adoption of ifrs in u.s. - an introduction
DESCRIPTION
This webinar was presented at Proformative on March 2012 by Sunil Thukral, CPA, CFA. This presentation provides the overview of the framework of IFRS in U.S.TRANSCRIPT
THE RESOURCE FOR CORPORATE FINANCE, ACCOUNTING & TREASURY PROFESSIONALS
Sunil Thukral, CPA, CFA
Technical Accounting Advisory
Adoption of IFRS in U.S.- An Introduction
IFRS in U.S.
• Where are we today?
• Rules vs. Principles - exercise
• What can I do today?
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• What can I do today?
SEC Roadmap on IFRS
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• Cost
– By far the two most common criticisms of the roadmap were the
cost of adoption and the belief that a more measured
convergence process was the best option.
• Convergence over Adoption
Comments on SEC Roadmap for IFRS
convergence:
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– Continued convergence was a better option than adoption,
mostly because fuller convergence between both sets of
standards would be less complex and less costly than IFRS
adoption.
• Consistency Not Guaranteed
– Geographic bias
• Specific Concerns by Specific Industries
– IFRS does not have any industry specific guidance.
• IASB Funding
– Is IASB really independent?
Comments on SEC Roadmap for IFRS
convergence (Contd.):
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– Is IASB really independent?
• What about Private Companies?
– Since the SEC regulates only public companies, comments also
pointed to concern that the SEC was not recognizing that most
companies in the U.S. are not SEC registrants (issuers).
Source: http://www.ifrs.com/updates/aicpa/IFRS_SEC.html
U.S. companies need to understand the impact of IFRS:
• Convergence of accounting standards (leasing, revenue
recognition, and financial instruments)
• IFRS is impacting business decisions
– Foreign subsidiaries of U.S. companies might be required to
IFRS is impacting U.S. companies today!
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– Foreign subsidiaries of U.S. companies might be required to
report under IFRS for their local filings
– U.S. companies making foreign acquisitions (targets reporting
under IFRS)
– U.S. subsidiaries of foreign parent are required to report under
IFRS.
Comparability of IFRS financials:
• IFRS as issued by IASB
• IFRS with Carve-outs
(e.g. EU version of IFRS)
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• IFRS are principles based
rules. Hence, the
application of these rules
can be quite different as to
“who” applies them.
(e.g. geographic bias).
Which traffic light crossing will you prefer?
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Rules Vs Principles exercise:
Sort the following shapes into two groups:
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Sorted by shape
• A • B
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Sorted by color:
• A • B
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• By Color • By Shape
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What if we add a green
colored circle – where
will it go?
Most people choose sorting by shapeC.Why?
• A • B
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Additional Information – assume that:
Mixing BLUE (80%)
with
YELLOW (20%)
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YELLOW (20%)
makes
GREEN
Based on fact green has more blue than yellow:
• A • B
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Same facts can provide you with different
conclusions!
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“But under a different accounting convention…..”
Source: cartoonstock.com
So, what does it all mean?
Applying different interpretation to
the same facts might result in a
different answer.
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different answer.
Reality check: Life for the
accountants will not become easy
when applying simple rules
(principles) to complex transactions
Revenue Recognition Exposure Draft
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Slides Source: www.SVACPA.com
Over 100 glossary terms
deleted and replaced with
only approx. 9 items in the
new revenue recognition
exposure draft.
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STEPS IN IMPLEMENTING IFRS –
A HIGH LEVEL APPROACH
IFRS will impact all the areas of your
businesses:
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Graphic Source: kpmg.com
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STEP 1 – REVIEW YOUR
BUSINESS
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STEP 2 – IDENTIFY THE IFRS
THAT WILL HAVE MATERIAL
IMPACT
Identifying which IFRS impacting your
organization
• Determine the IFRS are converged / not-converged, etc.
(e.g. – leasing, revenue, business combination, etc.)
• Apply the summarized IFRS summarized checklist to
identify which IFRS will impact your entities.
• Document your findings
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• Document your findings
– maintain back-ups / draft preliminary white papers.
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STEP 3 – DETAILED ANALYSIS
Detailed Analysis:
• Determine the STRATEGIC choices
• Update accounting policies
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• System changes (IT)
• Review internal control over financial
reporting
IFRS in U.S. – Other challenges
• IFRS/ U.S. GAAP currently have a joint project for development of the accounting standardsCC.. RESULTCC. many more changes to come over in the next few years (e.g.: Revenue recognition, leasing , financial instruments).
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instruments).
Bottom line: IFRS is constantly changing – so need to remain up to date with the changes!!
Tools to track your IFRS implementation:
• Regularly monitor the IFRS project:
– Excel spreadsheets or other project management software
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Graphic source: www.SVACPA.com
• Conduct benchmarking
– www.DisclosureNet.com
– Search engines
THANK YOU!
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QUESTIONS
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QUESTIONS
Sunil Thukral, CPA, CFA
LinkedIN: http://www.linkedin.com/in/sunilthukral
Proformative: http://www.proformative.com/questions/expert/sunil-thukral
Twitter: @SunilThukral
THE RESOURCE FOR CORPORATE FINANCE, ACCOUNTING & TREASURY PROFESSIONALS
Sunil Thukral, CPA, CFA
Technical Accounting Advisory
Adoption of IFRS in U.S.- An Introduction