- The document summarizes recent developments in International Financial Reporting Standards (IFRS), including delays in convergence projects between the IASB and FASB, new standards and pronouncements issued, and differences in IFRS adoption across countries. - Key countries' approaches to adopting IFRS for statutory versus listed company filings are reviewed, with most requiring IFRS for consolidated listed company filings but maintaining local GAAP for statutory filings. - Oversight of the IASB and concerns about independence are discussed, as well as recommendations for the SEC as it considers a potential future adoption of IFRS in the US.

1. Latest Developments in IFRS 4 th Annual Hot Topics Seminar October 4, 2011 Stephen G. Austin, CPA, MBA Firm Managing Partner Swenson Advisors, LLP

2. New IASB Leader Hans Hoogervorst Background Political issues U.S. adoption option Risk of non-U.S. commitment XBRL

3. On April 14, 2011, FASB and IASB have jointly announced a further delay to the convergence of IFRS Announced that they would defer “by a few months” the timeline for: Revenue recognition – End of 2011 Leasing – End of 2011 Financial instruments – End of 2011 Insurance – First half of 2012 Boards expect to issue new standards on fair value measurements and presentations of other comprehensive income in the new few weeks. April 21, 2011 – Progress Report “ IASB and FASB Report Progress on Convergence” (Journal of Accountancy, 4/21/11)

4. Mary Schapiro Chairman of US SEC: “ I think the rigour and timeliness of oversight is especially important.” BREAKING NEWS “ Global accounting rule setters urged to take time,” 4/1/11, H.Jones

7. Overview of Convergence Process

8. MoU Process First MoU – February 2006 Second MoU – 2008 Third MoU – 2009

10. SEC Initial Work Plan (February 2010) – Six Components Sufficient development and application of IFRS for the US domestic reporting system Independent Standard settings for the benefit of investor Investor understanding and education regarding IFRS Regulatory environment Impact of issuers Human capital readiness

11. Subsequent Series of Progress and Work Plan Reports

12. 2010-2011 New Pronouncements and Updates

13. One new standard – IFRS 9 One revised standard – IAS 24 Amendments to IFRS that were issued as separate documents Amendments to IFRS issued in the second annual improvement projects Amendments to other IFRS resulting from those revised or amended standards Two new interpretations – IFRIC 18 and 19

14. IFRS 9 Financial Instruments IAS 24 Related Party Disclosures IFRIC 18 Transfers of Assets from Customers IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments New Pronouncements

15. Amendments to IFRS Issued as Separate Documents Amendments to IFRS 7 Amendments to IFRIC 9 and IAS 39 Annual improvements Amendments to IFRS 2 Amendments to IFRS 1 Amendments to IAS 32 Amendments to IFRIC 14 Amendments to IAS 12

16. New IFRS for SMEs September 2011

17. Overview of the New Revenue Recognition Model

18. Exposure Draft Issued in June 2010

19. 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 satisfied

20. Expanded Footnote Disclosures

21. 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: Made generally available, via the boards’ websites, for interested parties to review; Used as the basis for outreach with parties that are most affected by the proposed new requirements; and Subjected to a detailed drafting review with selected parties, as part of the fatal flaw review process each board is required to undertake

22. 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’ proposals

23. Top 10 Industrialized countries and their Use of IFRS and How they Have Implemented the New Standards

24. Understanding the Differences between “ Adoption ” VS “ Adapting ”

25. China Rules for Listed Filings Is IFRS required for all listed companies? No, however CAS (Chinese Accounting Standards) have “somewhat converged” with IFRS. It is not a direct translation of IFRS and several differences remain between CAS and IFRS. The Ministry of Finance has plans to eliminate those differences. Version of IFRS is not applicable. Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? IFRS or IFRS for SMEs are prohibited. Basically “stuck” in the 2006 version of IFRS. IFRS adoption by country – www.pwc.com

26. India Rules for Listed Filings Is IFRS required for all listed companies? No, Financial Statements must be prepared in accordance with Indian GAAP. Version of IFRS is not applicable . Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? IFRS and IFRS for SMEs are prohibited. Financial Statements must be prepared in accordance with Indian GAAP. Failed to meet the March, 2011 deadline. IFRS adoption by country – www.pwc.com

27. United Kingdom Rules for Listed Filings Is IFRS required for all listed companies? Required for consolidated financial statements. Permitted for standalone/separate financial statements. IFRS as adopted by EU. Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? Permitted for standalone/separate financial statements. IFRS for SMEs is prohibited. Parent companies can choose to apply IFRS or UK GAAP. IFRS adoption by country – www.pwc.com

28. Germany Rules for Listed Filings Is IFRS required for all listed companies? Required for all consolidated financial statements. IFRS as adopted by EU. Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? Permitted, for standalone financial statements as long as additionally, local GAAP (HGB) consolidated financial statements are prepared and filed. IFRS for SMEs is prohibited. IFRS adoption by country – www.pwc.com

29. France Rules for Listed Filings Is IFRS required for all listed companies? Required for consolidated financial statements. IFRS as adopted by EU. Are subsidiaries of foreign companies or foreign companies listed on local exchanges subject to different rules? Yes. Non-EU companies can apply Japanese, US or Canadian GAAP. Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? IFRS and IFRS for SMEs are prohibited. IFRS adoption by country – www.pwc.com

30. Australia Rules for Listed Filings Is IFRS required for all listed companies? Required for consolidated financial statements. There is no longer a requirement to prepare separate standalone financial statements for the parent entity. IFRS as adopted using the Australian version of IFRS. Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? IFRS is required for most consolidated and standalone/separate financial statements. IFRS for SMEs is prohibited. IFRS adoption by country – www.pwc.com

31. New Zealand Rules for Listed Filings Is IFRS required for all listed companies? Required for consolidated and standalone/separate financial statements. Like Australia, IFRS as adopted locally . All requirements of IFRS as published by IASB are retained, but also some additional requirements are included in New Zealand Equivalents to IFRS (NZ IFRS) (mainly in relation to public benefit entities, so these would not be relevant for listed entities). Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? NZ IFRS is required for some companies and IFRS for SMEs is prohibited. IFRS adoption by country – www.pwc.com

32. Japan Rules for Listed Filings Is IFRS required for all listed companies? Listed companies which meet certain requirements ("Specified Companies") are permitted to use IFRS for their consolidated financial statements ending on or after March 31, 2010. IFRS as adopted by the Financial Services Agency ("Designated IFRS’"). The Commissioner of the Financial Services Agency of Japan will designate those IFRSs published by the IASB which are recognized as having been approved and issued through fair and reasonable due process and are expected to be considered as being fair and appropriate financial reporting standards from the viewpoint of investor protection and market integrity in Japan . Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? Companies which file their consolidated financial statements under the Companies Act are permitted to use IFRS for the consolidated financial statements ending on or after March 31, 2010, if they are Specified Companies. IFRS adoption by country – www.pwc.com

33. Spain Rules for Listed Filings Is IFRS required for all listed companies? IFRS is required for consolidated financial statements for listed companies (other than financial institutions). Financial institutions must apply a local accounting plan that complies with IFRS although it is not called IFRS. Main differences are the elimination of the “non preferable accounting policies” when there are alternatives (i.e. the fair value model for IAS16 items is not permitted). IFRS as adopted by the EU . Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? IFRS is permitted for consolidated financial statements. All other companies must use New Spanish GAAP (effective January 1, 2008), which is essentially IFRS based with some differences. IFRS for SMEs is prohibited. IFRS adoption by country – www.pwc.com

34. South Korea Rules for Listed Filings Is IFRS required for all listed companies? Adoption of IFRS is required for all listed companies and certain unlisted financial institutions from 2011. IFRS as published by IASB and translated to Korean language word-for-word. Rules for Statutory Filings Is IFRS or IFRS for SMEs required, permitted or prohibited? IFRS is permitted from 2009 for all statutory filers. In 2011, IFRS is a requirement for all listed statutory filers and certain unlisted financial institutions. IFRS for SME is prohibited for statutory filings. IFRS adoption by country – www.pwc.com

35. SEC “Preliminary Observations” 2010 Approaches to Incorporate IFRS into a Jurisdiction’s Financial Reporting System Use IFRS as issued by IASB Very few follow! Use IFRS after some form of national incorporation process Leading to... Convergence approach and/or Endorsement approach

36. Convergence Approach China – 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”

37. 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 – 2 nd largest example 2005 Must follow IAS adopted by European Commission for listed companies 2006 - Present New IFRS must go through multiple steps before its authorized by the “ 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

38. Other Critical SEC Observations and Concerns Oversight of the IFRS Foundation? Composition of the IFRS Foundation and IASB Significant underfunding of the IFRS Foundation Operating deficits of $4 million 75% of the countries do not help fund United States accounts for about 25% of total funding Many issues to resolve!!!

39. IASB Independence Concerns Voiced at SEC IFRS Roundtable; (July 2011) Chairman Schapiro Sees Danger of Differing Jurisdiction – Specific Interpretations Development of inconsistency in global IFRS through differing national interpretations of global accounting standards Consensus that the IASB could be monitored until it achieves FASB-like due process in its standard setting. Must adopt FABS due processes IABS does not have enough investor participation

40. Personal Experience in 2011 Teaching IFRS to the Chinese at the MBA Level at Shanghai University of Finance and Economics

41. AICPA Recommendations to the SEC August 19, 2011 Option to Adopt IFRS Future Framework Supports the Endorsement Supports Prospective Application Transition Concerns PCAOB needs to harmonize Audit Standards with International Audit Standards

42. SEC White Papers- Fall 2011 Quality of Accountancy under IFRS Remaining Differences yet unresolved Recent PWC Poll

43. What to Expect from the SEC in the Next 75 Days December_2011

44. Thank You Stephen G. Austin, MBA, CPA [email_address] www.SwensonAdvisors.com www.swentrack.com www.swensonforensic.com