2011 Alt Inv Summit V7

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

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2011 Alt Inv Summit V7

  1. 1. Third Annual Alternative Investment SummitInternational Financial Reporting Standards (IFRS)<br />Markus Veith<br />Partner, Financial Institutions<br />
  2. 2. Table of Content<br />Introduction<br />Overview of IFRS<br />Expected Roadmap to Adoption in the U.S.<br />Impact of IFRS on Financial Services Companies<br />1<br />
  3. 3. Introduction<br />2<br />IfrsE = E Tk2<br />IfrsE = IFRS excellence<br />E = expertise<br />Tk = technical accounting knowledge<br />
  4. 4. Introduction<br />3<br />The US GAAP Literature<br />Over 2,000 pronouncements<br />Over 6,500 pages – FASB material alone<br />Some 25,000 pages of standards and guidance in total<br />The IFRS Literature<br />55 pronouncements<br />Some 2,500 pages (all pronouncements)<br />
  5. 5. Overview of IFRS<br />4<br />Set of Principles vs. Set of Rules<br />Principles (IFRS)<br />A general statement with widespread support, which is intended to support truth and fairness and acts as a guide to action<br />Use of judgement<br />Rules (US GAAP)<br /><ul><li>A means of establishing an unambiguous decision-making method in order to eliminate doubts about when and how it is to be applied
  6. 6. Check-list culture</li></li></ul><li>Overview of IFRS<br />Currently 120+ countries that permit/require use <br />North America<br />US – see following slides for overview<br />Canada – Public companies must use IFRS 1/1/11<br />South/Central America: various countries require/permit use<br />Europe<br />Listed companies must apply IFRS as endorsed by EU<br />Member states may extend requirement to non-listed<br />Certain amendments and IFRS 9 not yet endorsed<br />Asia-Pacific<br />Variety of methods<br />5<br />
  7. 7. Expected Roadmap to Adoption in the U.S.Initial Milestone<br />6<br />Foreign issuers are no longer required to prepare a reconciliation between IFRS and US GAAP (21 December 2007)<br />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<br />EU companies that have taken advantage of the EU carve-out of IAS 39 are on a two-year transition<br />
  8. 8. Expected Roadmap to Adoption in the U.S.Original 2008 SEC Roadmap<br />Proposed original timeline <br />Limited early adoption beginning in 2009<br />Large accelerated filers beginning for fiscal years ending on or after December 15, 2014<br />Accelerated filers beginning for fiscal years ending on or after December 15, 2015<br />Non-accelerated filers beginning for fiscal years ending on or after December 15, 2016<br />Would require 3-year comparative financials<br />Final decision to be made by SEC in 2011 <br />7<br />
  9. 9. Expected Roadmap to Adoption in the U.S.SEC Proposed Roadmap – Possible Timeline towards Global Standards<br />Possible early adoption period<br />Possible phased in adoption periods<br />Large accelerated filers<br />2010<br />2011<br />2018<br />2009<br /> 31 December 2008<br />2012<br />2014<br />2016<br />2017<br />2015<br />2013<br />Evaluation period<br />Effective dates of converged standards<br />Transition date<br />Reporting date<br />SEC Final decision<br />8<br />
  10. 10. AICPA Annual Conference – December 2010<br />SEC Chairman Shapiro comments:<br />Reiterated commitment to a decision in 2011 – although no promise of decision by June 2011<br />Allow a minimum of four years for public companies to make the adjustment to IFRS<br />Paul Beswick, SEC Deputy Chief Accountant, comments:<br />Introduced a possible alternative to both IFRS conversion and U.S. endorsement of IFRS<br />“Condorsement” approach <br />Incorporates properties of both convergence and endorsement<br />Would allow FASB to retain control over US GAAP<br />9<br />Expected Roadmap to Adoption in the U.S.Recent comments from the SEC<br />
  11. 11. Expected Roadmap to Adoption in the U.S.Recent comments from the AICPA<br />10<br />AICPA Recommends SEC Allow Optional Adoption of IFRS by U.S. Public Companies  <br />“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.<br />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.<br />
  12. 12. Impact of IFRS on Financial Services Companies <br />11<br />IFRS does not provide industry-specific guidance or standards for registered investment companies or private funds<br />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.<br />
  13. 13. Impact of IFRS on Financial Services Companies <br />12<br />Industry Views of IFRS for Investment Funds<br />US GAAP are more appropriate to open-end investment funds than existing IFRS<br />IFRS does not presently provide a satisfactory basis for investment funds financial reporting and is not sufficiently focused on the needs of investors.<br />
  14. 14. Impact of IFRS on Financial Services Companies <br />13<br />Sample key differences between IFRS and US GAAP<br /><ul><li>Consolidation</li></li></ul><li>Impact of IFRS on Financial Services Companies <br />14<br />Sample key differences between IFRS and US GAAP<br /><ul><li>Classification of Investor Ownership</li></li></ul><li>Impact of IFRS on Financial Services Companies <br />15<br /><ul><li>Challenges for Investment Funds
  15. 15. IFRS 7 Disclosures
  16. 16. Consolidation of Investments
  17. 17. Systems Limitations
  18. 18. Investor Education</li></li></ul><li>16<br />Thank you<br />

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