IFRSAbandon Ship or Smooth Sailing Ahead?Neal J. HannonAAA Interactive Data AssociatesStamford, CT 203-274-6806nhannon@gmail.com

Use of IFRSs Is Widespread!Used by more than 15,000 listed companies overseasAnother 12,000 planned by 2011Used by foreign subsidiaries of US-based multinationalsUsed by SEC foreign registrants without reconciliation to US GAAPWill probably be used by US companies in a few yearsBoth SEC registrants and private companies

More than 100 countries, including the members of the EuropeanUnion and much of Asia, have already adopted and implementedIFRS. Israel is adopting IFRS this year, with Chile and South Koreaset for 2009, Brazil for 2010, and Canada for 2011.

Use of IFRSs Is Widespread!FASB, SEC, AICPA, Big-4, and major US multinationals all strongly favor use of IFRSsDesignation of IASB under AICPA Rules 202-203 (May 2008)Potential for use of IFRS for Private Entities when it is finished early 2009What will become of the FASB (and other national standard setters)?

Why globalaccounting standards?

Why Global Standards?Enhanced worldwide comparability for investorsEnhanced quality of reportingSome national GAAPs are weak or outdatedPossibly a lower cost of capital for companies adopting IFRSsMore company-friendly US securities market for foreign listings

Why Global Standards?Reduced reporting costsFor instance, multinational with subs applying many GAAPsNo need to develop and maintain national standardsFor audit firms and companies: Easier movement of auditors and accountants across borders

Brief HistoryIASC started 1973:Volunteer, part-time, met 3X/yearIssued IASs 1-41 + interpretationsRestructured 2001:Full-time IASB based in London14 membersIssues IFRSsOld IASs (most revised by IASB) remain in force

IASB Structure

Use of IFRSs Around the WorldToday, IFRSs are used by listed companies in over 100 jurisdictions

For domestic listed companies:Number of JurisdictionsIFRSs required for all85IFRSs required for some 4IFRSs permitted24

Use of IFRSs Around the WorldToday, IFRSs are used by unlisted companies in over 80 jurisdictions

Use of IFRSs Means All IFRSs!33 existing IASs (1 to 41, some deleted) issued by IASC 1973-2000:Most amended or replaced by IASB during 2003-2008IFRSs 1-8 issued by IASBAlso Interpretations

Use of IFRSs by Listed EntitiesEurope (EU+EEA+ Switzerland):All listed (about 8,000 companies)In consolidated financial statements EU: One modification (of IAS 39)Consequently, audit report refers to IFRSs as adopted by the EUEndorsement mechanism results in time lags

Use of IFRSs by Listed EntitiesAsia-Pacific:Nearly word-for-word convergence: Australia, New Zealand, Hong KongModifications, time lags, some not adopted: Singapore, Thailand, Malaysia, Philippines, ChinaOwn standards: Japan (convergence program), Taiwan2011 planned: India, Korea

Use of IFRSs by Listed EntitiesNorth America:Canada: planned 2011USA: Permitted for foreign SEC registrants since March 2008 SEC studying domestic registrants roadmap suggests 2014

Use of IFRSs by Listed EntitiesLatin America/Caribbean:IFRSs required: Brazil (2010 all listed and banks), Chile (2009-2011 phased in), and over a dozen smaller jurisdictions

Middle East and Africa:IFRSs required: Many countries

US vs. the World?The stated objective of the 2002 Norwalk Agreementbetween FASB and the IASB is the development of high quality, compatible accounting standards that could be used for both domestic and cross-border financial reporting.Clearly, this approach says lets make both sets ofstandards better, not choose one set over the other.

Convergence Still OnSep 11, 2008 FASB, IASB To Complete Major Convergence Projects by 2011, Says MoU FASB expects to release proposals in 2008 on Subsequent Events and Income Taxes. Similar to the improve and adopt approach described by FASB Chairman Robert Herz in interviews and Senate testimony Other matters noted in 2008 MoU Update: Conceptual Framework: Work is ongoing on the boards joint conceptual framework projects.

FASB and the IASB recognize the need for due process

Work Programs Include Other Matters: The boards remain committed to completing the MoU projects because they represent a significant step toward the goal of a common set of high quality standards.

Principles Vs. RulesPrinciple: Drive safelyRule: 55 MPH Limit

Voices of NoteThe question about whether the world is going to global standards is no longer if, but when. Switching to IFRS significantly reduces the cost of accounting and financial reporting for multi-national companies, which would otherwise have to translate and reconcile records prepared under various country-specific standards.

KPMG Chairman and CEO Timothy P. Flynn

Voices of NoteAn international language of disclosure and transparency is a goal worth pursuing on behalf of investors who seek comparable financial information to make well-informed investment decisions, said SEC Chairman Christopher Cox. The increasing worldwide acceptance of financial reporting using IFRS, and U.S. investors increasing ownership of securities issued by foreign companies that report financial information using IFRS, have led the Commission to propose this cautious and careful plan. Clearly setting out the SECs direction well in advance, as well as the conditions that must be met, will help fulfill our mission of protecting investors and facilitating capital formation.

Voices of NoteMeanwhile the IASB at the dawn of the 21st Century began to add meat to but left out many of the bright line rules. Hence it generated a reputation for principles-based standards instead of rules-based its milk toast "politically correct" starter-set of international standards. In many instances it copied FASB standards.

Bob Jensen, Professor emeritus Trinity University. www.trinity.edu/rjensen

Voices of Note"We should start off [a financial reporting standard] with the core principle, which is really the 'true and fair' core of the standard." Sir David Tweedie, Chairman IASB.

The idea of true and fair in accounting is little more than faith-based accounting, and most certainly not the appropriate starting point for any process of developing high-quality accounting standards. Tom Selling (www.accountingonion.com)

Voices of NoteOn accounting, SEC Chairman Cox has unveiled a roadmap where US companies would switch from US GAAP to IFRS by 2014. Unthinkable only two years ago! A dramatic signal indeed. Following the EU's lead, the US is indicating it also wants to choose global standards. One set, in sight, at last. And of course we need to strengthen the governance of the IASB. That is why we are working hard with some of our major counterparts to install new, strengthened oversight mechanisms.

Charles McCreevy, European Commissioner for Internal Market 14 September 2008.

Voices of NoteA precipitous move away from U.S. Generally Accepted Accounting Principles will undermine the U.S. regulatory system, and thereby "put in jeopardy the thing that gives the U.S. a competitive advantage. All research shows that the U.S. is unique in its regulation. No [country] is as effective . . . . We have the lowest cost of capital in the world. Do we really want to give that up?

Charles Niemeier, a member and former acting chair of the Public Company Accounting Oversight Board

Voices of NoteBy the logic of others, which I cant explain, fuzzy lines in accounting standards have come to be exalted as principles-based and bright lines are disparaged asrules-based.

Tom Selling, author of The Accounting Onion blog

It is important to note that conversion to IFRS will require the retroactive restatement of certain historical periods presented within a companys first set of IFRS based financial statements. Those restated periods could show a host of changes to a companys key metrics, bottom-line performance and financial position.

Source: PriceWaterhouseCoopers, September 2008

What Are the Major Differences?

Major DifferencesUS GAAP - IFRSRevenue recognitionExpense recognition: share-based paymentsFinancial liabilities and equityConsolidationAssetsnonfinancial assetsAssetsfinancial assets

Major DifferencesUS GAAP - IFRSLiabilitiestaxesLiabilitiesotherFinancial liabilities and equityDerivatives and hedgingConsolidationsBusiness combinationsOther accounting and reporting topics

What If IFRS starts 12-31-11?Preparing IFRS financial statements for the three years ending December 31, 2011, would have a transition date of January 1, 2009. That would also be the date of the opening IFRS balance sheet.

IFRS 1 requires that the opening IFRS balance sheet:Include all of the assets and liabilities that IFRS requires;Exclude any assets and liabilities that IFRS does not permit;Classify all assets, liabilities and equity in accordance with IFRS; andMeasure all items in accordance with IFRS.

These general principles are followed except where one of the optional exemptions or mandatory exceptions does not require or permit recognition, classification and measurement in accordance with IFRS.

IFRS ResourcesDownload a comprehensive list:www.iasplus.com/resource/0808aaaifrsresources.pdf

Or http://fairfield-ais.wikispaces.com/IFRS+Resource+Page

Most of the cited hyperlinks lead to additional resourcesMost available for free

IFRS ResourcesDeloitteiGAAP 2009 A Guide to IFRS Reporting (2nd ed., 2,100 pages)iGAAP 2008 Financial Instruments: IAS 32, IAS 39 and IFRS 7 Explained (4th ed., 851 pages). www.iasplus.comIFRS e-LearningIFRSs in your Pocket 2008

IFRS ResourcesErnst & YoungErnst & Young International GAAP 2008 (2 volumes)www.ey.com/ifrsNew academic resource center to be launched Sept. 2008Grant Thorntonhttp://faculty.gtexperience.com

IFRS ResourcesKPMGKPMG IFRS Institutewww.kpmgifrsinstitute.com/KPMG faculty portalwww.kpmgfacultyportal.comKPMG IFRG websitewww.kpmgifrg.comIFRS publications librarywww.kpmgifrg.com/pubs/index.cfm

IFRS ResourcesPricewaterhouseCoopersIFRS reporting websitewww.pwcglobal.com/ifrsIFRS Pocket Guide 2008IFRS Ready toolkit for educatorswww.pwc.com/facultyPWC IFRS Bloghttp://pwc.blogs.com/ifrs/

IFRS ResourcesUS SEC Global Accounting Pagewww.sec.gov/spotlight/ifrsroadmap.htmIASBwww.iasb.orgSubscriptions and e-IFRSWebcasts of meetingsWorld Accounting Reportwww.i-financial.com/

IFRS Academic ResourcesIAAERwww.iaaer.orgOffers very low-cost academic subscription to eIFRS (from IASB)Includes all IFRSs and other educational materials of the IASB $25 (academician) and $20 (student) Normal price from IASB $400

IFRS ResourcesAICPAIFRSs on CPA Exam:www.cpa-exam.orgNew IFRS websitewww.ifrs.comCanadian Institute of CAsIFRS Transition Page:www.cica.ca/index.cfm?ci_id=39166&la_id=1

IFRS ResourcesEuropean CommissionAccounting:http://ec.europa.eu/internal_market/accounting/index_en.htmThis includes links to:EU accounting newsIFRS news and informationEU IFRS-related committeesEU IFRS directives and regulations

IFRS - How to Assess Your Financial Readiness Date: Tuesday, November 4, 2008 Time: 1:00 p.m. EDT Place: Online The move to International Financial Reporting Standards (IFRS) is of extreme importance to finance professionals as it has already been adopted in Europe and will be required in Canada in 2011. In the US growing evidence suggests that the SEC is accelerating measures to retire US GAAP and require all public companies to adopt IFRS. The impact of IFRS will not only affect the finance function, but stretch to encompass key business decisions across the entire organization. Having the right plan and systems in place is critical to ensure a smooth transition. But where do you start Register Now for this LIVE WebcastJoin Deloitte and Longview Solutions as they offer helpful advice on key IFRS topics including:The status of IFRS adoption in North America How to assess your companys IFRS readiness People Processes Support Systems Business Performance Management (BPM) as an enabler of IFRS Featured Speakers: Don Newell, Deloitte Partner, National IFRS Leader Tony Wright, Director of Product Management, Longview Solutions Sign up now and join us on November 4 for this educational webcast!

IFRS Resources for EducatorsTextbooks some recent ones:Nobes and ParkerRoberts, Weetman and GordonChoi and MeekHolt, Mirza and OrrellAlfredson, Leo, Picker, Pacter et alHistories of the IASC:Camfferman and ZeffKirsch

Credits for IASB history and IASB Resources:Stephen Zeff, Rice Universityand Paul Pacter, IASB

From a presentation to:American Accounting Association Anaheim, CA August 4, 2008

Thank you. Questions and comments?

For more: ficpa-ifrs.wikispaces.comNeal J. Hannon, AAA Interactive Data AssociatesStamford, CT 203-274-6806nhannon@gmail.comBridging the GAAP between XBRL and the SEC

******************European economic area; IAS 39 Financial Instruments - Recognition and Measurement - Derivatives ******Sep 11, 2008FASB, IASB To Complete Major Convergence Projects by 2011, Says MOU UpdateMajor FASB-IASB convergence projects will be completed by 2011*, according to an update of their Memorandum of Understanding issued today (the 2008 MOU Update or the update) and as noted at the top of a related news release. Dating back to the 2002 Norwalk Agreement followed by the 2006 MOU, the update outlines progress to date and next steps remaining on the 11 major convergence projects and the additional short-term convergence projects set forth in the 2006 MOU. * NOTE:The subtitle of FASB-IASB's news release states: "2008 update establishes goal of completing joint projects on major topics by 2011." Virtually all of the11 projects are scheduled to be completed by 2011, except for intangibles (which is inactive) and Financial Instruments, for which the completion date is listed as "to be determined." FASB expects to release proposals in 2008 on Subsequent Events and Income Taxes, according to the 2008 MOU Update. Noting that in light of the possibility that some or all U.S. public companies might be permitted or required to adopt IFRS at some future date, the update says the income tax project will be handled by FASB issuing an Invitation to Comment later this year on IASBs proposed replacement of its own Income Tax standard, IAS 12. At the conclusion of that review, [FASB] will decide whether to undertake projects that would eliminate differences in the accounting for taxes, investment properties, and research and development by adopting the relevant IFRS standards..."Thissounds similar to the improve and adopt approach described by FASB Chairman Robert Herz in his recent interview in Financial Executive Magazine and inhis Senate testimony last year.We have summarized the next steps on the 11 joint convergence projects described in the 2008 MOU Update in this FEI summary (FEI members only).Other matters noted in 2008 MOU Update: Conceptual Framework: Work is ongoing on the boards joint conceptual framework projects. Consultation Requirements: FASB and the IASB recognize the need for due process, including consultation with third parties. Therefore, the timetable for completion is subject to change depending on input received throughout a projects development. Staggering of Effective Dates: With several projects anticipated for completion in 2010 and 2011, The Boards will consider staggering effective dates of standards to ensure an orderly transition to new standards.Work Programs Include Other Matters: The boards remain committed to completing the MoU projects because they represent a significant step toward the goal of a common set of high quality standards. However, they will also devote resources to other active projects and respond to other market demands.Revenue recognitionIn many regards, IFRS and US GAAP are supported by similarprinciples. But US GAAP uses additional layers of rules in itsguidance. The practical accounting differences that result are realand can reverberate throughout a company.For instance, US GAAP provides highly prescriptive revenuerecognition guidance, including a significant number of standardsissued by the various standard setting bodies in the US.These highly detailed standards often dictate industry-specificaccounting. By comparison, IFRS has just two primary revenuestandards and a handful of revenue related interpretations thatcapture all revenue transactions. The broad principles laid outin IFRS are generally applied without elaboration and withoutexceptions for specific industries.Revenue recognitionIn many regards, IFRS and US GAAP are supported by similarprinciples. But US GAAP uses additional layers of rules in itsguidance. The practical accounting differences that result are realand can reverberate throughout a company.For instance, US GAAP provides highly prescriptive revenuerecognition guidance, including a significant number of standardsissued by the various standard setting bodies in the US.These highly detailed standards often dictate industry-specificaccounting. By comparison, IFRS has just two primary revenuestandards and a handful of revenue related interpretations thatcapture all revenue transactions. The broad principles laid outin IFRS are generally applied without elaboration and withoutexceptions for specific industries.********************