Latest Developments in IFRS  4 th  Annual Hot Topics Seminar October 4, 2011 Stephen G. Austin, CPA, MBA Firm Managing Par...
New IASB Leader  <ul><li>Hans Hoogervorst </li></ul><ul><li>Background </li></ul><ul><li>Political issues </li></ul><ul><l...
<ul><li>On April 14, 2011, FASB and IASB  have jointly announced a further  delay to the convergence of IFRS  </li></ul><u...
<ul><li>Mary Schapiro Chairman of US SEC: </li></ul><ul><li>“ I think the rigour and timeliness of  oversight is especiall...
Overview of  Convergence Process
MoU Process <ul><li>First MoU – February 2006 </li></ul><ul><li>Second MoU – 2008 </li></ul><ul><li>Third MoU – 2009 </li>...
<ul><li>SEC Initial Work Plan  (February 2010) </li></ul><ul><li>–  Six Components </li></ul><ul><li>Sufficient developmen...
Subsequent Series of Progress  and Work Plan Reports
2010-2011  New Pronouncements and Updates
<ul><li>One new standard – IFRS 9 </li></ul><ul><li>One revised standard – IAS 24 </li></ul><ul><li>Amendments to IFRS tha...
<ul><li>IFRS 9 Financial Instruments </li></ul><ul><li>IAS 24 Related Party Disclosures </li></ul><ul><li>IFRIC 18 Transfe...
Amendments to IFRS Issued  as Separate Documents <ul><li>Amendments to IFRS 7 </li></ul><ul><li>Amendments to IFRIC 9 and ...
New IFRS for SMEs September 2011
Overview of the  New Revenue Recognition Model
<ul><li>Exposure Draft  </li></ul><ul><li>Issued in June 2010 </li></ul>
Key Components : Revenue Recognition <ul><li>Step 1 Identify the contracts with the customer </li></ul><ul><li>Step 2 Iden...
Expanded Footnote Disclosures
Work Plan for Remaining Priority Convergence Projects <ul><li>Leasing: </li></ul><ul><li>The objective of this project is ...
Work Plan for Remaining Priority Convergence Projects <ul><li>Financial instruments: </li></ul><ul><li>Efforts to improve ...
<ul><li>Top 10 Industrialized countries  and their Use of IFRS </li></ul><ul><li>and </li></ul><ul><li>How they Have Imple...
<ul><li>Understanding the  Differences between  </li></ul><ul><li>“ Adoption ”  </li></ul><ul><li>VS </li></ul><ul><li>“ A...
China <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>No, ...
India <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>No, ...
United Kingdom <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul...
Germany <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Re...
France <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Req...
Australia <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>...
New Zealand <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><l...
Japan <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>List...
Spain <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>IFRS...
South Korea <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><l...
SEC “Preliminary Observations” 2010 <ul><li>Approaches to Incorporate IFRS into a Jurisdiction’s </li></ul><ul><li>Financi...
Convergence Approach <ul><li>China – Best Example </li></ul><ul><li>Moving closer </li></ul><ul><li>Not full incorporated ...
Endorsement Approach (Vast Majority Follow this Approach) <ul><li>Degree of deviation varies by jurisdiction </li></ul><ul...
Other Critical  SEC Observations and Concerns <ul><li>Oversight of the IFRS Foundation? </li></ul><ul><li>Composition of t...
IASB Independence Concerns Voiced at SEC IFRS Roundtable; (July 2011)  Chairman Schapiro Sees Danger of Differing Jurisdic...
Personal Experience in 2011 Teaching IFRS to the Chinese  at the MBA Level  at Shanghai University  of Finance and Economi...
AICPA Recommendations to the SEC <ul><li>August 19, 2011 </li></ul><ul><li>Option to Adopt IFRS </li></ul><ul><li>Future F...
SEC White Papers- Fall 2011 <ul><li>Quality of Accountancy under IFRS </li></ul><ul><li>Remaining Differences yet unresolv...
<ul><li>What to Expect from the SEC  in the Next 75 Days </li></ul><ul><li>December_2011       </li></ul>
Thank You Stephen G. Austin, MBA, CPA [email_address] www.SwensonAdvisors.com www.swentrack.com www.swensonforensic.com
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Latest IFRS Developments

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Steve Austin presents at the 4th Annual Hot Topics Seminar on the topic of IFRS.

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Latest IFRS Developments

  1. 1. Latest Developments in IFRS 4 th Annual Hot Topics Seminar October 4, 2011 Stephen G. Austin, CPA, MBA Firm Managing Partner Swenson Advisors, LLP
  2. 2. New IASB Leader <ul><li>Hans Hoogervorst </li></ul><ul><li>Background </li></ul><ul><li>Political issues </li></ul><ul><li>U.S. adoption option </li></ul><ul><li>Risk of non-U.S. commitment </li></ul><ul><li>XBRL </li></ul>
  3. 3. <ul><li>On April 14, 2011, FASB and IASB have jointly announced a further delay to the convergence of IFRS </li></ul><ul><li>Announced that they would defer “by a few months” the timeline for: </li></ul><ul><ul><li>Revenue recognition – End of 2011 </li></ul></ul><ul><ul><li>Leasing – End of 2011 </li></ul></ul><ul><ul><li>Financial instruments – End of 2011 </li></ul></ul><ul><ul><li>Insurance – First half of 2012 </li></ul></ul><ul><li>Boards expect to issue new standards on fair value measurements and presentations of other comprehensive income in the new few weeks. </li></ul><ul><li>April 21, 2011 – Progress Report </li></ul>“ IASB and FASB Report Progress on Convergence” (Journal of Accountancy, 4/21/11)
  4. 4. <ul><li>Mary Schapiro Chairman of US SEC: </li></ul><ul><li>“ I think the rigour and timeliness of oversight is especially important.” </li></ul>BREAKING NEWS “ Global accounting rule setters urged to take time,” 4/1/11, H.Jones
  5. 5.
  6. 6.
  7. 7. Overview of Convergence Process
  8. 8. MoU Process <ul><li>First MoU – February 2006 </li></ul><ul><li>Second MoU – 2008 </li></ul><ul><li>Third MoU – 2009 </li></ul>
  9. 9.
  10. 10. <ul><li>SEC Initial Work Plan (February 2010) </li></ul><ul><li>– Six Components </li></ul><ul><li>Sufficient development and application of IFRS for the US domestic reporting system </li></ul><ul><li>Independent Standard settings </li></ul><ul><li>for the benefit of investor </li></ul><ul><li>Investor understanding and education regarding IFRS </li></ul><ul><li>Regulatory environment </li></ul><ul><li>Impact of issuers </li></ul><ul><li>Human capital readiness </li></ul>
  11. 11. Subsequent Series of Progress and Work Plan Reports
  12. 12. 2010-2011 New Pronouncements and Updates
  13. 13. <ul><li>One new standard – IFRS 9 </li></ul><ul><li>One revised standard – IAS 24 </li></ul><ul><li>Amendments to IFRS that were issued as separate documents </li></ul><ul><li>Amendments to IFRS issued in the second annual improvement projects </li></ul><ul><li>Amendments to other IFRS resulting from those revised or amended standards </li></ul><ul><li>Two new interpretations – IFRIC 18 and 19 </li></ul>
  14. 14. <ul><li>IFRS 9 Financial Instruments </li></ul><ul><li>IAS 24 Related Party Disclosures </li></ul><ul><li>IFRIC 18 Transfers of Assets from Customers </li></ul><ul><li>IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments </li></ul>New Pronouncements
  15. 15. Amendments to IFRS Issued as Separate Documents <ul><li>Amendments to IFRS 7 </li></ul><ul><li>Amendments to IFRIC 9 and IAS 39 </li></ul><ul><li>Annual improvements </li></ul><ul><li>Amendments to IFRS 2 </li></ul><ul><li>Amendments to IFRS 1 </li></ul><ul><li>Amendments to IAS 32 </li></ul><ul><li>Amendments to IFRIC 14 </li></ul><ul><li>Amendments to IAS 12 </li></ul>
  16. 16. New IFRS for SMEs September 2011
  17. 17. Overview of the New Revenue Recognition Model
  18. 18. <ul><li>Exposure Draft </li></ul><ul><li>Issued in June 2010 </li></ul>
  19. 19. Key Components : Revenue Recognition <ul><li>Step 1 Identify the contracts with the customer </li></ul><ul><li>Step 2 Identify the separate performance obligations </li></ul><ul><li>Step 3 Determine the transaction price </li></ul><ul><li>Step 4 Allocate the transaction price to the performance obligations </li></ul><ul><li>Step 5 Recognize revenue when a performance obligation is satisfied </li></ul>
  20. 20. Expanded Footnote Disclosures
  21. 21. Work Plan for Remaining Priority Convergence Projects <ul><li>Leasing: </li></ul><ul><li>The objective of this project is to improve financial reporting by ensuring that all assets and liabilities arising from lease contracts are recognized in the statement of financial position </li></ul><ul><li>The boards published a joint exposure draft in August 2010 </li></ul><ul><li>The boards have been considering the feedback received from comment letters and the boards’ extensive outreach activities </li></ul><ul><li>They intend to develop a draft of the new standard, which will be: </li></ul><ul><ul><ul><li>Made generally available, via the boards’ websites, for interested parties to review; </li></ul></ul></ul><ul><ul><ul><li>Used as the basis for outreach with parties that are most affected by the proposed new requirements; and </li></ul></ul></ul><ul><ul><ul><li>Subjected to a detailed drafting review with selected parties, as part of the fatal flaw review process each board is required to undertake </li></ul></ul></ul>
  22. 22. Work Plan for Remaining Priority Convergence Projects <ul><li>Financial instruments: </li></ul><ul><li>Efforts to improve our requirements and to reach a common solution have been complicated by differing imperatives that pushed our respective development timetables out of alignment </li></ul><ul><li>Strategy for addressing those differences remains the same – each board has been publishing its proposals while also soliciting comment on those of the other board, as a way of giving interested parties the opportunity to compare and assess the relative merits of both boards’ proposals </li></ul>
  23. 23. <ul><li>Top 10 Industrialized countries and their Use of IFRS </li></ul><ul><li>and </li></ul><ul><li>How they Have Implemented the New Standards </li></ul>
  24. 24. <ul><li>Understanding the Differences between </li></ul><ul><li>“ Adoption ” </li></ul><ul><li>VS </li></ul><ul><li>“ Adapting ” </li></ul>
  25. 25. China <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>No, however CAS (Chinese Accounting Standards) have “somewhat converged” with IFRS. It is not a direct translation of IFRS and several differences remain between CAS and IFRS. The Ministry of Finance has plans to eliminate those differences. Version of IFRS is not applicable. </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><ul><li>IFRS or IFRS for SMEs are prohibited. </li></ul></ul><ul><ul><li>Basically “stuck” in the 2006 version of IFRS. </li></ul></ul>IFRS adoption by country – www.pwc.com
  26. 26. India <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>No, Financial Statements must be prepared in accordance with Indian GAAP. Version of IFRS is not applicable . </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>IFRS and IFRS for SMEs are prohibited. Financial Statements must be prepared in accordance with Indian GAAP. </li></ul><ul><li>Failed to meet the March, 2011 deadline. </li></ul>IFRS adoption by country – www.pwc.com
  27. 27. United Kingdom <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Required for consolidated financial statements. Permitted for standalone/separate financial statements. </li></ul><ul><li>IFRS as adopted by EU. </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>Permitted for standalone/separate financial statements. </li></ul><ul><li>IFRS for SMEs is prohibited. </li></ul><ul><li>Parent companies can choose to apply IFRS or UK GAAP. </li></ul>IFRS adoption by country – www.pwc.com
  28. 28. Germany <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Required for all consolidated financial statements. </li></ul><ul><li>IFRS as adopted by EU. </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>Permitted, for standalone financial statements as long as additionally, local GAAP (HGB) consolidated financial statements are prepared and filed. </li></ul><ul><li>IFRS for SMEs is prohibited. </li></ul>IFRS adoption by country – www.pwc.com
  29. 29. France <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Required for consolidated financial statements. </li></ul><ul><li>IFRS as adopted by EU. </li></ul><ul><li>Are subsidiaries of foreign companies or foreign companies listed on local exchanges subject to different rules? </li></ul><ul><li>Yes. Non-EU companies can apply Japanese, US or Canadian GAAP. </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>IFRS and IFRS for SMEs are prohibited. </li></ul>IFRS adoption by country – www.pwc.com
  30. 30. Australia <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Required for consolidated financial statements. There is no longer a requirement to prepare separate standalone financial statements for the parent entity. </li></ul><ul><li>IFRS as adopted using the Australian version of IFRS. </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>IFRS is required for most consolidated and standalone/separate financial statements. </li></ul><ul><li>IFRS for SMEs is prohibited. </li></ul>IFRS adoption by country – www.pwc.com
  31. 31. New Zealand <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Required for consolidated and standalone/separate financial statements. Like Australia, IFRS as adopted locally . All requirements of IFRS as published by IASB are retained, but also some additional requirements are included in New Zealand Equivalents to IFRS (NZ IFRS) (mainly in relation to public benefit entities, so these would not be relevant for listed entities). </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>NZ IFRS is required for some companies and IFRS for SMEs is prohibited. </li></ul>IFRS adoption by country – www.pwc.com
  32. 32. Japan <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Listed companies which meet certain requirements (&quot;Specified Companies&quot;) are permitted to use IFRS for their consolidated financial statements ending on or after March 31, 2010. </li></ul><ul><li>IFRS as adopted by the Financial Services Agency (&quot;Designated IFRS’&quot;). </li></ul><ul><li>The Commissioner of the Financial Services Agency of Japan will designate those IFRSs published by the IASB which are recognized as having been approved and issued through fair and reasonable due process and are expected to be considered as being fair and appropriate financial reporting standards from the viewpoint of investor protection and market integrity in Japan . </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>Companies which file their consolidated financial statements under the Companies Act are permitted to use IFRS for the consolidated financial statements ending on or after March 31, 2010, if they are Specified Companies. </li></ul>IFRS adoption by country – www.pwc.com
  33. 33. Spain <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>IFRS is required for consolidated financial statements for listed companies (other than financial institutions). Financial institutions must apply a local accounting plan that complies with IFRS although it is not called IFRS. Main differences are the elimination of the “non preferable accounting policies” when there are alternatives (i.e. the fair value model for IAS16 items is not permitted). </li></ul><ul><li>IFRS as adopted by the EU . </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>IFRS is permitted for consolidated financial statements. </li></ul><ul><li>All other companies must use New Spanish GAAP (effective January 1, 2008), which is essentially IFRS based with some differences. </li></ul><ul><li>IFRS for SMEs is prohibited. </li></ul>IFRS adoption by country – www.pwc.com
  34. 34. South Korea <ul><li>Rules for Listed Filings </li></ul><ul><li>Is IFRS required for all listed companies? </li></ul><ul><li>Adoption of IFRS is required for all listed companies and certain unlisted financial institutions from 2011. </li></ul><ul><li>IFRS as published by IASB and translated to Korean language word-for-word. </li></ul><ul><li>Rules for Statutory Filings </li></ul><ul><li>Is IFRS or IFRS for SMEs required, permitted or prohibited? </li></ul><ul><li>IFRS is permitted from 2009 for all statutory filers. In 2011, IFRS is a requirement for all listed statutory filers and certain unlisted financial institutions. </li></ul><ul><li>IFRS for SME is prohibited for statutory filings. </li></ul>IFRS adoption by country – www.pwc.com
  35. 35. SEC “Preliminary Observations” 2010 <ul><li>Approaches to Incorporate IFRS into a Jurisdiction’s </li></ul><ul><li>Financial Reporting System </li></ul><ul><ul><li>Use IFRS as issued by IASB </li></ul></ul><ul><ul><li>Very few follow! </li></ul></ul><ul><ul><li>Use IFRS after some form of national incorporation process </li></ul></ul><ul><ul><li>Leading to... </li></ul></ul><ul><ul><li>Convergence approach </li></ul></ul><ul><ul><li> and/or </li></ul></ul><ul><ul><li>Endorsement approach </li></ul></ul>
  36. 36. Convergence Approach <ul><li>China – Best Example </li></ul><ul><li>Moving closer </li></ul><ul><li>Not full incorporated </li></ul><ul><li>Follow “ASBEs” – Accounting Standards for Business Enterprises (Set by the Accounting Law of the PRC) </li></ul><ul><li>Adopted 2006 standards in 2007 </li></ul><ul><li>September 2009 – new Roadmap (exposure draft) </li></ul><ul><li>In state of “lull” </li></ul>
  37. 37. Endorsement Approach (Vast Majority Follow this Approach) <ul><li>Degree of deviation varies by jurisdiction </li></ul><ul><li>Translated into local language (not English) </li></ul><ul><li>Modification based on “country specific issues” </li></ul><ul><li>EU – largest example </li></ul><ul><li>Australia – 2 nd largest example </li></ul>2005 Must follow IAS adopted by European Commission for listed companies 2006 - Present New IFRS must go through multiple steps before its authorized by the “ EFRAG ” (European Financial Reporting Advisory Group) and then “ SARG ” (Standards Advice Review Group) and then.. “ ARC ” (Accounting Regulatory Commission) and finally... the European Parliament has three months to oppose endorsement If not opposed published in the Office Journal of the EU
  38. 38. Other Critical SEC Observations and Concerns <ul><li>Oversight of the IFRS Foundation? </li></ul><ul><li>Composition of the IFRS Foundation and IASB </li></ul><ul><li>Significant underfunding of the IFRS Foundation </li></ul><ul><ul><li>Operating deficits of $4 million </li></ul></ul><ul><ul><li>75% of the countries do not help fund </li></ul></ul><ul><ul><li>United States accounts for about 25% of total funding </li></ul></ul><ul><li>Many issues to resolve!!! </li></ul>
  39. 39. IASB Independence Concerns Voiced at SEC IFRS Roundtable; (July 2011) Chairman Schapiro Sees Danger of Differing Jurisdiction – Specific Interpretations <ul><li>Development of inconsistency in global IFRS through differing national interpretations of global accounting standards </li></ul><ul><li>Consensus that the IASB could be monitored until it achieves FASB-like due process in its standard setting. </li></ul><ul><li>Must adopt FABS due processes </li></ul><ul><li>IABS does not have enough investor participation </li></ul>
  40. 40. Personal Experience in 2011 Teaching IFRS to the Chinese at the MBA Level at Shanghai University of Finance and Economics
  41. 41. AICPA Recommendations to the SEC <ul><li>August 19, 2011 </li></ul><ul><li>Option to Adopt IFRS </li></ul><ul><li>Future Framework </li></ul><ul><li>Supports the Endorsement </li></ul><ul><li>Supports Prospective Application </li></ul><ul><li>Transition Concerns </li></ul><ul><li>PCAOB needs to harmonize Audit Standards with International Audit Standards </li></ul>
  42. 42. SEC White Papers- Fall 2011 <ul><li>Quality of Accountancy under IFRS </li></ul><ul><li>Remaining Differences yet unresolved </li></ul><ul><li>Recent PWC Poll </li></ul>
  43. 43. <ul><li>What to Expect from the SEC in the Next 75 Days </li></ul><ul><li>December_2011   </li></ul>
  44. 44. Thank You Stephen G. Austin, MBA, CPA [email_address] www.SwensonAdvisors.com www.swentrack.com www.swensonforensic.com
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