latest ifrs developments

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Latest Developments in IFRS Latest Developments in IFRS

44thth Annual Hot Topics Seminar Annual Hot Topics SeminarOctober 4, 2011October 4, 2011

Stephen G. Austin, CPA, MBAStephen G. Austin, CPA, MBAFirm Managing PartnerFirm Managing PartnerSwenson Advisors, LLPSwenson Advisors, LLP

New IASB Leader

Hans HoogervorstBackgroundPolitical issuesU.S. adoption optionRisk of non-U.S. commitmentXBRL

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■ 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)

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Mary Schapiro

Chairman of US SEC:

“I think the rigour and timeliness of

oversight is especially important.”

BREAKING NEWSBREAKING NEWS

“Global accounting rule setters urged to take time,” 4/1/11, H.Jones

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Overview of Convergence Process

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MoU Process

First MoU – February 2006

Second MoU – 2008

Third MoU – 2009

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SEC Initial Work Plan (February 2010)

– Six Components

1. Sufficient development and application of IFRS for the US domestic reporting system

2. Independent Standard settings

for the benefit of investor

3. Investor understanding and education regarding IFRS

4. Regulatory environment

5. Impact of issuers

6. Human capital readiness

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Subsequent Series of Progress and Work Plan Reports

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2010-2011

New Pronouncements and Updates

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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

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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

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Amendments to IFRS Issued as Separate Documents

Amendments to IFRS 7

Amendments to IFRIC 9 and IAS 39

Annual improvements



Amendments to IAS 32

Amendments to IFRIC 14

Amendments to IAS 12

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New IFRS for SMEsSeptember 2011

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Overview of the

New Revenue Recognition Model

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Exposure Draft

Issued in June 2010

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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

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Expanded Footnote Disclosures

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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:

a) Made generally available, via the boards’ websites, for interested parties to review;

b) Used as the basis for outreach with parties that are most affected by the proposed new requirements; and

c) Subjected to a detailed drafting review with selected parties, as part of the fatal flaw review process each board is required to undertake

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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

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Top 10 Industrialized countries and their Use of IFRS

and

How they Have Implemented the New Standards

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Understanding the Differences between

“Adoption”

VS

“Adapting”

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ChinaChina 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

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IndiaIndia Rules for Listed Filings


No, Financial Statements must be prepared in accordance with Indian GAAP. Version of IFRS is not applicable.



IFRS and IFRS for SMEs are prohibited. Financial Statements must be prepared in accordance with Indian GAAP.

Failed to meet the March, 2011 deadline.


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United KingdomUnited Kingdom

Rules for Listed Filings


Required for consolidated financial statements. Permitted for standalone/separate financial statements.

IFRS as adopted by EU.



Permitted for standalone/separate financial statements.

IFRS for SMEs is prohibited.

Parent companies can choose to apply IFRS or UK GAAP.


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GermanyGermany Rules for Listed Filings


Required for all consolidated financial statements.




Permitted, for standalone financial statements as long as

additionally, local GAAP (HGB) consolidated financial statements

are prepared and filed.



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FranceFrance Rules for Listed Filings


Required for consolidated financial statements.


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 FilingsIs IFRS or IFRS for SMEs required, permitted or prohibited?

IFRS and IFRS for SMEs are prohibited.


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AustraliaAustralia



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.



IFRS is required for most consolidated and standalone/separate financial statements.



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New ZealandNew 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).


NZ IFRS is required for some companies and IFRS for SMEs is prohibited.


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JapanJapan Rules for Listed Filings


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


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.


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SpainSpain 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.


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.



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South KoreaSouth Korea



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.



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.


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SEC “Preliminary Observations”SEC “Preliminary Observations”20102010

Approaches to Incorporate IFRS into a Jurisdiction’s

Financial Reporting System

1. Use IFRS as issued by IASB

Very few follow!

2. Use IFRS after some form of national incorporation process

Leading to...

Convergence approach

and/or

Endorsement approach

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Convergence ApproachConvergence 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”

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Endorsement ApproachEndorsement Approach(Vast Majority Follow this 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 – 2nd 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

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Other Critical Other Critical SEC Observations and ConcernsSEC 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!!!

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IASB Independence Concerns Voiced at SEC IASB Independence Concerns Voiced at SEC IFRS Roundtable; (July 2011)IFRS Roundtable; (July 2011)

Chairman Schapiro Sees Danger of Differing Chairman Schapiro Sees Danger of Differing Jurisdiction – Specific InterpretationsJurisdiction – 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

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Personal Experience in 2011Personal Experience in 2011

Teaching IFRS to the Chinese Teaching IFRS to the Chinese

at the MBA Level at the MBA Level

at Shanghai University at Shanghai University

of Finance and Economics of Finance and Economics

AICPA Recommendations to the SECAICPA 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

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SEC White Papers- Fall 2011SEC White Papers- Fall 2011

Quality of Accountancy under IFRS Remaining Differences yet unresolved Recent PWC Poll

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What to Expect from the SEC What to Expect from the SEC in the Next 75 Daysin the Next 75 Days

December_2011December_2011

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Thank You

Stephen G. Austin, MBA, CPA

[email protected]

www.SwensonAdvisors.com

www.swentrack.com

www.swensonforensic.com