of IFRS
    4
    Set of Principles vs. Set of Rules
    Principles (IFRS)
    A general statement with widespread support, which is intended to support truth and fairness and acts as a guide to action
    Use of judgement
    Rules (US GAAP)
    • A means of establishing an unambiguous decision-making method in order to eliminate doubts about when and how it is to be applied
    • 6. Check-list culture
  • Overview of IFRS
    Currently 120+ countries that permit/require use
    North America
    US – see following slides for overview
    Canada – Public companies must use IFRS 1/1/11
    South/Central America: various countries require/permit use
    Europe
    Listed companies must apply IFRS as endorsed by EU
    Member states may extend requirement to non-listed
    Certain amendments and IFRS 9 not yet endorsed
    Asia-Pacific
    Variety of methods
    5
  • 7. Expected Roadmap to Adoption in the U.S.Initial Milestone
    6
    Foreign issuers are no longer required to prepare a reconciliation between IFRS and US GAAP (21 December 2007)
    Foreign private issuers in their filings with the Commission are allowed to file financial statements prepared in accordance with IFRS as issued by the IASB without reconciliation to US GAAP
    EU companies that have taken advantage of the EU carve-out of IAS 39 are on a two-year transition
  • 8. Expected Roadmap to Adoption in the U.S.Original 2008 SEC Roadmap
    Proposed original timeline
    Limited early adoption beginning in 2009
    Large accelerated filers beginning for fiscal years ending on or after December 15, 2014
    Accelerated filers beginning for fiscal years ending on or after December 15, 2015
    Non-accelerated filers beginning for fiscal years ending on or after December 15, 2016
    Would require 3-year comparative financials
    Final decision to be made by SEC in 2011
    7
  • 9. Expected Roadmap to Adoption in the U.S.SEC Proposed Roadmap – Possible Timeline towards Global Standards
    Possible early adoption period
    Possible phased in adoption periods
    Large accelerated filers
    2010
    2011
    2018
    2009
    31 December 2008
    2012
    2014
    2016
    2017
    2015
    2013
    Evaluation period
    Effective dates of converged standards
    Transition date
    Reporting date
    SEC Final decision
    8
  • 10. AICPA Annual Conference – December 2010
    SEC Chairman Shapiro comments:
    Reiterated commitment to a decision in 2011 – although no promise of decision by June 2011
    Allow a minimum of four years for public companies to make the adjustment to IFRS
    Paul Beswick, SEC Deputy Chief Accountant, comments:
    Introduced a possible alternative to both IFRS conversion and U.S. endorsement of IFRS
    “Condorsement” approach
    Incorporates properties of both convergence and endorsement
    Would allow FASB to retain control over US GAAP
    9
    Expected Roadmap to Adoption in the U.S.Recent comments from the SEC
  • 11. Expected Roadmap to Adoption in the U.S.Recent comments from the AICPA
    10
    AICPA Recommends SEC Allow Optional Adoption of IFRS by U.S. Public Companies 
    “Whether or not the SEC decides to incorporate IFRS into the U.S. financial reporting system through an endorsement/convergence approach, we believe U.S. issuers should be given the option 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 letter to the SEC.
    Per this proposition, U.S. Issuers compliant with US GAAP should also be able to represent that they are compliant with IFRS as issued by the IASB.
  • 12. Impact of IFRS on Financial Services Companies
    11
    IFRS does not provide industry-specific guidance or standards for registered investment companies or private funds
    Where specific guidance does not exist for industry specific issues, investment companies following IFRS must look to other IFRS dealing with similar issues, the Conceptual Framework, standards of other standard-setting bodies and, in certain circumstances, accepted industry practices.
  • 13. Impact of IFRS on Financial Services Companies
    12
    Industry Views of IFRS for Investment Funds
    US GAAP are more appropriate to open-end investment funds than existing IFRS
    IFRS does not presently provide a satisfactory basis for investment funds financial reporting and is not sufficiently focused on the needs of investors.
  • 14. Impact of IFRS on Financial Services Companies
    13
    Sample key differences between IFRS and US GAAP
    • Consolidation
  • Impact of IFRS on Financial Services Companies
    14
    Sample key differences between IFRS and US GAAP
    • Classification of Investor Ownership
  • Impact of IFRS on Financial Services Companies
    15
    • Challenges for Investment Funds
    • 15. IFRS 7 Disclosures
    • 16. Consolidation of Investments
    • 17. Systems Limitations
    • 18. Investor Education
  • 16
    Thank you