Accounting rules and reporting issues for business and public sector 20151111

© 2009 IBM Corporation
IBM Confidential – Internal Use Only
Standards for Business/Government
Report – November 11, 2015
Author: Paul Young, CGA
Proven Practice Advisor
Business Analytics
IBM Canada Inc.

2
Agenda
• Project Plan
• Major Standards
• New SEC Filing
• Annual Budgeting Cycle
• Risk Management
• Internal Audit
• OECD – Tax Policies
• PSAB/Canada
• IPSAB/Global
• GASB

Introduction:
• IFRS is the International Financial Reporting Standards that being used by over
100 countries. In addition IFRS has also undertaken joint projects with FASB
(United States Financial Accounting Standards Board).
• The presentation will touch on the revised standards and discuss potential
impact on IBM Cognos's Financial solution, including blueprints as well as the
potential for services to be engaged with work via re-statement, reporting,
models review, etc.
• Below tables show the major countries/regions and were they stand on IFRS

Work Plan included the Effective dates for the revised IFRS Standard

Work Plan included the Effective dates for the revised IFRS Standard (Implementation cont.)

Work Plan included the Effective dates for the revised IFRS Standard – Research Projects

Completed FASB Projects

FASB Completed Projects

SEC – United States

Revenue Recognition – IAS 18
This objective of this project is to develop a single conceptual model, and general principles,
for determining when revenue should be recognized in the financial statements. This single
conceptual model would apply to all industries and all types of revenue-generating
transactions.
Currently, IAS 18 provides guidance on revenue recognition. However, it provides little
guidance on revenue transactions with multiple components (for example, sale of hardware
combined with software, and sale of hardware combined with service). The new standard
will address the components part of the contract.
The second part of the standard deals with the performance obligation of the contract.
Warranties will be broken down between product warranties and performance based
warranties.
Construction Contracts will also be impacted by the new approach, because the new
standard will look at when ownership has transferred and this will determine how the
revenue will be recorded. This could mean some projects could go from Percentage of
completion to completed contract.
What’s next?
• Implementation 2018 – Companies need more time to prepare
• Work is ongoing with source systems/reporting to meet the reporting requirement.
• 2017 likely will be the target date as companies like to have two years of data as part of
their reporting cycle
Option:
• New exhibits/notes will be required as part of disclosing the change and/or details. The
notes disclosure feeds into Cognos Disclosure Management as well as TM1. TM1 could be
used for budgeting/re-statement
• A template could be included as part of the reporting requirement as way to build the
exhibit/note into the 10K/10Q reporting

Leases – IAS 17
New Lease Proposal will make no distinction between Capital and Operating Leases. All
leases with the exception of the following will be accounted for using the right-to-use model:
• Mineral rights leases
• Leases < 1 year
The new proposal will required the lease to be set up as an asset with its corresponding
liability.
Balance Sheet
Right to Use – Asset
Liability under right to use
Income Statement
Lease Expense – right to use
Financial Charge – Lease
What’s Next
• IFRS has approved the new leasing standard. The effective date is 2019. Earlier adopters
can move up the date if they have already changed to the new revenue recognition
standard for contracts
Options
• Leasing is currently part of the notes/exhibit, but on annual basis. The new standard will
make the leasing reporting part of the 10Q as well as regular monthly reporting for
business
• FASB (USA) will use a dual leasing model which could trigger FASB GAAP/ IFRS GAAP
reconciliation
• Cognos Disclosure Management/TM1 could be used as part of the reporting requirement
for Leases

Insurance Contracts – IAS 4
The ED proposes a comprehensive measurement approach for all types of insurance
contracts issued by entities (and reinsurance contracts held by entities), with a modified
approach for some short-duration contracts. The approach is based on the principle that
insurance contracts create a bundle of rights and obligations that work together to generate
a package of cash inflows (premiums) and outflows (benefits and claims). An insurer would
apply to that package of cash flows a measurement approach that uses the following
building blocks:
(a) a current estimate of the future cash flows;
(b) a discount rate that adjusts those cash flows for the time value of money
(c) an explicit risk adjustment
(d) a residual margin.
What’s Next:
• New IFRS in 2016. The effective date likely will be 2019, but push up earlier to possibly
2017 or 2018
• The financial statements will have to be re-built along with schedules to support the new
reporting. Cognos Disclosure Management can help with the new reporting requirement

Financial Instruments– IAS 39
The hedge accounting project is Phase III of IFRS 9, the IASB’s project to replace IAS 39
Financial Instruments: Recognition and Measurement. The objective of this phase is to
improve the usefulness of financial statements for users by fundamentally reconsidering the
current hedge accounting requirements.
What’s Next:
• IFRS has been completed and the effective date is 2018. Many companies will push up
the date to 2017
• Cognos Disclosure Management and Algorithmics could be solution to handle the
disclosure as it relates to Financial Instruments

Joint Arrangements – IAS 11
Under the new requirements the accounting for joint arrangements will be driven by a
principle, namely that parties should recognise their rights and obligations arising from the
arrangements.
What’s Next:
• The new Joint Venture/Agreement standard is effective January 2016.
• Cognos Controller can already handle the situation via the company ownership rules

SEC Compensation Reporting
What’s Next:
• This would be additional reporting requirement as part of 10K/10Q filing
• Cognos Disclosure Management/ICM/TM1 could be part of the solution. The
recommendation could be creating a specific template that could be used as
part of building the exhibits/notes

SEC Compensation Reporting

Key Comments on the budgeting
Cycle – The article emphasizes more
rolling forecast and/or different
approach to budget cycle.

Risk Management

Internal Audit

OECD

PSAB/Canada

IPSAB

GASB

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