• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
IFRS and Other International Developments 2013

IFRS and Other International Developments 2013



The LatIFRS, latest developments, accounting day 2013, Stephen G. Austin, International Financial Reporting Standards

The LatIFRS, latest developments, accounting day 2013, Stephen G. Austin, International Financial Reporting Standards



Total Views
Views on SlideShare
Embed Views



0 Embeds 0

No embeds


Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
Post Comment
Edit your comment

    IFRS and Other International Developments 2013 IFRS and Other International Developments 2013 Presentation Transcript

    • Looking at IFRS from a“London view” and theRest of the WorldAccounting Day 2013May 20, 2013Stephen G. Austin, CPA, MBAFirm Managing PartnerSwenson Advisors, LLP
    • BREAKING NEWSMay 1, 2013 Investment CompanyInstitute (ICI) MeetingMary Jo White, SEC Chairman:2“In 2007, the Commission agreed to accept the use of InternationalFinancial Reporting Standards by foreign private issuers for theirfinancial statements included in Commission filings without U.S. GAAPreconciliations. Over 450 foreign private issuers representing trillionsof dollars in market capitalization use IFRS to raise capital in theU.S. In addition, we have eased the deregistration procedures andsimplified the Exchange Act registration exemption for foreigncompanies, recognizing that it is not necessary to require registrationand reporting by a thinly-traded foreign company already listed on aforeign stock exchange and subject to similar oversight in its homecountry.”
    • BREAKING NEWSMay 1, 2013 Investment CompanyInstitute (ICI) Meeting (Continued)Mary Jo White, SEC Chairman:3“We also are active participants in the process forestablishing accounting standards used globally. TheFinancial Accounting Standards Board is closely and activelyengaged with the International Accounting Standards Boardin pursuit of their joint convergence projects, and the FASBalso is a founding member of the IASB’s new AccountingStandards Advisory Forum.”
    • BREAKING NEWSMay 1, 2013 Investment CompanyInstitute (ICI) Meeting (Continued)Mary Jo White, SEC chairman:4“But the promise of global accounting standards fades ifthere is not consistency in their application, implementation,and enforcement. Here again we are active participants notonly through the staff’s filing review process of foreignprivate issuers, but also through our collaboration withforeign counterparts bilaterally as well as through IOSCO.”
    • BREAKING NEWSRussell GoldenLeslie Seidman’s successor:.5 Accounting Today, K. Tusiak, 4/23/2013“We are close to issuing a very important,converged solution on revenue recognition,which I have been working on for a numberof years and I believe will be a goodsuccess, and will improve financialreporting for companies across the world”
    • BREAKING NEWSBarry Melancon,AICPA President and CEO:6 Journal of Accountancy K. Nilsen, 10/22/2012“The U.S. must keep pushing forconvergence of U.S. GAAP and internationalstandards”.
    • IASB Site Visit withMichael StewartNovember 1, 2012London, England7
    • SEC Report Offers LingeringQuestions about IFRSThe SEC staff report released on July13, 2012 is 127 pages of details onhow IFRS has been developed,maintained and is performing globally,and the potential challenges andbenefits of their use by U.S. publiccompanies.But NO recommendation for adoption!SEC.gov, 7/13/12
    • IFRS Foundation Staff Analysisof the SEC Final Staff ReportOn October 23, 2012 the Trusteesof the IFRS Foundation publisheda staff analysis of the UnitedStates SEC Final Staff Report onIFRSs.9
    • Analysis of the Conclusion of theSEC Staff ReportGovernanceThe SEC staff note that the overall design of the governance structureof the IFRS Foundation strikes a reasonable balance betweenproviding oversight of the IASB and recognising and supporting itsindependence. In addition, while the IASB’s objectivity could bethreatened by outside political influence, such tension is not unique tothe IASB.[The IFRS Foundation] believes that the heterogeneous nature of theIFRS community, the internationally and professionally diversecomposition of the IASB and the creation of the Monitoring Board allhelp to dilute undue pressure from any one jurisdiction or specialinterest group. Nevertheless, the IFRS Foundation and the IASB willalways have to be vigilant in protecting the independence of accountingstandard-setting.10
    • Analysis of the Conclusion of the SECStaff Report (continued)FundingThe SEC Staff Report:(a) raises concerns about the continued reliance by the IFRS Foundation on fundingfrom the large public accounting firms;(b) notes that fewer than 30 countries contribute to the financing of the IFRS Foundation;(c) notes that the Trustees have been unsuccessful in obtaining the funding for theportion of the IFRS Foundation budget allocated to the US; and(d) notes the ‘in-kind’ funding contributions to the IFRS Foundation by US sources,such as the FASB staff efforts on US GAAP–IFRS convergence projects.The IFRS Foundation response:The analysis of the funding arrangements as set out in the SEC Staff Report overlooksthe fact that the European Commission, which is the biggest contributor to our budget,represents 27 member states of the European Union (EU). Furthermore, the analysisdoes not recognise that royalty payments are received from an additional 19 countries.It also does not take into account that some voluntary funding arrangements by somecountries have been withdrawn in anticipation of the introduction of publicly-sponsoredschemes that have already been agreed. When considering these factors, 69 countriesprovide, directly or indirectly, financial support for the work of the IFRS Foundation,instead of the fewer than 30 as identified by the SEC staff. 11
    • Analysis of the Conclusion of the SECStaff Report (continued)Due ProcessThe SEC Staff:(a) observes that the IASB’s due process is heavily based on consultation andgathering of facts and views, open deliberations, analysis, and the explanationof its decisions to the public;(b) notes that IASB members’ deliberations involve extensive debate andanalysis; and(c) believes that IASB members decide on the resolution of issues on projectson the basis of their technical merits and overall usefulness for investors andother users of financial statements.[The IFRS Foundation] welcomes the SEC staff’s comments. Furthermore, during2012 the IASB has been working with the Trustees to further enhance itsreporting, accountability and due process requirements. As a result of theseenhancements, the IASB is required to report throughout the life of each technicalproject on the steps that it has taken to protect the integrity of its technicaldecisions.12
    • Analysis of the Conclusionof the SEC Staff Report (continued)Due Process (continued)The Trustees have:(a) undertaken activities that highlight the importance of the independence ofthe standard-setting process;(b) enhanced the role of the DPOC to periodically check that the IASB’s dueprocess is operating against an agreed framework;(c) intensified the DPOC’s interactions with the IFRS Advisory Council (theAdvisory Council) and the IFRS Interpretations Committee (the InterpretationsCommittee) so that more meaningful and better-informed feedback on thefunctioning of the IASB is received; and(d) appointed dedicated staff to support the management of their due processresponsibilities. 13
    • Analysis of the Conclusion of the SEC StaffReport. IFRS as Global Accounting Standard.ComprehensivenessRemaining differences between US GAAP and IFRS[The IFRS Foundation] notes that, as a result of more than ten years ofjoint work with the FASB to improve IFRS and US GAAP and bring abouttheir convergence, the differences that the US will have to bridge aresignificantly smaller in scope than the differences faced by other majorcountries that have already adopted IFRS.14
    • Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)MaintenanceThe SEC Staff Report notes observations from outreach conducted by SEC staffthat the Interpretations Committee should do more to address issues on a timelybasis.[The IFRS Foundation] agrees that the Interpretations Committee should be moreactive in providing Interpretations.In May 2012 the Trustees published the recommendations of a further review ofthe efficiency and effectiveness of the Interpretations Committee. This reviewrecommended that the Interpretations Committee should:(a) develop a broader range of ‘tools’ to be deployed by the InterpretationsCommittee, enabling it to be more responsive to requests for assistance;(b) revise the criteria used to determine which issues the InterpretationsCommittee should take action on;(c) improve the Interpretations Committee’s communications regarding issuesthat it decides not to address; and(d) expand the Interpretations Committee’s outreach and the transparencysurrounding its decisions.The recommendations of the review have been now been implemented in full. 15
    • National Standard-SettersThe SEC Staff Report:(a) recognises the procedures that the IASB has in place for working withnational standard-setters, as well as the high levels of interaction withnational standard-setters on a bilateral basis; and(b) recommends that the IASB should extend its involvement with nationalstandard-setters in several processes, such as during the development ofa new Standard, outreach activities and Post-implementation Reviews.16The IASB already has strong and effective relationships with national andregional accounting standard-setting bodies through a combination ofbilateral, multi-lateral and informal arrangements. However, [The IFRSFoundation] agrees that these relationships could be strengthened further byformalising such networks and organising them on a regional and globalbasis. This was an important recommendation of the Trustees’ StrategyReview.Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • EnforceabilityThe SEC Staff Report notes the importance of achieving greaterconsistency in the enforcement of IFRS if the benefits of a single set ofglobal accounting standards are to be fully realised.[The IFRS Foundation] agrees with this conclusion.17Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • Issues Related to Adoption, Endorsement and TransitionThe SEC Staff Report discusses various issues related to incorporatingIFRS into US GAAP. Many of these issues are specific to the US and canonly be addressed by US authorities in the environment in which theyoperate.The IFRS Foundation staff is not in a position to give definitive answers orsuggestions to the observations made by the SEC staff. Instead, in thischapter we [IFRS Foundation] refer extensively to the way in which manyIFRS jurisdictions have dealt with different issues while adopting IFRS.While it is true that every jurisdiction has its unique challenges, and thiswill certainly be the case in the biggest national capital market in the world,we believe this international experience provides a useful backdrop foranalysis.18Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • Methods of IncorporationThe SEC Staff Report notes that:(a) pursuing the designation of IFRS as directly authoritative was notsupported by the vast majority of participants in the US capital markets;(b) an endorsement mechanism is needed, to ensure that sovereignty ismaintained and proper influence can be exerted in the standard-settingprocess of the IASB;(c) the SEC staff would find it most logical to incorporate IFRS into US GAAPfor legal and administrative reasons.19None of these considerations is unique to the US. As stated by the SEC StaffReport, few jurisdictions designate IFRS as authoritative, with most followingsome form of endorsement process through which the Standards becomeauthoritative. Such a mechanism can serve as an important ‘sovereignty circuit-breaker’ to ensure that international rules do not automatically form a part ofnational law. Such arrangements are used by the majority of IFRS jurisdictionsand are respected by the IASB.Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • Transition ArrangementsThe SEC Staff Report notes that:(a) some commentators were opposed to a ‘big bang’ method oftransition, favouring instead a more gradual transition to IFRS; and(b) indirect methods of incorporation could lessen the total costsrequired while extending any timeframe for incorporation.20[The IFRS Foundation] note that it is for individual jurisdictions to determinethe most appropriate method to adopt IFRS.Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • Investors’ understanding of IFRS in the USThe SEC Staff Report notes that investors generally support the idea of the USmoving to a single set of global accounting standards, but that support for IFRS asthat set of standards is conditional. Investors’ primary concerns are similar to thoseof other US stakeholders.The SEC Staff Report notes that:(a) most institutional and professional investors who are already familiar withIFRS do not see investor preparedness being a major hurdle to incorporatingIFRS; but(b) investors who are focused exclusively on US domestic companies, as wellas smaller companies and private investors who are less familiar with IFRS,are reluctant to commit to develop a competence in IFRS until it becomes clearhow the SEC will proceed with IFRS.Experience from other jurisdictions has shown that once a decision is made aboutIFRS, even domestic investors have sufficient time and resources to support thetransition.21Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • Regulatory EnvironmentThe SEC Staff Report notes that adopting IFRS can present challenges tothe regulatory environment.[The IFRS Foundation] agrees with the SEC that these challenges shouldnot be underestimated. Our analysis of other major jurisdictions that havealready adopted IFRS suggest that adaptations in the regulatoryenvironment can indeed be challenging, but they can be overcome.22Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • Human Capital ReadinessThe SEC Staff Report notes that the large US international public accounting firmsand multinational companies have an extensive understanding of IFRS. Webelieve that this substantial human capital capability puts the US at a distinctadvantage when compared to other jurisdictions setting out to make the transitionto IFRS.However, in the same way as for other jurisdictions, the IFRS Foundationaccepts the argument that US preparers with limited internationaloperations, and smaller and mid-sized US audit firms, will need to furtherdevelop their IFRS competencies in advance of any transition to IFRS.23Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • Cost of TransitionThe SEC Staff Report notes the difficulties associated with developingimplementation plans and assessing transition costs until the SEC decides if andhow to proceed with IFRS.The experience of other jurisdictions is helpful when assessing the range ofpossible costs. In Canada, a study of 146 companies involved in the recenttransition to IFRS showed that 66 per cent of respondents had budgeted less than$500,000 in Canadian dollars for the transition, while 32 per cent planned to spendless than $100,000 in Canadian dollars.In Korea, the costs for non-financial companies making the transition to IFRS wereestimated to be $250,000 in US dollars while the total cost for financial companieswas $2,400,000 in US dollars.In Brazil, a survey revealed that transition costs were less than $1 million USdollars for 77 per cent of respondents.For smaller companies in Europe, the cost of making the transition to IFRS and thesubsequent recurrent application costs were estimated to be respectively 0.31 percent and 0.06 per cent of turnover. 24Analysis of the Conclusion of the SEC Staff Report.IFRS as Global Accounting Standard. (continued)
    • 2013 International Financial ReportingStandards IFRS® is the only official printed editionof the consolidated text of the IASBs authoritativepronouncements as issued at 1 January 2013.Whats new? Government Loans (Amendments to IFRS 1) Consolidated Financial Statements, Joint Arrangementsand Disclosure of Interests in Other Entities: TransitionGuidance(Amendments to IFRS 10, IFRS 11 and IFRS12) Investment Entities (Amendments to IFRS 10, IFRS 12and IAS 27); and Annual Improvements to IFRSs 2009–2011Cycle (which contained separate amendments to IFRS1, IAS 1, IAS 16, IAS 32 and IAS 34).25
    • Work Plan for IFRS - as of 30 April 201326
    • Work Plan for IFRS - as of 30 April 201327
    • Work Plan for IFRS - as of 30 April 201328
    • Work Plan for IFRS - as of 30 April 201329
    • Work Plan for IFRS - as of 30 April 201330
    • Work Plan for IFRS - as of 30 April 201331
    • IASB/FASB MeetingJanuary 30, 2013Revenue Recognition. The IASB and the FASB continuedtheir joint redeliberations on the revised ExposureDraft, Revenue from Contracts with Customers (the 2011ED). The Boards discussed the following topics: Scope Repurchase agreements Effect of the revenue recognition model on assetmanagers Transfers of assets that are not an output of an entity’sordinary activities Update on outreach regarding disclosure and transitionproposals32
    • IASB/FASB MeetingJanuary 30, 2013 (Continue)ScopeThe Boards tentatively decided to confirm the scope of the2011 ED, including the definition of a customer.The Boards also tentatively decided to clarify: That a collaborative arrangement (as described in paragraph 10 ofthe 2011 ED) is not limited to the development andcommercialization of a product That a contract with a collaborator or a partner is within the scope ofthe revenue standard if the counterparty meets the definition of acustomer That the application of paragraph 11 of the 2011 ED specifies howan entity would apply the revenue standard when a contract with acustomer is partially within the scope of the revenue standard andpartially within the scope of other standards.33
    • IASB/FASB MeetingJanuary 30, 2013 (continued)Repurchase AgreementsThe Boards discussed the following topics related to theimplementation guidance on repurchase agreements inparagraphs IG38–IG48/B38–B48 of the 2011 ED: Sale-leaseback transactions that include a put option Other amendments Application guidance Call options—significant economic incentive not toexercise. 34
    • IASB/FASB MeetingJanuary 30, 2013 (continued)Effect of the Revenue Recognition Model on AssetManagersThe Boards discussed the application of the 2011 ED to theasset management industry, specifically, the application of the: Constraint on revenue recognized Contract cost proposals.35
    • IASB/FASB MeetingJanuary 30, 2013 (continued)Transfers of Assets That Are Not an Output of anEntity’s Ordinary ActivitiesThe Boards tentatively decided to confirm the consequentialamendments proposed in the 2011 ED for transfers of nonfinancialassets that are not an output of an entity’s ordinary activities. Thoseamendments would require an entity to apply the control andmeasurement requirements (including the constraint on revenuerecognized) from the revenue model for the purposes of determiningwhen the asset should be derecognized and the amount ofconsideration to be included in the gain or loss recognized on transfer.The Boards also tentatively decided that the requirements inparagraphs 13–15 of the 2011 ED for determining whether a contractexists should apply to transfers of nonfinancial assets that are not anoutput of an entity’s ordinary activities 36
    • IASB/FASB MeetingJanuary 30, 2013 (continued)Update on Outreach Regarding Disclosure andTransition ProposalsThe staff provided the Boards with a summary of thefeedback received on the Boards’ proposed disclosure andtransition requirements in the 2011 ED. This feedback wasreceived through comment letters, outreach, andworkshops held in Japan, the UK, and the United Statesthat included both preparers and users. No decisions weremade. The issues will be discussed by the Boards inFebruary 2013.37
    • 38IMA San Diego MeetingThursday, August 8, 20135:30pm – 8:00pmDel Mar Doubletree
    • 39Thank YouStephen G. Austin, MBA, CPAsteve.austin@swensonadvisors.comWWW.SWENSONADVISORS.COMA Full Service Regional Accountingand Advisory Firm