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PresentsPresents
An Overview of IFRSAn Overview of IFRSA Webinar Hosted By Deloitte
March 25, 2009
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Questions may be submitted using the Q&A iconon the right hand panel
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Welcome & Introduction
Dr. Raef Lawson
VP of Research andProfessor-in-Residence
Institute of ManagementAccountants
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Featured Presenter
D.J. Gannon
Partner, Audit andEnterprise Risk Services
Deloitte & Touche LLP
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D.J. Gannon - Bio
In July 2000, D.J. Gannonjoined Deloitte & Touche LLP as apartner where he specializes in international accounting andfinancial reporting, as well as global regulatory and professionalissues.Mr. Gannon is the leader of the International Financial ReportingStandards (IFRS) Centre of Excellence for the Americas region.Prior to that he was the leader of International Financial AccountingServices, a group within the organizations Global IFRS andOfferings Services Group that assists companies in implementing orconverting to International Financial Reporting Standards (IFRS).Mr. Gannon is chairman of the American Institute of Certified PublicAccountants International Practices Task Force and the AICPAsAccounting Standards Executive Committees Short-TermInternational Convergence Task Force. He is a Certified PublicAccountant in the District of Columbia and a member of theAmerican Institute of Certified Public Accountants. He is active inspeaking and writing on a variety of global financial reporting topics.
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Featured Presenter
Randall Sogoloff
Partner, Audit andEnterprise Risk Services
Deloitte & Touche LLP
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Randall Sogoloff - Bio
Randall Sogoloff is a partner in the National Office of Deloitte &Touche LLP in Wilton, Connecticut (USA). His role involvesdeveloping firm accounting guidance, responding to standard-settingproposals, and providing accounting consultation services.Randall is also a participant in Deloittes Global IFRS LeadershipTeam and part of Deloittes IFRS Centre of Excellence for theAmericas region. He specializes in the accounting for leases,consolidation, and income taxes under both International FinancialReporting Standards and U.S. GAAP.Randall is also a member of the AICPAs Accounting StandardsExecutive Committee (AcSEC).
Randall is Certified Public Accountant (CPA) in the States of Floridaand Connecticut.Randall has been a frequent speaker at seminars, conferences, andexecutive-level meetings and has authored articles in accountancyand finance periodicals, including Journal of Accountancy,Derivatives Financial Products Report, and Deloitte Heads Up.
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AgendaBackground and Regulatory Developments
Global move towards IFRS
Recent SEC activity
Early adoption provisions
IFRS for non publicly accountable entities
IFRS Implementation Considerations
Key impacts of IFRS implementation
IFRS 1 considerations
Key benefits of IFRS adoption
Lessons learned
Wrap-up
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Learning Objectives
Upon completing this webinar, you will be able to:
Describe the global momentum toward IFRS identifythe regulatory background of IFRS and recent SECactivity
Follow the proposed timelines for transition and earlyadoption options
Discuss the First Time Adoption considerations of IFRS
Summarize the IASBs project on IFRS for PrivateEntities
Understand key benefits of IFRS adoption and lessonslearned to date
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Background and Regulatory
Developments
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The Global Move Towards IFRS
Europe2005
Australia2005
Canada2009/11
South Africa2005
United States
(2009-14?)
Current or anticipated requirement
or option to use IFRS (or equivalent)
Brazil2010
China
2007
India2011
Chile2009
Japan(?)
Mexico
2008/12
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IFRS Today and Tomorrow
Today, IFRS is used in more than 100countries: Required for all listed companies in EU
countries, starting in 2005 Argentina, Brazil, Canada, Chile, India,
Korea, and Mexico all have announcedmandated use
Japan currently considering allowing IFRSbeginning 2010, with a requirement in 2015
FPIs can now use IFRS in the U.S. SEC Roadmap contemplates use of IFRS
beginning in 2014
By 2011, it is expected that: All major countries will have adopted IFRS to
some extent Certain U.S. public companies will have the
option to use IFRS SEC decision on IFRS mandate for all U.S.
public companies
196188
116
0
50
100
150
200
250
2007
U.S GAAP IFRS Other
Account ing Standards Usedby Global Fortune 500
About 40% of t he Globa l For tune
500 Companies cur rent ly use I FRS.
That number is expec ted to grow as
more count r ies adopt IFRS over t he
nex t f ew years .
Copyright 2009 Deloitte Development LLC. All rights reserved.
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What is IFRS?
IFRS is a set of established accounting standards that is rapidlygaining worldwide acceptance
Standards are promulgated by the London-based InternationalAccounting Standards Board (IASB)
IASB includes representatives from major countries, including theU.S.
Generally more focused on objectives and principles and less relianton detailed rules and interpretations than U.S. GAAP
IFRS currently consists of a single volume of approximately 40
standards and 25 interpretations
Standards include IASs and IFRSs
Interpretations include SICs and IFRICs
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Summary of Proposed Rule on Early Use of IFRS
Provides information on how to assess eligibility
Instructs issuers to submit their criteria for eligibility to the Division of
Corporate Finance and receive a letter of no objection permitting the
use of IFRS
Must prepare financial statements using IFRS, as issued by the IASB
Must provide three years of financials in the year of adoption
Proposes alternatives on providing additional U.S. GAAP financial
information
Proposes amendments to the rules and regulations
Establishes a new class of issuer an IFRS Issuer
Proposed new Article 13 of Regulation S-X
Addresses other disclosure issues such as Guide information
May not use IFRS for the first time in quarterly reports, IPOs, proxy orinformation statements
Not impact filing dates
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Poll Question #2
By 2014, what percentage of total eligible U.S.public companies do you believe will have usedthe early adoption option?
A. Less than 10%
B. Between 10% and 25%
C. Between 26% and 50%
D. Between 51% and 75% E. Between 76% and 90%
F. Substantially all
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IFRS for Non Publicly Accountable Entities
Modifies the full set of IFRS
Self-contained principles
based standard
Topics irrelevant to private
entities omitted
Simplifies the recognition and
measurement principles
Less fair value measurement
Simplifies policy alternatives
Simplifies transition from US
GAAP
Reduces f i nanc ia l repo r t ing bu rden fo r sma l l and med ium en te rp r i ses
Back g r ou nd Ov er v iew o f Ex posu r e Dr a f t
IASB issued an Exposure Draftof IFRS for NPAEsin Feb.07
and proposed to issue the finalstandard in the 2009
Any entity that publishes general
purpose financial statements for
external users and does nothave public accountability can
use the IFRS for NPAEs.
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IFRS ImplementationConsiderations
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Illustrative Adoption Timeline
Al ignment w i th o ther in i t ia t ives and t ra in ing fo r appropr ia te personne l
IFRS
com
petence
Rat iona l izat ion and s tandard iza t ion o f s ta tu t ory repor t ing
Trans i t ion date
Repor t ing date
2 0 0 9
2 0 0 9 2 0 1 0
2 0 1 0 2 0 1 1
2 0 1 2 2 0 1 3
2 0 1 4
Awareness Assessment Plann ing
I n i t ia l Tra in ing Roadmap
TargetedSta tu toryI m p l e m e n t a t i o n
Sys tem &Process
redes ign
Statu toryI m p l e m e n t at i o n
SelectExempt ions
Prepare I FRSOpening BS
Dry Runs
U.S. GAAP & I FRSopen ing ba lance
I n v e s t o rCommunica t ions
Audi t P rocedures Change
Standards
Trans i t ion toI FRS
Quar ter lyRepor t ing
I n v e s t o r
Communica t ions
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First-time Adoption of IFRS Overview
General RequirementsExemptions from Retrospective
ApplicationImplementation Considerations
Primary standard IFRS 1
Applicable when an entity makesits first explicit and unreservedreference to IFRS
Guidance addresses the processaround adopting IFRS for thefirst-time; generally apply allIFRS effective at the reportingdate retrospectively
Provides certain electiveexemptions from retrospectiveapplication; some exceptionsfrom retrospective applicationmust be followed, including useof estimates, hedging andderecognition of financial assets
Only requires one year ofcomparative financial information
Effect of transition adjustments isrecognized in retained earnings
Requires a reconciliation ofequity and income; narrativediscussion of transitionadjustments
Business combinations
Fair value as deemed cost
Employee benefits reset ofcorridor
Cumulative translation adjustments
Compound financial instruments
Subsidiary, associate and jointventure reporting
Designation of previously recognizedfinancial instruments
Share-based payment transactions
Insurance contracts
Decommissioning, restoration andsimilar liabilities
Leases may follow IFRIC 4
Key dates such as the reporting dateof the companys first IFRS financialstatements, and the transition date toIFRS
The overall approach to IFRSimplementation
Differences between existingaccounting policies and IFRS
Areas where extensive disclosureswill be required
Election and application of optionalexemptions; application of mandatoryexceptions
Processes and data capture aroundfirst-time adoption will need to bedeveloped
Key Quest ions to Ask What are the repor t ing and t r ans i t ion dates? What vo lun t ary e lec t ions f rom re t rospec t ive app l ica t ion have we
made? Are the cur rent in fo rm at ion sys tems capab le o f captur ing the
in form at ion necessary fo r f i r s t - t ime adopt ion o f I FRS?
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Poll Question #3To what extent have you been involved in IFRS scopingand planning discussions?
A. Scoping and planning activities have not beeninitiated
B. No involvement
C. Participate in a passive role
D. Actively participate, looked upon as subject matterexpert
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Key Benefits of IFRS Adoption
St ream l in ing f i nanc ia l repo r t ing p rocess th roug hou t g loba lope ra t ion e l im ina t es d ive rgen t accoun t ing sys tem, enab lesg rea te r cons is tency resu l t i ng in reduced costs & inc reasedope ra t iona l e f fec t i veness
ReducedComp lex i t y
Compan ies a lso may need to conve r t to I FRS i f they a re asubs id iary o f a fo re ign company tha t m us t use I F RS, o r i ft hey have a fo re ign inves to r tha t m us t use IF RS
I m p r o v e dTransparency
P resen ta t ion o f f i nanc ia l s ta temen ts on the same bas is as i t sfo re ign compe t i t o rs mak ing compa r isons eas ie r
EnhancedComparab i l i t y
Greater m arket e f f ic ienc ies can be rea l ized. I FRS encouragesbo th compan ies and inves to rs t o have eas ie r access tom u l t i p l e / f o r e ig n m a r k e t s t h u s s t i m u l a t i n g i n v es t m e n t a n dcross border cap i ta l f low
I nc reasedEff ic iency
Compan ies w i th subs id ia r ies in coun t r ies th a t requ i re o rpe rm i t I FRS may be ab le to use one accoun t ing languagec o m p a n y - w i d e
GreaterCons is tency
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Lessons Learned The Rear View Mirror
Views ofpreparers,users, andauditors
Most EU investors believe IFRS has improved the quality of consolidated financialstatements
Large multinational companies that rely more heavily upon equity financingperceive the benefits of IFRS to be greater than other companies
Larger companies in the EU converted earlier and devoted considerable resourcesto educating and training their boards, staff, and investors
Views ofCFO/CIO
organizations
Systems impacts of IFRS conversions were underestimated Its not just about accounting, its about the Process, People, Controls and
Technology
Lessonslearned from
IFRSconversions
Primary lesson learned is not to treat IFRS as a purely technical accountingexercise
Effort to convert was often underestimated Lead time from announcement to reporting date was short Late start to converting often resulted in escalation of costs, especially after
transition date Many companies did not achieve a stable state for IFRS reporting Often companies neglected to take a holistic approach towards IFRS conversion
resulting in an imperfect conversion effort
Reaction ofsecuritiesmarkets
In the EU, there is widespread agreement that IFRS has made financial statementseasier to compare across countries and competitors
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Wrap-up
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Poll Question # 4Which of the following do you think would be the mostsignificant area in IFRS for management accountants?
A. Analyzing the impact of IFRS on financial reporting
B. Assessing the impact of IFRS on working capital, ratios and
capital budgeting decisions
C. Discussion on accounting policy choices with management
D. Focus on technical accounting differences
E. Technology changes due to IFRS implementation
F. All of the above
G. None of the above
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Suggested Near-Term Action StepsAction Step Immediate Benefits Long Term Benefits
Develop and analyze statutory
reporting baseline
Immediate understanding on statutory
reporting requirements, processes, and
related resources, and the existing
implications of IFRS
Reduced costs due to increased
standardization and centralization of
statutory reporting
Analysis of initial accounting
implications of IFRS
Immediate high-level understanding of
the impact of IFRS adoption on your
financial statements
Reduced risk of error or surprises in the
ultimate conversion to IFRS
Preliminary analysis of significant
IFRS tax provision and planning
implications
Immediate high-level understanding of
the impact of IFRS adoption on your
significant US and foreign tax positions
Identification of significant tax issues
important in planning for conversion and
developing a roadmap to readiness
High level impact analysis (process,
systems) and related workshops
Immediate high-level understanding of
specific IFRS impacts on your processes,
technologies, and other businessactivities
Provide realistic estimate regarding long-
term effort of IFRS implementation
Increased executive consensus and
reduced risk of surprises
Technical training sessions Increase exposure and knowledge of key
finance resources or IFRS standards
Increased knowledge and familiarity of
team regarding IFRS requirements
Consideration of IFRS impact on
specific long-term finance initiatives
High-level assessment of IFRS
implications on company-wide finance or
major system initiatives
Reduced risk of IFRS-related surprises
as long-term financial initiatives are
completed
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Questions & AnswersUse theQ & A Panel to send your questions to our panelists
Dr. Raef LawsonVP of Research and
Professor-in-ResidenceInstitute of
Management Accountants
D.J. GannonPartner, Audit and
Enterprise Risk ServicesDeloitte & Touche LLP
Randall SogoloffPartner, Audit and
Enterprise Risk ServicesDeloitte & Touche LLP
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Thank You to Our Featured Presenters
D.J. GannonPartner, Audit and
Enterprise Risk ServicesDeloitte & Touche [email protected]
Randall SogoloffPartner, Audit and
Enterprise Risk ServicesDeloitte & Touche [email protected]
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Inside IFRS2009 Calendar of Events!
IFRS Financial Reporting LiabilitiesNovember 2009
(tentative)
IFRS Financial Reporting Assets and RevenueSeptember 23, 2009
IFRS Financial Reporting EntitiesAugust 13, 2009
IFRS Financial Reporting Presentation ConsiderationsMay 20, 2009
New IFRS Course Package
IMA IFRS Series: Embracing IFRS: A Background Primer
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