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Latest Developments in IFRS5th Annual Hot Topics SeminarOctober 16, 2012Stephen G. Austin, CPA, MBAFirm Managing PartnerSw...
2
BREAKING NEWS    Gregory Anton, AICPA Chairman:       “IFRS Adoption by the U.S. is not            coming any time soon”  ...
BREAKING NEWSSEC Report Offers LingeringQuestions about IFRSThe SEC staff report released on July13, 2012 is 127 pages of ...
BREAKING NEWS    SEC Shuts Down IFRS Decision Timeline      The SEC is making it clear that the staff’s long-          awa...
BREAKING NEWS        Accounting Panel Expresses ‘Regret’                 Over U.S. Stance       The IFRS Foundation, which...
Executive Summary    Summary Findings    1.Development of IFRS         • IASB has made significant progress in developing ...
Executive Summary, Continued    3.   IASB’s Use of National Standard Setters         • The IASB needs to understand the in...
Executive Summary, Continued5.       Governance of the IASB         • IASB does not have a mandate to consider the        ...
Executive Summary, Continued6. Status of Funding, continued• Staff’s most significant concern about the funding   approach...
RECENT NEWS     David Tweedy:            “U.S. decision is a key to         future international standards.”      “Nations...
MoU ProcessFirst MoU – February 2006   Second MoU – 2008    Third MoU – 2009                            12
Subsequent Series of Progress   and Work Plan Reports                                13
SEC Staff Released Reports Analyzing the        Current Reporting Practices and Comparing            U.S. GAAP & IFRS in S...
Reports, Continued                A Comparison of               U.S. GAAP and IFRS     Summary of similarities & differenc...
IASB Work PlanProjected targets as at October 1, 2012
IASB Work PlanProjected targets as at October 1, 2012, Continued
IASB Work Plan     Projected targets as at October 1, 2012, Continued18
FASB/IASB Status of Projects                               19
Overview of     Convergence Process20
IFRS for SMEs21
   Progress report on Guide for micro-sized entities         applying for IFRS for SMEs        New English-language trai...
    A fact sheet on the IFRS for SMEs that summarizes     activities since the IFRS for SMEs was issued has     been post...
Guidance for Micro-Sized Entities         Applying for IFRS for SMEs    The IASB staff has started to develop guidance to...
IFRS for SMEs Translation:               Status Report Current status of translations of the IFRS for SMEs  approved by t...
Overview of the New Revenue          Recognition Model26
Exposure Draft Issued in June 201027
Key Components :               Revenue Recognition     Step 1 Identify the contracts with the customer     Step 2 Identify...
Revision to Exposure Draft Originally Issued in June 24, 2010  Re-Exposed in November 2011The boards decided tore-expose t...
Summary of Changes from Previous Exposure Draft                           30
Summary of Changes fromPrevious Exposure Draft, ContinuedJournal of Accountancy “A new system for recognizing revenue”, Ja...
IASB/FASB Meeting                       September 2012     Topics discussed of revised Exposure Draft (ED)     “Revenue fr...
IASB/FASB Meeting         September 2012, Continued Constraining the cumulative amount of revenue recognized The Boards te...
IASB/FASB Meeting              September 2012, Continued     Collectability     The Board tentatively decided:     To app...
IASB/FASB Meeting             September 2012, Continued     Time-Value of Money     The Board tentatively decided:     To...
IASB/FASB Meeting             September 2012, Continued     Contract Issues – Distribution Networks     The Boards discuss...
Leases Exposure Draft Issued in August 2010 (Re-Exposed)37
Work Plan for Remaining Priority             Convergence Projects Leasing:    The objective of this project is to improve...
Work Plan for Remaining Priority               Convergence Projects     Financial Instruments:        Efforts to improve ...
Convergence ApproachChina – Best Example   Moving closer   Not full incorporated   Follow “ASBEs” – Accounting Standard...
Endorsement Approach           (Vast Majority Follow this Approach)       Degree of deviation varies by jurisdiction    ...
IFRS Future      in the U.S.42
Schapiro’s Tenure:      She’s Already Outlasted      Average SEC Chairman      It was reported on 9/18/12 that Schapiro is...
Post Election Prediction44
Thank You  Stephen G. Austin, MBA, CPAsteve.austin@swensonadvisors.com  www.SwensonAdvisors.com    www.SwenAsia.com    www...
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Latest IFRS Developments from Hot Topics Seminar

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IFRS presentation given by Steve Austin of Swenson Advisors, LLP at the 5th Annual Hot Topics Seminar on October 16, 2012.

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Transcript of "Latest IFRS Developments from Hot Topics Seminar "

  1. 1. Latest Developments in IFRS5th Annual Hot Topics SeminarOctober 16, 2012Stephen G. Austin, CPA, MBAFirm Managing PartnerSwenson Advisors, LLP
  2. 2. 2
  3. 3. BREAKING NEWS Gregory Anton, AICPA Chairman: “IFRS Adoption by the U.S. is not coming any time soon” Anton said the AICPA supports giving US companies the option to use IFRS, and supports the issue of one set of high-quality standards, but warned that the "absolute soonest" IFRS will be seen in the US will be in five to six years time.3 Accountancy Age, R. Crump, 8/10/2012
  4. 4. BREAKING NEWSSEC 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. SEC.gov, 7/13/12
  5. 5. BREAKING NEWS SEC Shuts Down IFRS Decision Timeline The SEC is making it clear that the staff’s long- awaited final report will not contain any recommendations for commission action. SEC Chief Accountant, James Kroeker has announced his plans to leave his position at the SEC in July to return to the private sector. Compliance Week, T. Whitehouse, 7/9/125
  6. 6. BREAKING NEWS Accounting Panel Expresses ‘Regret’ Over U.S. Stance The IFRS Foundation, which oversees the IASB, said that while it recognizes the SEC’s right to determine how and when IFRS should be used in the U.S., but “we regret that the staff report is not accompanied by a recommendation action plan for the SEC.” Wall Street Journal, 7/15/126
  7. 7. Executive Summary Summary Findings 1.Development of IFRS • IASB has made significant progress in developing a comprehensive set of accounting standards • Standards are generally perceived to be high quality by the global financial reporting community. However, there continue to be areas that are underdeveloped (extractive industries, insurance, rate-regulated industries) 2.Interpretive Process • The staff’s outreach both domestically and internationally indicates that the IFRS IC should do more to address issues on a timely basis • IFRS Foundation recently implemented changes to address this concern, however, it is unknown at this point whether they will be effective7
  8. 8. Executive Summary, Continued 3. IASB’s Use of National Standard Setters • The IASB needs to understand the intricacies of a number of distinct domestic reporting and regulatory systems in order to develop accounting standards that could be incorporated in multiple jurisdictions • The IASB should consider greater reliance on national standard setters 4. Global Application and Enforcement • To derive many of the key benefits of a single set of accounting standards, it is critical that those standards are applied and enforced on a consistent basis • The SEC conducted a review of financial statements prepared in accordance with IFRS, while financial statements generally appeared to comply with IFRS, global8 application of IFRS could be improved to narrow
  9. 9. Executive Summary, Continued5. Governance of the IASB • IASB does not have a mandate to consider the establishment of standards with the focus of any single capital market • May be necessary to put in place mechanisms specifically to consider and to protect the U.S. capital markets Example, maintaining an active FASB to endorse IFRSs 6. Status of Funding • IFRS Foundation has made progress in developing a funding mechanism • More than 100 countries around the world, but current funding is provided to the IFRS Foundation by businesses, not-for-profits, and governments in fewer than 30 countries • Unsuccessful in obtaining funding for the portion of the IASB budget allocated to the U.S.!! • Financial Accounting Foundation – committed to participating in 9 discussions on the issue of funding from U.S. sources
  10. 10. Executive Summary, Continued6. Status of Funding, continued• Staff’s most significant concern about the funding approach is the continued reliance on the large public accounting firms to provide funds to the IASB7. Investor Understanding• Staff observed that investor education on accounting issues and changes in the accounting standards is not uniform 10
  11. 11. RECENT NEWS David Tweedy: “U.S. decision is a key to future international standards.” “Nations with significant economies such as Japan, China and India might not adopt IFRS if the U.S. doesn’t.”11 Journal of Accountancy, K. Tysiac 4/25/2012
  12. 12. MoU ProcessFirst MoU – February 2006 Second MoU – 2008 Third MoU – 2009 12
  13. 13. Subsequent Series of Progress and Work Plan Reports 13
  14. 14. SEC Staff Released Reports Analyzing the Current Reporting Practices and Comparing U.S. GAAP & IFRS in Specific Areas An Analysis of IFRS in Practice Shows the results of the analysis of the most recent consolidated financial statements of 183 companies, including SEC registrants & non-registrants, that prepare financial statements in accordance with IFRS.14
  15. 15. Reports, Continued A Comparison of U.S. GAAP and IFRS Summary of similarities & differences between two sets of reporting standards in 29 FASB Accounting Standards Codification subject areas. The report is informal only and does not include conclusions and recommendations.15
  16. 16. IASB Work PlanProjected targets as at October 1, 2012
  17. 17. IASB Work PlanProjected targets as at October 1, 2012, Continued
  18. 18. IASB Work Plan Projected targets as at October 1, 2012, Continued18
  19. 19. FASB/IASB Status of Projects 19
  20. 20. Overview of Convergence Process20
  21. 21. IFRS for SMEs21
  22. 22.  Progress report on Guide for micro-sized entities applying for IFRS for SMEs  New English-language training modules  IFRS for SMEs translations: status report  IFRS for SMEs ‘train the trainers’ workshop held in Mongolia and Ukraine22
  23. 23.  A fact sheet on the IFRS for SMEs that summarizes activities since the IFRS for SMEs was issued has been posted to the IASB’s website The fact sheet includes information about adoptions, translations, training, Q&As, publications, and the comprehensive review that is currently under way. It also contains an up-to-date list of SME resources that are available for free download from the IASB’s website. The IFRS for SMEs fact sheet is available to download at www.ifrs.org23
  24. 24. Guidance for Micro-Sized Entities Applying for IFRS for SMEs The IASB staff has started to develop guidance to help micro-sized entities apply the IFRS for SMEs. The SME Implementation Group (SMEIG) will work with the staff in developing this guidance. No fixed timetable for completion of guidance. However, staff is aiming for publication in early 2013.24
  25. 25. IFRS for SMEs Translation: Status Report Current status of translations of the IFRS for SMEs approved by the IFRS Foundation:Completed: Albanian, Arabic, Armenian, Bosnian, Chinese (simplified), Croatian, Czech, French, Hebrew, Italian, Japanese, Kazakh, Lithuanian, Macedonian, Mongolian, Polish, Portuguese, Romanian, Russian, Serbian, Spanish, TurkishIn progress: Estonian, German, Khmer, and UkrainianAvailable for free download at www.ifrs.org25
  26. 26. Overview of the New Revenue Recognition Model26
  27. 27. Exposure Draft Issued in June 201027
  28. 28. Key Components : Revenue Recognition Step 1 Identify the contracts with the customer Step 2 Identify the separate performance obligations Step 3 Determine the transaction price Step 4 Allocate the transaction price to the performance obligations Step 5 Recognize revenue when a performance obligation is satisfied28
  29. 29. Revision to Exposure Draft Originally Issued in June 24, 2010 Re-Exposed in November 2011The boards decided tore-expose the proposed revenueguidance to avoid unintendedconsequences from the finalstandard and to increasetransparency. 29
  30. 30. Summary of Changes from Previous Exposure Draft 30
  31. 31. Summary of Changes fromPrevious Exposure Draft, ContinuedJournal of Accountancy “A new system for recognizing revenue”, Jan. 2012, M. Lamoreaux
  32. 32. IASB/FASB Meeting September 2012 Topics discussed of revised Exposure Draft (ED) “Revenue from Contracts with Customers”: Constraining the cumulative amount of revenue recognized Collectability, including accounting for contracts with customers that contain nonrecourse, seller-based financing Time-value of money Contract issues—distribution networks32
  33. 33. IASB/FASB Meeting September 2012, Continued Constraining the cumulative amount of revenue recognized The Boards tentatively decided: That in keeping with the proposal in the 2011 ED, an entity should evaluate whether to constrain the cumulative amount of revenue recognized if the amount of consideration to which an entity expects to be entitled is variable To clarify the meaning of ‘variable consideration’ to indicate that the constraint should apply to a fixed price contract in which there is uncertainty about whether the entity would be entitled to that consideration after satisfying the related performance obligation33
  34. 34. IASB/FASB Meeting September 2012, Continued Collectability The Board tentatively decided: To approve the proposal in the 2011 ED that an entity should adjust the amount of promised consideration for the effects of the time-value of money if the contract with a customer has a significant financing component34
  35. 35. IASB/FASB Meeting September 2012, Continued Time-Value of Money The Board tentatively decided: To present any impairments recognized in the current period or in a subsequent period in a consistent manner To provide additional guidance in the Standard about how to determine whether a contract with a customer exists based on the customer’s commitment to perform its obligations under the contract35
  36. 36. IASB/FASB Meeting September 2012, Continued Contract Issues – Distribution Networks The Boards discussed the application of the proposals in the 2011 ED to arrangements that arise in distribution networks An entity (such as a manufacturer) may transfer control of a product to its customer (who may be an intermediary, such as a dealer or retailer) The manufacturer may also promise other goods or services as sales incentives to encourage the sales of those products that have become part of the intermediary’s inventory36
  37. 37. Leases Exposure Draft Issued in August 2010 (Re-Exposed)37
  38. 38. Work Plan for Remaining Priority Convergence Projects Leasing:  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  The boards published a joint exposure draft in August 2010  The boards have been considering the feedback received from comment letters and the boards’ extensive outreach activities  They intend to develop a draft of the new standard, which will be: a) Made generally available, via the boards’ websites, for interested parties to review; b) Used as the basis for outreach with parties that are most affected by the proposed new requirements; and c) Subjected to a detailed drafting review with selected parties, as part of the fatal flaw review process each board is required to undertake38
  39. 39. Work Plan for Remaining Priority Convergence Projects Financial Instruments:  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  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’ proposals39
  40. 40. Convergence ApproachChina – Best Example Moving closer Not full incorporated Follow “ASBEs” – Accounting Standards for Business Enterprises (Set by the Accounting Law of the PRC) Adopted 2006 standards in 2007 September 2009 – new Roadmap (exposure draft) In state of “lull” 40
  41. 41. Endorsement Approach (Vast Majority Follow this Approach)  Degree of deviation varies by jurisdiction  Translated into local language (not English)  Modification based on “country specific issues”  EU – largest example Australia – 2nd largest example2005 Must follow IAS adopted by European Commission for listed companies2006 - New IFRS must go through multiple steps before its authorized by thePresent “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 41
  42. 42. IFRS Future in the U.S.42
  43. 43. Schapiro’s Tenure: She’s Already Outlasted Average SEC Chairman It was reported on 9/18/12 that Schapiro is considering resigning following the election. The SEC says “she has no departure plans.” Officially, Schapiro’s term expires in 2014.43 Wall Street Journal, 9/19/12
  44. 44. Post Election Prediction44
  45. 45. Thank You Stephen G. Austin, MBA, CPAsteve.austin@swensonadvisors.com www.SwensonAdvisors.com www.SwenAsia.com www.swentrack.com www.swensonforensic.com 45
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