pwc convergence* are you ready? june 2008 *connectedthinking

Convergence*Are you ready?

June 2008

*connectedthinking

PricewaterhouseCoopersJune 2008

2

Discussion Topics

IFRS Overview

Convergence ‘defined’

Practical applications for CPAs

How to get ready

Appendixes: • What the SEC is doing• IASB and FASB Convergence• Differences between IFRS & US GAAP• Educational Resources


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Countries seeking convergence with the IASB on pursuing adoption of IFRSs

Countries that require or permit IFRSs

IFRS Developments – What’s the big dealThe Momentum Towards Global IFRS Adoption

More than 100 countries require or permit the use of International Financial Reporting Standards (IFRSs), or are converging with the IASB’s standards.

Top 10 Global Capital Markets

US US GAAP

Japan Converting to IFRS

UK IFRS

France IFRS

Canada Converting to IFRS

Germany IFRS

Hong Kong IFRS

Spain IFRS

Switzerland IFRS or US GAAP

Australia IFRS


4

What the Regulators are saying

“In 2008, the Division of Corporation Finance and the Office of the Chief Accountant, led by Wayne Carnall and Julie Erhardt, will formally propose to the Commission an updated "roadmap" that lays out a schedule, and appropriate milestones on which the schedule will be conditioned, for continuing the progress that the United States is making in moving to accept IFRS in this country.”

Christopher Cox, Chairman of the U.S. Securities and Exchange CommissionFebruary 8, 2008

Remarks to the 'SEC Speaks in 2008' Program of the Practising Law Institute


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IFRS 1 – First Time Adoption of IFRS

• Application of IFRS 1 is a critical issue for companies making the transition to IFRS.

• IFRS 1 requires an entity in its opening IFRS balance sheet to:- Recognize all assets and liabilities required by IFRS- Not recognize assets and liabilities not permitted by IFRS- Classify all assets, liabilities and equity as required by IFRS;

and - Measure all items in accordance with IFRS

EXCEPT where an exemption or exception allows or requires otherwise


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• Accounting policies based on current version of IFRS at the reporting date

• Retrospective application to opening IFRS balance sheet and all periods, subject to

• 14 optional exemptions; and

• 5 mandatory exceptions

• Earlier versions of the same IFRS are not used

• Transition guidance in IFRS not used by first time adopters unless specifically directed

IFRS 1 – First Time Adoption of IFRS

https://www.pwc.com/Extweb/service.nsf/docid/A25393F5C6287B8B8025715E00344108#four

https://www.pwc.com/Extweb/service.nsf/docid/A25393F5C6287B8B8025715E00344108#five


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Key IFRS – US GAAP Differences

Framework

Fundamentally, the frameworks and concepts underlying both IFRS and US GAAP are similar

Principles vs. Rules

IFRS built under principles based methodology; approximately 2,500 pages US GAAP is more prescriptive and rules-based addressing specific industries and types of transactions in many areas; approximately 25,000 pages

Fair value accounting

Greater use of fair value under IFRS than US GAAP (e.g., greater use of discounting, requirement to bifurcate compound instruments, option to revalue property, plant & equipment, investment property and intangibles)


8

Key Differences Between IFRS and US GAAP

• Consolidation

• Revenue recognition (e.g., VSOE, percentage of completion)

• R&D capitalization

• Impairments

• Securitizations/asset derecognition

• Provisions

• Debt/equity classification

• Hedging qualification

• Employee stock compensation

• LIFO

• Tax consequences of these differences

• Income tax accounting


9

Market Considerations

• Additional flexibility in capital raising initiatives • Cross border acquisition and divesture activities may require

IFRS knowledge• Increased investor interest; effective market communications• Benchmarking with peers• Take steps to influence regulators and tax authorities around

the impact and acceptance of IFRS• Being seen as a front runner in the adoption of IFRS in the US• Certain US companies are starting now; do you want to be

behind the curve?

How many IFRS filers in 2007?


10

How do you define convergence?

IFRS GAAP

US GAAP

Local Territory Statutory GAAP

Local Territory Statistical

Local Territory Tax Federal

Local Territory Tax State & Local

Local Territory Performance

Others?

convergence

Convergence


11

Dutch Taxonomy Project –

http://www.xbrl-ntp.nl/english

“The Dutch government intends to reduce the administrative burden of businesses 25 percent”



12

Australian SBR

“The benefits to business are ultimately estimated rise to $795M per year on an ongoing basis”


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The Adoption of XBRL is a Reality

Country Organization Program/Application

Japan Tokyo Stock Exchange (TSE), NTO, BoJ

TSE Registrant Financial Report Filings

United States Securities Exchange Commission

FFIEC/FDIC/FRS/OCC

XBRL Voluntary Filer Program

Call Report Modernization

UK Companies House

HM Revenue and Customs

Accounts Filings

Company Tax Filings

China China Securities Regulatory Commission

Interactive Data Filing for Financial Statements

Korea Financial Supervisory Service/DART

Mandatory Filing for all registrants

Australia

Netherlands

Australian Treasurer

Min of Finance/Justice

Standard business reporting program – Business Centric Model

Singapore ACRA Mandatory Filing for all registrants

A sampling of projects:

http://www.sec.gov/spotlight/xbrl.htm


http://www.treasurer.gov.au/tsr/content/pressreleases/2007/084.asp


http://www.acra.gov.sg/Services/Company/Filing_of_Financial_Statement_in_XBRL.htm


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1515

IFRS XBRL Taxonomy

Currently available at http://www.iasb.org/xbrl

Supports a range of languages:• Arabic

• Dutch

• English

• French

• German

• Hungarian

• Italian

• Portuguese

• Spanish

being prepared: Polish, Hebrew, Chinese, etc.

http://www.iasb.org/xbrl


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What is XBRL?

International Supply Chain Standardization effort

Relevant to internal and external business information

Mandated by economics as it enables significant benefits

Mandated by regulators (including SEC)

Replaces manual process steps with automation

Applicable to business information, related business rules, formulas, controls, processes, resources, etc.

http://www.xbrl.org and http://xbrl.us

‘Bar Code’ for business information

http://www.xbrl.org/

http://xbrl.us/


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Here is the problem – a simple Income StatementI will give $50 to anyone who can tell me the following:

The name of the company

The period of the report

The currency used

The accounting principles used

If the accounts are audited or not

The exchange on which the company is traded


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How long does it take for you to……..

Aggregate note disclosure information from subsidiaries?

Validate the math within company financial statements?

Find the disclosures related to specific concepts in F/S?

Identify relevant FASB standards and Reg SX regulations?

Compare performance with others?

Share analytical formulas/models with others?

Obtain data from a wide range of disparate ERP systems?

Validate and analyze data?

If your answer is more than a few seconds, then XBRL can help


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Recent Headlines & White Papers

Motley Fool – The most important shareholder initiative in a decade (March 24th)

Gartner - XBRL Will Enhance Corporate Disclosure and Corporate Performance Management (April 23rd)

MSN Money – A Revolution for the small investor (April 30th)

Treasury & Risk Magazine – Time to Speak the Same Language (April)

FEI Magazine – XBRL: Not Just for External Reporting (May)

SEC Proposed Rule to Mandate XBRL (May 30th)

http://www.fool.com/investing/general/2008/03/24/the-most-important-shareholder-initiative-in-a-dec.aspx

http://articles.moneycentral.msn.com/Investing/CompanyFocus/ARevolutionForSmallInvestors.aspx

http://www.treasuryandrisk.com/topic/governance/reporting/

http://www.sec.gov/rules/proposed/2008/33-8924.pdf


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The business reporting supply chain

ExternalBusinessReporting

BusinessOperations

InternalBusinessReporting

Investment,Lending,

Regulation

Economic Policymaking

US GAAP IFRS

GRI G3Statutory

MD&A

XBRL External Reporting

SCOAPayables Ledger

Receivables LedgerFixed Asset Ledger

Others

XBRL Global Ledger

TransactionLayer

Processes


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XBRL is More Than Just Tagging Business Information• Multi-dimensional

business and financial data representations

• Flexibility of business reporting vocabularies (i.e. taxonomies)

• Mathematical relationships between concepts

• Flexibility about how to present information to users

CalculationsCash = Currency + Deposits

CalculationsCash = Currency + Deposits

PresentationCash & Cash Equivalents

PresentationCash & Cash Equivalents

FormulasCash ≥ 0

FormulasCash ≥ 0

ReferencesGAAP I.2.(a)

CoA 1100

ReferencesGAAP I.2.(a)

CoA 1100

DefinitionsRelated to Liquid Assets

DefinitionsRelated to Liquid Assets

ContextsUS $X

FY2009Budgeted

ContextsUS $X

FY2009Budgeted

XBRL<cash>“200”

XBRL<cash>“200”

LabelCash in Bank

LabelCash in Bank


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What does XBRL Look Like?

What does XBRL look like?• Example here

How does it make your life better?• Example here – how to find disclosures• Example here – how to consolidate/aggregate info• Example here – how to access data?• Example here – how to map XBRL GL to your ERP• Case Study here – how to enhance process agility• Case Study here – how to enhance data quality &

analysis

What does CALCPA.org look like?Example here

http://www.sec.gov/Archives/edgar/data/789019/000119312507116258/msft-20070331.xml

http://www.microsoft.com/msft/IC/default.aspx

http://www.rivetsoftware.com/resources/files/CrossfireLaunch/CrossfireAnalystReportCreation.htm

http://www.iphix.net/resources/nunavut.htm

http://www.iphix.net/resources/howto.htm

http://www.xbrl.org/Business/Companies/Breathing-New-Life-into-Old-Systems.pdf

http://www.xbrl.org/Business/Regulators/FFIEC-White-Paper-31Jan06.pdf

http://www.calcpa.org/Content/home.aspx


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XBRL US GAAP TaxonomyExplicit References

US GAAP Taxonomies are available here

What is the FASB Standard for the current deferred tax assets?

http://xbrl.us/Pages/US-GAAP.aspx


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SEC Proposed Rule to Mandate XBRL

How – via a new exhibit supplemental to financial statements

What - The financial statement footnotes (as block text) and financial statement schedules in first year. After the first year, filer would be required to tag the detailed disclosures within the footnotes and schedules. This would apply to annual and quarterly reports, as well as registration statements containing financial statements for such fiscal periods.

See http://www.sec.gov for details

Comments due on August 1, 2008

http://www.sec.gov/


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SEC Proposed Rule to Mandate XBRLWhen - beginning with fiscal periods ending on or after December 15, 2008. • In year 1, the proposed rules would apply only to domestic and foreign

large accelerated filers that use U.S. GAAP and have a worldwide public float above $5 billion, approximately 500 companies.

• In year 2, all other domestic and foreign large accelerated filers using U.S. GAAP.

• In year 3, all remaining filers using U.S. GAAP, including smaller reporting companies, and all foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB

• A 30 day grace period would be permitted for the first interactive data exhibit of each filer


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What do companies need?

Software – embedded in your existing tools here and here

Taxonomies – basic reporting concepts• US GAAP XBRL Taxonomies• IFRS GAAP Taxonomies• Proxy Taxonomy• Others

Understanding/Awareness – what is new• Processes• Case Studies

They do not need to understand the XBRL technology

http://www.xbrl.org/tools

http://www.xbrl.us/vendors/Pages/default-expand.aspx

http://www.xbrl.us/Pages/US-GAAP.aspx

http://www.iasb.org/xbrl/index.html

http://www.broadridge-ir.com/ne/2007.htm

http://www.xbrl.org/FRTaxonomies/

http://www.xbrl.us/101/Pages/default.aspx

http://xbrl.org/XBRLandBusiness/


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Forms of XBRL Adoption

• Outsourcing – via automated tagging and SAAS workflow offerings (http://www.tryxbrl.com as an example)

• High level – Bolt-on- XBRL can be quickly adopted by companies at the “highest”

reporting level (i.e. consolidated) solely for purposes of complying with regulatory requirements. However, its benefits for business reporting process enhancements are not fully realized.

• Embedded - XBRL & XBRL Global Ledger- XBRL Global Ledger implementation requires more time and

better planning. - Requires companies to assess information needs and provides

an opportunity to eliminate inefficiencies in current reporting practices.

- Maximizes benefits of XBRL to preparers and internal and external users of financial and non-financial information.

http://www.tryxbrl.com/


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Typical Reporting Process – Bolt-on XBRL to prepared report

ERP

HFM ERP

ERP

10-Q in Word

Edgar

Supplemental Data

10-Q in Word

10-Q in Word

Review and Check

Review and Check


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Streamlined Reporting Process – Embedded in Report Writer

ERP

10-Q in XBRL

Edgar

HFM

XBRL TaggedERP

ERP

Supplemental Data

XBRL Tagged

WacoalFujitsu


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Practical applications for CPAsAn Internet standard for business information

Accessing data from disparate ledgers, sub-ledgers, transaction ledgers

- information useful in tax returns, elimination entries, M-3 reconciliations, internal audits, performance reports, budgets, projections, etc.

Analyzing data across a wide range of software applications

- any type of analytics, benchmarking, budgeting & planning, control design, process design, validation rules, etc.

Reporting

- report generation, visualization, management reports, BI dashboards, Business Performance Management

Knowledge Sharing

- GAAP, GAAS, Tax, Company Policies, SME’s, Training, etc.

- Analytics, benchmarking data, controls, business rules, etc.


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What is at stake?


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How to get your members readyWhat you can doGet the message out – get ready for convergence

Make members aware of short term implications/opportunities

Provide training on IFRS & XBRL implications

Relate to the individual CPA working practices

Increase knowledge of relevant projects, taxonomies, and tools

Organize members to engage in market collaboration efforts:

IFRS and US GAAP Taxonomy Project efforts

Industry, Performance, Sustainability efforts

Expose members to tool training/enhancements

Convergence*Are you ready?

Any Questions??

*connectedthinking


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What the SEC is doing


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Chairman Christopher Cox of the SEC

“I'd like to invite every public company, [especially] those companies not yet involved in our voluntary filing program, to consider whether they should obtain a copy of this new GAAP set of data tags ... and its supporting documentation and consider using it alongside your current process as you prepare your calendar 2007 filings or your filings for the fourth quarter of 2007.”

Will XBRL be mandated?

“This is the recommendation that we will be seeking from all of the offices within the Spring of next year.”

From the “Major Announcement About Interactive Data in Financial Reporting, Tuesday, September 25, 2007”



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Proposed Rule to mandate XBRL

May 30th, 2008

Please See http://www.sec.gov/rules/proposed/2008/33-8924.pdf for issuance of proposed rule to mandate XBRL for public registrants


http://www.sec.gov/rules/proposed/2008/33-8924.pdf


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SEC Proposed Rule to Mandate XBRL – How/What

How – via a new exhibit supplemental to financial statements

What - The financial statement footnotes (as block text) and financial statement schedules in first year. After the first year, filer would be required to tag the detailed disclosures within the footnotes and schedules. This would apply to annual and quarterly reports, as well as registration statements containing financial statements for such fiscal periods.

60 day public comment period.



38

SEC Proposed Rule to Mandate XBRL – When

When - beginning with fiscal periods ending on or after December 15, 2008. • In year 1, the proposed rules would apply only to domestic and

foreign large accelerated filers that use U.S. GAAP and have a worldwide public float above $5 billion, approximately 500 companies.

• In year 2, all other domestic and foreign large accelerated filers using U.S. GAAP.

• In year 3, all remaining filers using U.S. GAAP, including smaller reporting companies, and all foreign private issuers that prepare their financial statements in accordance with IFRS as issued by the IASB.



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SEC Proposed Rule to Mandate XBRL – Submission Format

Interactive data would be required with a company's annual and quarterly reports, transition reports, and Securities Act registration statements

Interactive data would also be required to be posted on the company’s corporate web site, if it maintains one



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SEC Proposed Rule to Mandate XBRL – Submission Timing

Interactive data would be required to be provided to the Commission, and posted on company websites, at the same time as the related report or registration statement, with two exceptions. • A 30 day grace period would be permitted for the first

interactive data exhibit of each filer, • A 30 day grace period would be permitted for the first

interactive data exhibit that is required to include the footnotes and schedules tagged in detail.



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SEC Proposed Rule to Mandate XBRL – Liability and Non-Compliance

Filers that do not provide or post required interactive data on the date required would be deemed not current with their Exchange Act reports.

Data in the interactive data file submitted to us would be subject to liability similar to that of the voluntary program and, as a result, would be subject to only limited liability.



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What do companies need?

Software – embedded in your existing tools here and here

Taxonomies – basic reporting concepts• US GAAP XBRL Taxonomies• IFRS GAAP Taxonomies• Proxy Taxonomy• Others

Understanding/Awareness – what is new• Processes• Case Studies

You do not need to understand the XBRL technology


http://www.xbrl.org/tools

http://www.xbrl.us/vendors/Pages/default-expand.aspx



http://www.broadridge-ir.com/ne/2007.htm

http://www.xbrl.org/FRTaxonomies/

http://www.xbrl.us/101/Pages/default.aspx

http://xbrl.org/XBRLandBusiness/


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Data Standard vs Data Standardization

• XBRL Taxonomies DO NOT create a standard reporting template

• XBRL Taxonomies - Common disclosure concepts- Represent a wide range of disclosure concepts

• Statutory, financial, tax, statistical, non-financial, etc.- Extensible to represent unique company specific

concepts- Both public and private concepts- More than just defining concepts



44

Forms of XBRL Adoption

• Outsourcing – via automated tagging and SAAS workflow offerings (http://www.tryxbrl.com as an example)

• High level – Bolt-on- XBRL can be quickly adopted by companies at the “highest”

reporting level (i.e. consolidated) solely for purposes of complying with regulatory requirements. However, its benefits for business reporting process enhancements are not fully realized.

• Embedded - XBRL & XBRL Global Ledger- XBRL Global Ledger implementation requires more time and

better planning. - Requires companies to assess information needs and provides

an opportunity to eliminate inefficiencies in current reporting practices.

- Maximizes benefits of XBRL to preparers and internal and external users of financial and non-financial information.


http://www.tryxbrl.com/


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What You Can Do Now

• Use available resources to get smart on XBRL (see appendix for resources)

• Develop plan for assessment/implementation

• Consider Relevant Taxonomies

- Financial

• US GAAP

• IFRS

- Non-Financial

• Proxy

• Enhanced Business Reporting Consortium

• Global Reporting Initiative




https://myservice.broadridge.com/XBRL/

http://www.ebr360.org/

http://www.globalreporting.org/ReportingFramework/G3Guidelines/XBRL/


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SEC - Other XBRL Related Activities

$49m EDGAR Modernization project (XBRL Compliant)

$5.5m US GAAP XBRL Taxonomy Enhancement Project available for review here: http://usgaap.xbrl.us

XBRL viewer released on December 5th 2006 http://www.sec.gov/spotlight/xbrl.htm

Executive Compensation tool released on December 5th 2007 http://www.sec.gov/news/press/2007/2007-268.htm

New SEC Office of Interactive Disclosure created

Advisory Committee on Improvements to Financial Reporting includes Delivering Financial Information Subcommittee

Executive compensation XBRL project launched in December 2007

Proxy XBRL Taxonomy also available for review: https://myservice.broadridge.com/XBRL

‘Round Table’ discussions (June 06, Oct 06, March 07)SEC XBRL Spotlight site http://www.sec.gov/spotlight/xbrl.htm

XBRL US GAAP Taxonomies and Supporting Documentation http://www.xbrl.us/Pages/US-GAAP.aspx


http://usgaap.xbrl.us/


http://www.sec.gov/news/press/2007/2007-268.htm

https://myservice.broadridge.com/XBRL




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IASB and FASB Convergence


48

Convergence of IFRS and US GAAP

• Overall vision and objective

• Short-term convergence

• Long-term convergence



49

Overall Vision and Objective

• Objective is to create one global set of high-quality standards

• Convergence goes beyond US GAAP and IFRS

• “Convergence means change. We must not have convergence for the sake of it”—Bob Herz—Chairman FASB

• Convergence is a two-way street



50

FASB and IASB Memorandum of Understanding

(February 2006)Roadmap for convergence between IFRS and US GAAP between 2006—2008

General guidelines are as follows

• Convergence is best achieved through the development of high quality standards over time

• Differences between standards in need of improvement should not be eliminated; new standards should be developed instead

• Weaker standards should be replaced with stronger standards



51

Convergence—Accounting standard setters FASB and IASB

Overall strategy

• Short-term convergence project

- High-quality solution achievable in the short-term

Coordination of work programs—joint projects

• Business combinations

• Revenue recognition

• Conceptual framework

• Consolidation

• Fair value measurements


Differences between IFRS & US GAAP


53

Key Differences Between IFRS and US GAAP

• Consolidation

• Revenue recognition (e.g., VSOE, percentage of completion)

• R&D capitalization

• Impairments

• Securitizations/asset derecognition

• Provisions

• Debt/equity classification

• Hedging qualification

• Employee stock compensation

• LIFO

• Tax consequences of these differences

• Income tax accounting


54

Financial instrumentsKey IFRS – US GAAP differences

Temporary equity (or mezzanine equity) classification is allowed without bifurcation of financial liability component.

Depending on the terms, instrument has to be bifurcated between financial liability and equity.

Preferred equity securities

No split accounting unless beneficial conversion feature

Interest is accounted for at nominal interest rate

US GAAP

Split accounting is compulsory

Interest expense is accreted using effective interest rate method which is based on market interest rate for a similar bond without conversion features.

IFRS

Convertible debt

Securitization / Derecognition of financial assets

Generally similar principles, however, numerous differences in detailed application. IFRS offers more flexibility in terms of hedge design, however, fewer scope exemptions, stricter documentation requirements and effectiveness assessment criteria.

Derecognition is based primarily on transfer of control.

The derecognition model is governed by three key tests:

legal isolation of the transferred asset

ability of transferee to pledge or sell the asset

no right or obligation to repurchase

Hedging

A control test is performed to see whether securitization vehicle needs to be consolidated.

Derecognition is based primarily on evaluation of transfer of risks and rewards and secondly on transfer of control.

A transfer of risks and rewards can occur in one of two ways:

Transfer of contractual rights. Pass-through arrangement.

Once derecognition is confirmed, entity is required to analyze whether full or partial derecognition has occurred.


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Reversal of impairment losses

Impairment of long-lived assets

Key IFRS – US GAAP differences

Reversal of impairment losses is not permitted under US GAAP. An impairment loss relating to an intangible asset other than goodwill may be reversed if certain criteria are met.

Goodwill is assigned to an entity’s reporting unit (i.e., an operating segment) or one level below (i.e., a component). Two-step approach. 1 - Fair value vs. carrying value of reporting unit; 2- implied FV of GW vs. carrying amount of goodwill

US GAAP

Goodwill is assigned to one or more cash-generating units (cannot be higher than an operating segment). One step approach (comparison between recoverable amount and carrying amount).

IFRS

Impairment of goodwill

Impairment of PP&E, cash-generating units and finite-lived intangible assets

If impairment is indicated, a one step approach is used to determine the impairment based on discounted cash flows. Assets are written down to recoverable amount which is higher of:

fair value less costs to sell or

value in use based on discounted cash flows.

A two-step impairment test approach is used to determine impairment:

Step 1: Compare carrying amount with undiscounted cash flows expected from the asset.

Step 2: If carrying amount is higher, the impairment loss is measured as the difference between the carrying amount and fair value.


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Intangible assets - Development costs

IFRS US GAAP

General guidance Development costs must be capitalized if certain criteria are met

Development costs are expensed

Internal use software Same general guidance Costs incurred during the preliminary project stage are expensed. Costs relating to the application development stage are capitalized. Training costs are expensed.

Software to be sold or otherwise marketed

Same general guidance Costs incurred to establish the technological feasibility of computer software are expensed when incurred



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Stock-based compensationKey IFRS – US GAAP differences

Payroll taxes and social charges on employee stock based compensation are recognized on the date of the event triggering the measurement and payment of the tax to the taxing authority (generally the exercise date)

Payroll taxes and social charges are recorded in each period as the related compensation expense associated with a share-based payment transaction is recognized in the income statement

Social charges and payroll taxes

Provides an accounting policy choice for awards with graded vesting schedule and only service conditions to be recognized either on a straight line basis or treat each installment separately

Each installment of a graded vesting award is treated as a separate share option grant

Graded-vesting options

Date an employee begins to benefit from, or adversely affected by, subsequent changes in the price of the employer’s equity shares

The date when the entity and another party (including employees) agree to the arrangement. If arrangement is subject to approval, grant date is when approval is obtained

Grant date

US GAAPIFRS

Other recognition criteria

Fair value of the award recognized over the period to which

employees’ service relate Fair value of the award is recognized over the requisite service period


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ProvisionsKey IFRS – US GAAP differences

Higher recognition threshold under US GAAP for provisions, generally 75% or over.

Under IFRS, the recognition criteria for provisions is more likely than not which is considered as a probability of greater than 50%

Recognize when virtually certain, not to exceed amount of provision

Probable vs. more likely than not

ReimbursementsRecognize when probable (>75%)

US GAAP requires discounting only if there are fixed cash flows and uses a credit-adjusted, risk-free rate.

The accretion of interest is recorded as operating expense.

US GAAP

A provision is discounted based on estimated cash flows using a pre-tax rate reflecting the risks specific to the liability.

The adjustment of provisions due to the passage of time is recorded as interest expense, not operating expense.

IFRS

Discounting

Range of estimates In such a case, US GAAP requires use of the lowest point in the range.

If a range of estimates is present in measuring a provision, IFRS requires use of the mid-point of the range


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Income tax


Two step approach:

MLTN recognition step

Cumulative probability methodology for measurement step.

Extensive disclosures required.

No specific guidance in IAS12. Should reflect amount expected to be paid/received. MLTN recognition model is an acceptable approach.

Probability weighted average approach, or single best estimate/most likely outcome are acceptable measurement models.

Limited disclosure requirements.

Uncertain tax positions

US GAAPIFRS

Intercompany transfers of assets remaining in the group

(FAS 109 par. 9e)

Taxes paid by sellers on profits arising from intercompany asset transfers are not deferred. Buyer’s tax rate is used to calculate deferred tax asset in consolidated financial statements.

Taxes paid by sellers on profits arising from intercompany asset transfers should be deferred using seller’s tax rate. The buyer is prohibited from recognizing DTA resulting from the tax basis adjustments of transferred asset. Par. 9(e) will be eliminated in the convergence project.

Deferred tax on share based payments

Deferred tax is remeasured to intrinsic value of vested awards each reporting period. Shortfalls are recognized through PL; windfalls in equity. There is no concept of offsetting pools.

Changes in the stock price do not impact the deferred tax asset or result in any adjustments prior to settlement or expiration.

Foreign non-monetary Assets and Liabilities

(FAS 109 par. 9f)

No such exception under IAS 12. Deferred tax asset or liability is calculated on differences resulting from remeasurement from local currency to functional currency.

Prohibits recognition of DTA or DTL for differences related to assets and liabilities that, are remeasured from the local currency into the functional currency using historical exchange rates and that result from (i) changes in exchange rates or (ii) indexing for tax purposes. Par. 9(f) will be eliminated in the convergence project.

Educational Resources


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ResourcesSecurities and Exchange Commission Site: • Spotlight on XBRL: http://www.sec.gov/spotlight/xbrl.htm • XBRL Submissions: http://www.sec.gov/Archives/edgar/xbrl.html • XBRL Interactive Viewing tool: http://www.sec.gov/spotlight/xbrl/xbrlwebapp.htm • For specific questions about XBRL and SEC VFP, please contact XBRL US, Inc. at 212-362-

7630.

XBRL - US Site: • http://www.xbrl.us See Webinar Archive under the ‘Events’ tab• Case Studies http://www.xbrl.us/Documents/XBRL_all_case_studies.pdf • State of the Art Reporting (Four five-minute videos)• http://www.smartpros.com/xbrldemos/

XBRL International Web Site: • Tools: http://www.xbrl.org/tools • Products and Services: http://www.xbrl.org/productsandservices/ • Discussion Groups: http://www.xbrl.org/GroupsPublic/ • Project White Papers: http://www.xbrl.org/ProjectDetails/ • General Education: http://www.xbrl.org/EducationAndTraining/

Others: • “XBRL for Dummies”: http://www.xbrlfordummies.com • IMA Suggested Reading: http://www.imanet.org/research_technology_reading.asp • CFO.com XBRL site http://www.cfo.com/guides/guide.cfm/8310234



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Suggested ReadingGlobal Ledger Practices Guide for Study http://www.gl.iphix.net/

ROI on XBRL: http://www.aicpa.org/pubs/jofa/jun2007/stantial.htm

Hitachi Blogs: • http://blog.hitachixbrl.com/2007/01/16/the-entity-problem/ • http://blog.hitachixbrl.com/2007/01/30/relationships-matter/ • http://blog.hitachixbrl.com/2007/02/13/in-pursuit-of-process/ • http://blog.hitachixbrl.com/2007/01/09/master-data-management-the-xbrl-way/ • http://blog.hitachixbrl.com/2006/12/08/adaptation-or-evolution-what-is-your-xbrl-strategy/

XBRL Ledger white paper: http://www.imanet.org/pdf/8xbrl.pdf

FFIEC White Paper: http://www.xbrl.org/us/us/FFIEC%20White%20Paper%2002Feb2006.pdf



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Online demonstrationsMicrosoft Investor Central• http://www.microsoft.com/msft/IC/default.aspx

Executive Compensation Widget• http://www.ibanknet.com/widgets/index.shtml

Edgar-Online IMetrix• http://www.edgar-online.com • http://www.edgar-online.com/products/imetrix.aspx

Rivet Software Crossfire• http://www.rivetsoftware.com/content/index.cfm?

fuseaction=showContent&contentID=195&navID=166• http://www.rivetsoftware.com/resources/files/CrossfireLaunch/

CrossfireAnalystReportCreation.htm

Google OneBox• http://www.iphix.net/resources/nunavut.htm



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An Article to Read

“Speeding toward Convergence: Changes to Come Rapidly for Accounting Profession”

Allison M Henry

Pennsylvania CPA Journal



65

Typical Reporting Process – Bolt-on XBRL to prepared report

ERP

HFM ERP

ERP

10-Q in Word

Edgar

Supplemental Data

10-Q in Word

10-Q in Word

Review and Check

Review and Check


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Streamlined Reporting Process – Embedded in Report Writer

ERP

10-Q in XBRL

Edgar

HFM

XBRL TaggedERP

ERP

Supplemental Data

XBRL Tagged

pwc convergence* are you ready? june 2008 *connectedthinking

Documents

rules ifrs

global ifrs adoption

time adoption of ifrs

current version of ifrs

opening ifrs balance

ifrss ifrs developments

us gaap australiaifrs

pages us gaap