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IFRS Update


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Renee Ford presented this IFRS Update at the IMA Chattanooga chapter monthly meeting on Dec. 21, 2011.

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IFRS Update

  1. 1. IFRS UpdatePresented by: www.decosimo.comRenee B. Ford, CPA, Assurance PrincipalJoseph Decosimo and Company, PLLC
  2. 2. Worldwide use of IFRS  Approximately 120 nations and reporting jurisdictions permit or require IFRS for listed companies.  Of those, 90 have fully conformed with IFRS as promulgated by the IASB.  EU member nations require IFRS for listed companies.  Japan allows use of IFRS for certain entities but still working through convergence and adoption.  China is using mostly converged local GAAP.
  3. 3. US  GAAP  –  IFRS  Convergence  History   FASB  and  IASB  commit  to   2002   “Norwalk  Agreement”   compaEble  accounEng   standards;  joint  effort   FASB  and  IASB  develop   2006   “Memorandum  of   roadmap  for  convergence;   Understanding”   specific  milestones  by  2008   SEC  accepts  IFRS  statements   Result  of  European  Union   2007   from  foreign  issuers   requiring  its  listed  companies   to  use  IFRS.  2008  -­‐  2009   Ongoing  GAAP-­‐IFRS   FASB  and  IASB  reaffirm   convergence  projects;  update   commitment  to  converge  all   to  MoU   major  standards  by  2011.   2010   SEC  announces  Work  Plan  for   2011  decision  on  if/when   consideraEon  of  IFRS   IFRS  will  be  mandatory  for  US   adopEon  for  public  cos.   issuers   2011   SEC    issues  3  Staff  Papers   SEC  studies  IFRS  in  pracEce   and  inventories    areas  where   IFRS  guidance  <  GAAP  
  4. 4. Convergence     vs.     Adop/on  
  5. 5. “Convergence”  •  Merging  two  separate  sets  of  standards  •  Best  approach  of-­‐   –  US  GAAP   –  IFRS   –  Jointly  developed  new  standard  
  6. 6. Outstanding  Convergence  Projects  •  Financial  instruments  –  priority  project  •  Revenue  recogniEon  –  priority  project  •  Leasing  –  priority  project  •  Insurance  contracts  •  ConsolidaEon  •  All  others  delayed  indefinitely  
  7. 7. Some  of  the  differences  remaining…  •  Inventories  •  Fixed  assets  •  Income  taxes  •  Measurement  of  conEngencies  •  Financial  instrument  risk  disclosures  •  PresentaEon  of  basic  financial  statements  
  8. 8. Latest  SEC  AcEviEes  re:  IFRS  •  Staff  Paper  –  May  2011   –  Gradual  approach  via  convergence   –  Endorsement  of  new  IFRS  on  case-­‐by-­‐case  basis   –  SEC  to  conEnue  oversight  of  FASB   –  FASB  would  provide  input/support  to  IASB  •  Two  Staff  Papers  –  November  2011   –  Comparison  of  US  GAAP  and  IFRS   –  An  Analysis  of  IFRS  in  PracEce  
  9. 9. Comparison  of  US  GAAP  and  IFRS  •  ObjecEve  –  to  evaluate  if  IFRS  is  sufficiently   developed  •  Inventory  areas  where  IFRS  doesn’t  provide   guidance  or  provides  less  than  US  GAAP  •  Excluded  areas  undergoing  convergence  •  Findings  –   –  US  GAAP  –  more  consistency  within  industries   –  IFRS  –  more  consistency  across  industries  
  10. 10. Analysis  of  IFRS  in  PracEce  •  Financial  statements  of  183  companies  •  Findings  –   –  Transparency  and  clarity  could  be  enhanced   –  Diversity  in  applicaEon  of  IFRS  across  countries   and  industries   •  OpEons  provided  by  IFRS   •  Tendency  to  carry  over  country  guidance   –  Diminishes  comparability  on  a  global  level  
  11. 11. December  2011  •  SEC  indicates  decision  is  sEll  “at  least  a  few   months  away.”  •  FASB  Chair  announces  that  side-­‐by-­‐side   convergence  is  “not  the  opEmal  model  in  the   long  run.”  •  FAF  recommends  FASB  (and  other  naEonal   bodies)  be  engaged  in  internaEonal  standard   sehng,  “U.S.  GAAP”  be  retained.  
  12. 12. AICPA  RecommendaEon  “Whether  or  not  the  SEC  decides  to  incorporate  IFRS  into  the  U.S.  financial  reporEng  system  through  an  endorsement/convergence  approach,  we  believe  U.S.  issuers  should  be  given  the  opEon  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  leker  to  the  SEC.  
  13. 13. Private  Company  Scenarios  •  Conversion  to  IFRS  or  IFRS  for  SMEs  •  Private  company  US  GAAP  (“Blue  Ribbon   Panel”  report  in  early  2011  recommended  U.S.   GAAP  with  excepEons  and  modificaEons  for   private  companies,  with  separate  board.)   –  FAF  rejected  recommendaEon  in  October  2011  •  ExisEng  US  GAAP  maintained/updated  for   non-­‐public  enEEes.  
  14. 14. Short-­‐term  Concerns  •  Increased  awareness  of  and  readiness  for   standards  changes  resulEng  from  convergence  •  Monitoring  and  managing  subsidiaries’   adopEon  of  IFRS  •  Awareness  of  how/if  use  of  IFRS  by  non-­‐US   counterparEes  could  affect  structure  of  deals   and  transacEons  
  15. 15. CONTACT INFORMATION  Renee B. Ford, CPA Assurance Principal Joseph Decosimo and Company, PLLC (423) 756-7100