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10:15 AM – 10:30 AM
The Future of Accounting Standards
Mr. Binod Shankar, CFA
Managing Director
Genesis Institute
THE FUTURE OF
ACCOUNTING STANDARDS
         Binod Shankar, CFA
About Me
• 17+ years in project appraisal, audit, financial due
  diligence, financial feasibility, valuation and real
  estate finance
• 11 years in the Middle east- Oman, Bahrain and
  now Dubai
• Worked with KPMG, Arthur Andersen, Ernst &
  Young. Last position as Executive Director at Gulf
  Finance House, Bahrain
• Teaching advanced finance and accounting
  courses since 1996
• Chartered Accountant and a CFA charterholder
4
About Genesis

•Market leader in CFA preparatory courses in the UAE and Lower Gulf
•Diverse product portfolio of Customized Corporate Training, CFAB Review
Courses
•The only learning provider for all 3 levels of CFA in the Lower Gulf
•Authorized Distributor of Kaplan Schweser in the UAE
•Trained 1,500+ finance professionals and CFA candidates
•Approved Learning Partner of Institute of Chartered Accountants of England
and Wales




5
Convergence
• Between IFRS and UJS GAAP
• Started in 2004
• A few projects have been selected for
  convergence




6
Convergence
•   Financial instruments        • Balance sheet - Netting
•   Revenue recognition          • Financial statement
•   Leases                         presentation
•   Statement of comprehensive   • Discontinued operations
    income                       • Financial instruments with
•   Fair value measurement         characteristics of equity
•   Derecognition                • Insurance contracts
•   Consolidations               • Emissions trading schemes
•   Post-employment benefits


7
The spread of IFRS




8
From Rules to Principles
• US GAAP: Too many rules, exceptions
• Confusing and even contradictory standards
• Easier to find loopholes and “game” the
  standards
• One reason why the US has the maximum
  number and size of accounting scandals:
  Enron, Worldcom, Global Crossing


9
From Off to On
• Traditional off balance sheet items may end up on the
  balance sheet
• The ED issued in 2010 on Leases requires same
  treatment for operating leases and finance leases.
  Maybe finalised in 2012
• Excludes short term leases
• Huge impact:
      Companies may end up more leveraged; Airlines, retail
      May even breach bank covenants
      Limits ability to raise finance
      Interest costs may rise; profitability may fall

10
Public Sector Accounting
• Traditionally most Governments have followed
  cash based or modified accrual accounting
• Inertia due to lack of specialists, lack of
  funding and lack of experience with accrual
  accounting
• There is a growing trend towards full Accrual
  Accounting
• Growing adoption of International Public
  Sector Accounting Standards (IPSAS)
11
Public Sector Accounting




                      Source: Ernst & Young
12
SME Standards
• SMEs make up 95% of all companies. Yet they
  have to comply with some IFRSs that are
  irrelevant. Effect is higher cost and workload
• IASB issued accounting standards for SMEs in
  2009
• Abridged, simplified set of standards
• Makes IFRS easier to adopt. Yet another
  catalyst for growth of IFRS
13
Limiting the Choices-IFRS
Subject                      Option 1                    Option 2
Immaterial items             Part of financials          Show in notes
Cash flow from operations    Indirect method             Direct method
Interest paid                Cash flow from operations   Cash flow from financing
Dividend paid                Cash flow from operations   Cash flow from financing
Subsequent measurement       Cost model                  Revaluation model
of P P & E
Interest in joint ventures   Proportionate               Equity accounting
                             consolidation
Subsequent measurement       Cost model                  Fair value model
of Investment Properties
Govt grants                  Deferred income             Reduce from assets

14
Clarity and Simplicity
Standard                 Purpose(s)

IFRS 9: Financial        • Replaces the hideously complex IAS 39
Instruments              • Reduces asset classification to just two
                         • Simplified fair value options
                         • Comprehensive- measurement, impairment, hedging,
                           disclosure
                         • Impairment model for assets means losses may be
                           recognized earlier
IFRS 11: Joint           Replaces IAS 31
arrangements
IFRS 13: Fair Value      • Single framework for defining & measuring FV
                         • Eliminates different different in different IFRSs


15
Summary
1.   Convergence
2.   Spread of IFRS
3.   Rules to Principles
4.   Off balance sheet to on balance sheet
5.   Evolution of Public Sector Accounting
6.   SME standards
7.   Limiting the choices
8.   Clarity and Simplicity
16
Thank you!

Binod Shankar, CFA, FCA              www.genesisreview.com
Mobile: +971 50 558 2498                   Genesis Institute
Email : bshankar@genesisreview.com         Dubai. Abu Dhabi

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The Future of Accounting Standards

  • 1. Platinum Sponsor Gold Sponsor Partners The Early Bird Company
  • 2. 10:15 AM – 10:30 AM The Future of Accounting Standards Mr. Binod Shankar, CFA Managing Director Genesis Institute
  • 3. THE FUTURE OF ACCOUNTING STANDARDS Binod Shankar, CFA
  • 4. About Me • 17+ years in project appraisal, audit, financial due diligence, financial feasibility, valuation and real estate finance • 11 years in the Middle east- Oman, Bahrain and now Dubai • Worked with KPMG, Arthur Andersen, Ernst & Young. Last position as Executive Director at Gulf Finance House, Bahrain • Teaching advanced finance and accounting courses since 1996 • Chartered Accountant and a CFA charterholder 4
  • 5. About Genesis •Market leader in CFA preparatory courses in the UAE and Lower Gulf •Diverse product portfolio of Customized Corporate Training, CFAB Review Courses •The only learning provider for all 3 levels of CFA in the Lower Gulf •Authorized Distributor of Kaplan Schweser in the UAE •Trained 1,500+ finance professionals and CFA candidates •Approved Learning Partner of Institute of Chartered Accountants of England and Wales 5
  • 6. Convergence • Between IFRS and UJS GAAP • Started in 2004 • A few projects have been selected for convergence 6
  • 7. Convergence • Financial instruments • Balance sheet - Netting • Revenue recognition • Financial statement • Leases presentation • Statement of comprehensive • Discontinued operations income • Financial instruments with • Fair value measurement characteristics of equity • Derecognition • Insurance contracts • Consolidations • Emissions trading schemes • Post-employment benefits 7
  • 8. The spread of IFRS 8
  • 9. From Rules to Principles • US GAAP: Too many rules, exceptions • Confusing and even contradictory standards • Easier to find loopholes and “game” the standards • One reason why the US has the maximum number and size of accounting scandals: Enron, Worldcom, Global Crossing 9
  • 10. From Off to On • Traditional off balance sheet items may end up on the balance sheet • The ED issued in 2010 on Leases requires same treatment for operating leases and finance leases. Maybe finalised in 2012 • Excludes short term leases • Huge impact:  Companies may end up more leveraged; Airlines, retail  May even breach bank covenants  Limits ability to raise finance  Interest costs may rise; profitability may fall 10
  • 11. Public Sector Accounting • Traditionally most Governments have followed cash based or modified accrual accounting • Inertia due to lack of specialists, lack of funding and lack of experience with accrual accounting • There is a growing trend towards full Accrual Accounting • Growing adoption of International Public Sector Accounting Standards (IPSAS) 11
  • 12. Public Sector Accounting Source: Ernst & Young 12
  • 13. SME Standards • SMEs make up 95% of all companies. Yet they have to comply with some IFRSs that are irrelevant. Effect is higher cost and workload • IASB issued accounting standards for SMEs in 2009 • Abridged, simplified set of standards • Makes IFRS easier to adopt. Yet another catalyst for growth of IFRS 13
  • 14. Limiting the Choices-IFRS Subject Option 1 Option 2 Immaterial items Part of financials Show in notes Cash flow from operations Indirect method Direct method Interest paid Cash flow from operations Cash flow from financing Dividend paid Cash flow from operations Cash flow from financing Subsequent measurement Cost model Revaluation model of P P & E Interest in joint ventures Proportionate Equity accounting consolidation Subsequent measurement Cost model Fair value model of Investment Properties Govt grants Deferred income Reduce from assets 14
  • 15. Clarity and Simplicity Standard Purpose(s) IFRS 9: Financial • Replaces the hideously complex IAS 39 Instruments • Reduces asset classification to just two • Simplified fair value options • Comprehensive- measurement, impairment, hedging, disclosure • Impairment model for assets means losses may be recognized earlier IFRS 11: Joint Replaces IAS 31 arrangements IFRS 13: Fair Value • Single framework for defining & measuring FV • Eliminates different different in different IFRSs 15
  • 16. Summary 1. Convergence 2. Spread of IFRS 3. Rules to Principles 4. Off balance sheet to on balance sheet 5. Evolution of Public Sector Accounting 6. SME standards 7. Limiting the choices 8. Clarity and Simplicity 16
  • 17. Thank you! Binod Shankar, CFA, FCA www.genesisreview.com Mobile: +971 50 558 2498 Genesis Institute Email : bshankar@genesisreview.com Dubai. Abu Dhabi