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Copyright 2011. American Institute of Certified Public Accountants. All rights reserved
IFRS Readiness Tracking Survey
May 2011
1
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Survey Background
Semi-annual survey • Conducted 4/19 through 5/11, 2011• 1351 responses – 1167 qualified (BI or Public Practice member)
- 146 from US Public Companies- 185 from US Private Companies- 46 from Foreign Public Companies- 36 from Foreign Private Companies- 35 from Not for profit or educational institutions- 718 from Public Practice
Measures members readiness to implement IFRSIn addition to tracking questions, contains a number of questions unique to this surveyProvides information on their views surrounding other issues related to IFRS adoption
2
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Key Messages from IFRS Readiness Survey May 2011
Familiarity with IFRS has remained stable since May 2010U.S. public companies have backed off IFRS planning
• The percentage of respondents in the planning stages of IFRS adoption fell• The number of respondents delaying IFRS preparations until the SEC makes a
decision increased• Preparations by CPAs in public accounting remained steady
Members support adoption of IFRS, although more convergence is desired first
• 51% of members believe a 2015-2016 adoption date would allow enough time for implementation, 17% said no and 32% are unsure
A majority of members are aware of FASB/IASB convergence projects
• However, most do not plan to study the details until standards are issued• A high percentage are unsure whether the proposals will result in improvements• Members are about evenly spread between those that think the pace of change
is too fast, about right or are unsure. Few think the pace is too slow.
3
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Familiarity with IFRS
4
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Current Familiarity with IFRSAll Members
NA None Basic Some Advanced Expert
Fall 08 4% 30% 39% 21% 4% 1%Spring 09 5% 22% 43% 24% 6% 1%Fall 09 12% 22% 38% 23% 4% 1%Spring 10 5% 16% 47% 25% 5% 1%Fall 10 8% 15% 45% 26% 5% 2%Spring 11 8% 14% 47% 26% 4% 2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
5
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Needed Familiarity with IFRSAll Members
NA None Basic Some Advanced Expert
Fall 08 8% 14% 21% 26% 22% 10%Spring 09 7% 11% 21% 24% 28% 8%Fall 09 16% 14% 22% 24% 18% 5%Spring 10 9% 11% 23% 26% 24% 8%Fall 10 12% 10% 24% 25% 22% 8%Spring 11 12% 12% 24% 26% 20% 6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
6
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Familiarity with IFRSCurrent vs NeededAll Members
NA None Basic Some Advanced ExpertCurrent 8.0% 13.7% 46.8% 26.0% 4.0% 1.5%Needed 12.0% 11.6% 24.1% 26.2% 19.9% 6.2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
7
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Familiarity with IFRSUS Public Co Members
0%10%20%30%40%50%60%
NA None Basic Some Advanced Expert
Current vs Needed
Current
Needed
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Current FamiliarityFall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Needed Familiarity Fall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
8
A fairly large gap still exists between the level of familiarity public company respondents have and what they believe they need
The percentage members who know at least some about IFRS has been climbing steadily since Fall 09
Expectations for Needed Familiarity are also fairly stable
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Familiarity with IFRSUS Private Co Respondents
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Current vs Needed Familiarity
Current
Needed
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Current FamiliarityFall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Needed Familiarity Fall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
9
Members who work for US Private Cos generally have less familiarity with IFRS than they need
However familiarity has consistently grown since October 08
The percentage of members who think they will need at least some knowledge has continued to grow.
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Familiarity with IFRSForeign Owned Co Members
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Current vs Needed
Current
Needed
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Current FamiliarityFall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Needed Familiarity Fall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
10
Like their US counterparts members who work for Foreign companies generally have less familiarity with IFRS than they need but the gaps are smaller
Current familiarity increased slightly this springExpectations for familiarity needed also increased
slightlyCaveat: Because of small number of foreign
company respondents (81) these changes may or may not be significant
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Familiarity with IFRSPublic Practice Members
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Current vs Needed
Current
Needed
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Current Familiarity
Fall 09
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
0%
10%
20%
30%
40%
50%
60%
NA None Basic Some Advanced Expert
Needed Familiarity Fall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
11
Members who work for Public Practice continue to have less familiarity with IFRS than they need
The percentage of members with at least Basic knowledge has remained stable for the past year.
Members expectations for what they think they will need have also remained stable
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Who Needs Advanced & Expert Knowledge of IFRS?By type of organization
US Public Co US Private Co Public Practice Foreign OwnedSpring 09 59% 21% 30% 65%Fall 09 47% 14% 21% 48%Spring 10 48% 20% 27% 57%Fall 10 44% 22% 26% 52%Spring 11 48% 25% 20% 54%
0%
10%
20%
30%
40%
50%
60%
70%
Percent that need Advanced or Expert Knowledge
12
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When is IFRS knowledge Needed?By type of organization
Now Within the nextyear
In the next 2 to3 yrs
In more than 3yrs Not sure
US Public Co 8% 13% 47% 8% 25%US Private Co 9% 16% 33% 6% 37%Public Practice 8% 14% 32% 6% 40%Foreign Owned 41% 28% 26% 2% 2%
0%
10%
20%
30%
40%
50%
60%
70%
13
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Adoption and Implementation Plans
14
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Prepared to Adopt?By type of organization
NA ‐‐ Noplans
Stillevaluating
Adopting/NotBegun
PreliminaryDiscussions
ActivelyPreparing Ready
US Public Co 10% 39% 18% 19% 13% 1%US Private Co 43% 37% 10% 8% 1% 1%Public Practice 28% 25% 19% 14% 7% 9%Foreign Owned 4% 7% 9% 15% 21% 45%
0%
10%
20%
30%
40%
50%
60%
70%
15
Please rate the extent to which your company (firm) is prepared for IFRS adoption
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Prepared to Adopt/Support Adoption?
0%
10%
20%
30%
40%
50%
60%
NA Evaluating Adoptingnot begun
PreliminaryDiscussions
Active Ready
US Public Companies
Fall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
0%
10%
20%
30%
40%
50%
60%
NA Evaluating Adopting,not begun
PreliminaryDiscussions
Active Ready
US Private Companies
Fall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 110%
10%
20%
30%
40%
50%
60%
NA Evaluating Adopting,not begun
PreliminaryDiscussions
Active Ready
Public Practice Fall 08
Spring 09
Fall 09
Spring 10
Fall 10
Spring 11
16
US Companies have been moving slowly out of the evaluation phase
US Private Companies are still not planning to adopt or only in early stages
Most public practice firms are still not prepared for IFRS adoption but there has been an increase in the number of respondent who indicate their firm is ready
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Stage of Transition?Asked only of companies in the Preliminary Discussions or Actively Preparing phase
Initial HeavyPlanning Diagnostic Design Implement
ationParallelReporting Completed
US Public Co 47% 2% 32% 15% 2% 2% 0%US Private Co 74% 0% 16% 0% 0% 0% 11%Foreign Owned 12% 2% 14% 5% 9% 9% 50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
17
Please select the stage of transition that best describes the status of your implementation.
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IFRS Implementation ChallengesAll Members
67%
41%
47%
19%
58%
51%
11%
70%
19%
62%
27%
39%
35%
34%
9%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Educating CPAs/financial staff
Educating non‐CPAs/non‐…
Educating clients
Updating/changing IT systems
Educating the Public/Managing…
Updating accounting policies
Updating auditing policies
Managing transition
Other
Public Practice B&I
18
What are the largest challenges that implementing IFRS has presented/will present to your firm/company? (Select all that apply)
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Views on SEC Decision
19
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SEC Decision on IFRS?
YesYes, but onlyafter moreconvergence
No, but IFRSshould be an
option
No, IFRS sholdnot be
mandated orallowed
Unsure
Fall 10 15% 40% 21% 8% 17%Spring 11 14% 39% 23% 10% 14%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
20
On February 24, 2010 the SEC outlined a work plan for the continued consideration of whether and how to incorporate IFRS into the U.S. financial reporting for U.S. issuers. The work plan contemplates a 2011 decision on whether to require or permit IFRS. Do you believe ultimately the SEC should require adoption of IFRS for U.S. public companies?
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Timeline for IFRS Adoption?
49%
17%
34%
Public Practice
Yes No Unsure
21
If the SEC makes a decision in 2011 to require or permit use of IFRS for public companies, it believes the first time U.S. companies would report under the system would be 2015 or 2016. Do you believe this timeline will allow enough time for implementation?
50%
21%
29%
US Public Companies
Yes No Unsure
75%
9%
16%
Foreign Owned Companies
Yes No Unsure
Only about half of US Public Accounting firms and Public Companies believe the SEC timeline would permit enough time for implementationMembers from Foreign owned companies, most of whom already use IFRS are much more confident
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Delaying IFRS Preparations?
62%
28%
9%
59%
26%15%
63%
15%22%
76%
15%10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Yes No Not applicable
US Public CompaniesFall 09
Spring 10
Fall 10
Spring 11
29%
13%
58%
40%
15%
46%
35%
9%
56%
35%
13%
52%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Yes No Not applicable
US Private Companies
Fall 09
Spring 10
Fall 10
Spring 11
12%
38%
50%
14%
45%40%
12%
51%
38%
19%
39% 43%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Yes No Not applicable
Foreign‐owned Companies
Fall 09
Spring 10
Fall 10
Spring 11
33%23%
45%41%
21%
38%37%
19%
43%41%
16%
44%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Yes No Not applicable
Public PracticeFall 09
Spring10Fall 10
Spring11
22
Are you delaying IFRS preparations until the SEC announces that it will set a date certain for its adoption in the United States?
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More US Public Companies are Delaying Preparations for IFRS
60%
23%17%
76%
15%10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Yes No Not applicableFall 10 Spring 11
23
Are you delaying IFRS preparations until the SEC announces that it will set a date certain for its adoption in the United States?
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IFRS for SMEs
24
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IFRS for Small & Medium-sized Entities?
53%47%
US Private Companies
Yes
No
61%
39%
Foreign‐owned Companies
Yes
No
52%48%
Public Practice
Yes
No
25
Are you aware that the IASB issued an International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), which is a simplified, self-contained set of accounting standards designed to meet the financial reporting needs of constituents of private entities?
53%47%
US Public Companies
Yes
No
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Adopt IFRS for SMEs?
28%
2%
10%
22%
0% 0%
38%
29%
1%
15%
27%
0% 0%
28%
0%5%10%15%20%25%30%35%40%45%50% US Private Companies
Fall 2010
Spring 2011
15%
2%7%
22%
0%
27% 27%
17%
3% 3%
22%
0%
31%25%
0%5%
10%15%20%25%30%35%40%45%50%
Foreign‐owned Private Companies
Fall 2010
Spring 2011
9%
18% 20%
44%
10%9%
19%22%
40%
11%
0%5%10%15%20%25%30%35%40%45%50%
Yes Yes, butonly if IFRSis requiredfor publiccompanies
No Unsure Does notApply
Public Practice
Fall 2010
Spring 2011
26
Would you consider adopting/would you advise your clients to consider adopting the IASB’s recently issued IFRS for Small and Medium-sized entities?
Fewer respondents working for US entities are unsure about IFRS for SMEs than in the Fall
Respondents working for foreign companies are more certain but are about as equally likely to be positive as to be negative
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Convergence
27
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Convergence:Awareness of Priority Projects
70%
22%
8%
YesNoUnsure
28
Are you aware that the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) have identified several priority projects, including revenue recognition, leases and financial instruments for completion in 2011?
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Converged StandardsRevenue Recognition, Leasing
Have you or do you plan to read the proposals outlined in the exposure draft and follow board deliberation on the proposals? Recognition Leases
No, I will wait for a final standard to be issued 40% 35%
Yes, but I do not plan to study the implications for my company or clients until a final standard is issued 20% 21%
Yes, and I have (or will) investigate how the proposals will affect my company or clients 17% 24%
I am not aware that an exposure draft had been issued 13% 10%
Unsure or Other 10% 10%
29
On June 24, 2010, the U.S. FASB and IASB issued an exposure draft for a proposed standard on Revenue Recognition: Revenue from Contracts with Customers.
On August 17, 2010, the U.S. FASB and IASB issued an exposure draft for a proposed accounting standard to improve the financial reporting of lease contracts.
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Converged StandardsRevenue Recognition, Leasing
Do you believe proposals are understandable and think the implementation and application guidance provided is sufficient to make the proposals operational?
Revenue Recognition Leases
Yes 11% 18%
No 16% 19%
Unsure 73% 63%
30
On June 24, 2010, the U.S. FASB and IASB issued an exposure draft for a proposed standard on Revenue Recognition: Revenue from Contracts with Customers.
On August 17, 2010, the U.S. FASB and IASB issued an exposure draft for a proposed accounting standard to improve the financial reporting of lease contracts.
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Converged StandardsRevenue Recognition, Leasing, & Financial Instruments
Do you believe the proposals will result in improvements to current accounting requirements?
Revenue Recognition Leases Financial
Instruments
Yes 12% 17% 23%
No 20% 26% 15%
Unsure 68% 57% 62%
31
On June 24, 2010, the U.S. FASB and IASB issued an exposure draft for a proposed standard on Revenue Recognition: Revenue from Contracts with Customers.
On August 17, 2010, the U.S. FASB and IASB issued an exposure draft for a proposed accounting standard to improve the financial reporting of lease contracts.
The U.S. FASB and IASB are working to replace current standards for accounting for financial instruments with a common standard in 2011. The Boards believe that simplification of the accounting requirements for financial instruments should be an outcome of this improvement.
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Convergence:Pace of Change
Too fast, 30%
About right, 36%
Too slow, 6%
Unsure, 28%
Too fastAbout rightToo slowUnsure
32
By the end of 2011, FASB and IASB plan to complete major convergence projects outlined in their Memorandum of Understanding and issue several new accounting standards codification updates and IFRS amendments. What is your opinion about the pace of change?
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Implementation time
1 year 2 years 3 years More than 3 years Unsure
US Public 3% 22% 28% 32% 15%US Private 4% 21% 28% 27% 20%Public Practice 2% 19% 31% 25% 23%Foreign 11% 37% 34% 10% 10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
33
How long of an implementation period do you believe will be needed to adopt the new converged standards?
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Demographics
34
Respondent DemographicsAll Members
62%
12% 16%
4%3%
3%0%
Respondents by Organization Type
Public Practice US Owned Public Co
US Owned Private Co Foreign Owned Public co
Foreign Owned Private Co Not for Profit
Other
44%
56%
Multinational Company (B&I)?
YesNo
13%87%
Multinational Firm (PA)?
YesNo
35
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Organization Size
5%4% 1%
15%
6%
38%
7%
23%
US Public Companies $0 to under $10M
$10M to under $50M
$50M to under $100M
$100M to under $500M
$500M to under $1B
$1B to under $5B
$5B to under $10B
over $10B
26%
33%11%
17%
4%7%
1%2%
US Private Companies $0 to under $10M
$10M to under $50M
$50M to under $100M
$100M to under $500M
$500M to under $1B
$1B to under $5B
$5B to under $10B
over $10B
1%
13% 3%
16%
12%18%5%
32%
Foreign‐owned Companies$0 to under $10M
$10M to under $50M
$50M to under $100M
$100M to under $500M
$500M to under $1B
$1B to under $5B
$5B to under $10B
over $10B
54%
12%6%
7%
4%17%
Public PracticeLess than $3M
$3M to under $6M
$6M to under $10M
$10M to under $20M
$20M to under $40M
Over $40M
36
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