international regulation for accounting · + day-by-day accounting + finalizing the accounts for...
TRANSCRIPT
INTERNATIONAL REGULATIONFOR ACCOUNTING
STOCKHOLM
27/2/181
27/2/182
International Regulation for AccountingCONTENT
• A brief history of global standard settings
• Older global standards and interpretations still in force
• Newer global standards and interpretations
• Global implementation of standards
+ The work flow
• Regional implementation of global standards
+ The EU as example
• National implementations of regional standards
+ The EU member states example
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Abbreviations
• Global
+ IASC International Accounting Standards Committee
+ IAS International Accounting Standards
+ SIC Standing Interpretation Committee
+ IASB International Accounting Standards Board
+ IFRS International Financial Reporting Standards
+ IFRS-enterprises Listed enterprises and other who apply IFRS
+ IFRIC IFRS Interpretations Committee
+ GAAP Generally Accepted Accounting Principles
+ OECD The Organization for Economic Co-operation and Development
+ BEPS Base Erosion and Profit Shifting
• Regional
+ EU European Union
+ EFRAG European Financial Reporting Advisory Group
+ ESMA European Securities and Markets Authority
+ EEA European Economic Area
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Harmonization (or not) in Different Areas
1) Financial Reports
+ Listed companies: Good uniformity through IFRS
+ Unlisted companies: Poor uniformity although IFRS for SME
+ Smaller companies: No uniformity, with IFRS for SME as a too-large framework
2) Income Tax
+ No overall uniformity, neither globally nor within the EU
+ Partial uniformity, globally and within the EU
+ BEPS Project, within the EU as member of the OECD
3) VAT
+ Good uniformity within the EU
4) VAT versus Income Tax
+ No overall uniformity, neither globally nor within the EU
5) Accounting versus taxation and VAT
+ Poor uniformity, globally and regionally
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Chain of Standards for Accounting (1)
• Global – Regional – National (main topic of this webinar)
1) Global standards are issued
2) … and adopted regionally (by the EU after inspection)
3) … and implemented in the member states
+ As law and/or standard
+ With national adaption if needed, to legislation for
+ Accounting
+ Income taxation
+ IFRS adopted by the EU also applies to member states in the EEA
+ Iceland
+ Liechtenstein
+ Norway
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Chain of Standards for Accounting (2)
• Regional – National (not covered in this webinar)
1) Regional standards are issued by the EU for companies not applying IFRS
+ In each regulation there are limits for
+ What the member states can decide themselves
+ Wen the regulation should be nationally implemented
2) … and implemented in the member states
+ As law and/or standard
+ With national adaption if needed and permitted, to legislation for
+ Accounting
+ Income taxation
+ EU standards also applies to member states in the EEA
+ Iceland
+ Liechtenstein
+ Norway
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Chain of Standards for Accounting (3)
• National (not covered in this webinar)
+ Each member state within the EU have it’s own legislation for accounting topics which are not
covered by the EU
+ Day-by-day accounting
+ Finalizing the accounts for non-listed companies
+ And for those who doesn’t set up financial reports or consolidated accounts
+ National limits for categories, and the number of them, within EU legislation
+ Archiving the accounting
+ Audit of accounting (regulated by the EU but with wide limits)
+ IT-related matters
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1. Communication During the Standard Setting Process
• Represen-tation
• Comments
National
• Represen-tation
• Comments
EU• Committees
• Drafts
IFRS
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2. Adaption of Issued Standards
• Standard
• Interpretation
• Amendment
IFRS
• EFRIC Recom-mendation
• EU Adaption
EU• Adjustments
• Adaption
National
27/2/1810
Global (1) - IASC was the Predecessor
• Operative 1973-2001
+ Private non-profit organization, based in London
+ 1973 Established by auditor organizations in Australia, Canada, France, Germany, Japan,
Mexico, Netherlands, Great Britain and Ireland
+ 1989 Issued Framework for the Preparation and Presentation of Financial Statements –
The Framework)
+ Issued standards (IAS) and interpretations (SIC)
+ 2001 Replaced by IASB
+ Some IAS and SIC have been replaced by IFRS and IFRIC or revoked
+ But 2018 most IAS and some SIC are still in force, under supervision of IASB
+ 28 IAS
+ 8 SIC
27/2/1811
IASC Standards (1)
1) IAS 1 Presentation of Financial
Statements
2) IAS 2 Inventories
3) IAS 7 Statement of Cash Flows (Amended
2017)
4) IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors
5) IAS 10 Events after the Reporting Period
6) IAS 11 Construction Contracts
7) IAS 12 Income Taxes (Amended 2017)
8) IAS 16 Property, Plant and Equipment
9) IAS 17 Leases
10) IAS 18 Revenue
11) IAS 19 Employee Benefits
12) IAS 20 Accounting for Government Grants
and Disclosure of Government Assistance
13) IAS 21 The Effects of Changes in Foreign
Exchange Rates
14) IAS 23 Borrowing Costs
15) IAS 24 Related Party Disclosures
16) IAS 26 Accounting and Reporting by
Retirement Benefit Plans
17) IAS 27 Separate Financial Statements
18) IAS 28 Investments in Associates and
Joint Ventures *
* Amendment not yet adopted by the EU as
per December 12, 2017
Still in Force 2018
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IASC Standards (2)
20) IAS 29 Financial Reporting in
Hyperinflationary Economies
21) IAS 32 Financial Instruments:
Presentation
22) IAS 33 Earnings per Share
23) IAS 34 Interim Financial Reporting
24) IAS 36 Impairment of Assets
25) IAS 37 Provisions, Contingent Liabilities
and Contingent Assets
26) IAS 38 Intangible Assets
27) IAS 39 Financial Instruments:
Recognition and Measurement
20) IAS 40 Investment Property *
21) IAS 41 Agriculture
* Amendment not yet adopted by the EU as
per December 12, 2017
Still in Force 2018
27/2/1813
IASC Interpretations
1) SIC-7 Introduction of the Euro
2) SIC-10 Government Assistance—No
Specific Relation to Operating Activities
3) SIC-15 Operating Leases—Incentives
4) SIC-25 Income Taxes—Changes in the Tax
Status of an Entity or its Shareholders
5) SIC-27 Evaluating the Substance of
Transactions Involving the Legal Form of
a Lease
6) SIC-29 Service Concession
Arrangements: Disclosures
7) SIC-31 Revenue—Barter Transactions
Involving Advertising Services
8) SIC-32 Intangible Assets—Web Site Costs
Still in Force 2018
27/2/1814
Global (2) - IASB is the Successor
• Operative from 2001
+ Private independent, non-profit organization, based in London
+ Supported by the G20, the World Bank and other international organizations
+ Issues standards (IFRS) and interpretations (IFRIC)
+ Still manages older standards (IAS) and interpretations (SIC) from IASC
+ The standards are now required in 125 jurisdictions, and permitted in many others
• Framework and standards
+ 2001 Took over the framework from IASC
+ 2010 Issued Conceptual Framework for Financial Reporting – The IFRS Framework
+ Not adopted by the EU, therefor no official EU translations
+ - 2018: So far issued
+ The IFRS Framework
+ 17 IFRS
+ 20 IFRIC
+ The IFRS for SMEs Standard
+ IFRS Taxonomy
27/2/1815
IASB Standards (2)
1) IFRS 1 First-time Adoption of
International Financial Reporting
Standards
2) IFRS 2 Share-based Payment *
3) IFRS 3 Business Combinations
4) IFRS 4 Insurance Contracts
(Amended 2017)
5) IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations
6) IFRS 6 Exploration for and Evaluation of
Mineral Resources
7) IFRS 7 Financial Instruments: Disclosures
8) IFRS 8 Operating Segments
9) IFRS 9 Financial Instruments **
10) IFRS 10 Consolidated Financial Statements **
11) IFRS 11 Joint Arrangements
12) IFRS 12 Disclosure of Interests in Other
Entities
13) IFRS 13 Fair Value Measurement
14) IFRS 14 Regulatory Deferral Accounts *
15) IFRS 15 Revenue from Contracts with
Customers (Clarified 2017)
16) IFRS 16 Leases (New 2017)
17) IFRS 17 Insurance Contracts *
* Not yet adopted by the EU as per
December 12, 2017
** Amendment not yet adopted by the EU as per
December 12, 2017
Issued until 2018
27/2/1816
IASB Interpretations (1)
1) IFRIC 1 Changes in Existing
Decommissioning, Restoration and
Similar Liabilities
2) IFRIC 2 Members’ Shares in Co-operative
Entities and Similar Instruments
3) IFRIC 4 Determining whether an
Arrangement Contains a Lease
4) IFRIC 5 Rights to Interests arising from
Decommissioning, Restoration and
Environmental Rehabilitation Funds
5) IFRIC 6 Liabilities arising from
Participating in a Specific Market—Waste
Electrical and Electronic Equipment
6) IFRIC 7 Applying the Restatement
Approach under IAS 29 Financial
Reporting in Hyperinflationary Economies
7) IFRIC 9 Reassessment of Embedded
Derivatives
8) IFRIC 10 Interim Financial Reporting and
Impairment
9) IFRIC 12 Service Concession
Arrangements
10) IFRIC 13 Customer Loyalty Programmes
11) IFRIC 14 IAS 19—The Limit on a Defined
Benefit Asset, Minimum Funding
Requirements and their Interaction
Issued until 2018
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IASB Interpretations (2)
12) IFRIC 15 Agreements for the Construction
of Real Estate
13) IFRIC 16 Hedges of a Net Investment in a
Foreign Operation
14) IFRIC 17 Distributions of Non-cash Assets
to Owners
15) IFRIC 18 Transfers of Assets from
Customers
16) IFRIC 19 Extinguishing Financial
Liabilities with Equity Instruments
17) IFRIC 20 Stripping Costs in the
Production Phase of a Surface Mine
18) IFRIC 21 Levies
19) IFRIC 22 Foreign Currency Transactions
and Advance Consideration *
20) IFRIC 23 Uncertainty over Income Tax
Treatments *
• Not yet adopted by the EU as per
December 12, 2017
Issued until 2018
27/2/1818
The IFRS Framework (1)
• Highlights
+ 1989 Framework published by the IASC
+ 2001 Framework adopted by the IASB
+ 2010 Conceptual Framework published by the IASB
+ 2018, Q1 Planned publishing of revised Conceptual Framework
Planned update of references to Framework in IFRS Standards
• Principles and definitions
1) The objective of financial reporting
+ Providing financial information about the reporting entity that is useful to existing and
potential investors, lenders and other creditors in making decisions about providing
resources to the entity
2) The qualitative characteristics of useful financial information
+ Relevance, faithful representation, comparability, verifiability, timeliness and
understandability
3) The definition, recognition and measurement of the elements from which financial
statements are constructed
+ Assets and liabilities, Equity, Income and expenses
+ Helps you solve problems when there is an uncertainty!
27/2/1819
The IFRS Framework (2) – Assets
• F 4.4 (a): An asset is a resource
+ controlled by the entity
+ as a result of past events
+ and from which future economic benefits are expected to flow to the entity
• F 4.44: An asset is recognized in the balance sheet
+ when it is probable that the future economic benefits will flow to the entity
+ and the asset has a cost or value that can be measured reliably.
• Comment
+ Q: When should real estates be transferred to a new owner in the accounting?
+ On the day of contract?
+ On the day of take-over?
+ A: The criteria's of an asset and it’s recognition are fulfilled on the day of take-over
+ Possible national timely differences between accounting and income taxation!
27/2/1820
The IFRS Framework (3) – Liabilities
• F 4.4 (b): A liability is a present obligation of the entity
+ arising from past events,
+ the settlement of which is expected to result in an outflow from the entity
+ of resources embodying economic benefits
• F 4.46: A liability is recognized in the balance sheet
+ when it is probable that an outflow of resources embodying economic benefits
+ will result from the settlement of a present obligation
+ and the amount at which the settlement will take place can be measured reliably
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The IFRS Framework (4) – Equity
• F 4.4 (c): Equity is the residual interest in the assets of the entity,
+ after deducting all its liabilities
27/2/1822
The IFRS Framework (5) – Income
• F 4.25 (a): Income is increases in economic benefits during the accounting period
in the form of
+ inflows or enhancements of assets or decreases of liabilities that result in increases in equity,
+ other than those relating to contributions from equity participants
• F 4.47: Income is recognized in the income statement when an increase in future
economic benefits
+ related to an increase in an asset or a decrease of a liability has arisen that can be measured
reliably
+ recognition of income occurs simultaneously with the recognition of increases in assets or
decreases in liabilities
+ for example, the net increase in assets arising on a sale of goods or services or the decrease
in liabilities arising from the waiver of a debt payable
27/2/1823
The IFRS Framework (6) – Expenses
• F 4.25 (b): Expenses are decreases in economic benefits during the accounting
period in the form of
+ outflows or depletions of assets or incurrences of liabilities that result in decreases in equity,
+ other than those relating to distributions to equity participants
• F 4.49: Expenses are recognized when a decrease in future economic benefits
+ related to a decrease in an asset or an increase of a liability has arisen that can be measured
reliably
+ recognition of expenses occurs simultaneously with the recognition of an increase in liabilities or a
decrease in assets
+ for example, the accrual of employee entitlements or the depreciation of equipment
27/2/1824
The Standard Setting Process for IFRS (1)
1) Agenda consultation
a) Every 5 years: Priorities and work plan
+ 2017-2021: Better communication in financial statements
2) Research
a) Discussion paper, open for public comment
3) Standard-setting
a) Review of research and comments on discussion paper
b) Exposure draft (proposal of new standard or amendment of existing standard), open for
public consultation
c) Consultation with stakeholders around the world (parallel with step b)
d) Analysis of feedback
e) Release of standard or amendment
4) Maintenance
a) Consultation on implementation for the new standard or amendment
b) Interpretation by IFRIC
c) After a few years: Evaluation by a post-implementation review
27/2/1825
The Standard Setting Process for IFRS (3) – Phase 1-3
1. Research2. Standard-
setting3. Main-tenance
27/2/1826
The Standard Setting Process for IFRS (2) – Phase 2
2 a. Exposure Draft
2 b. Public Consultation
2 c. Release
27/2/1827
Regional Implementation – The EU (Step 1 of 3)
• Application of IAS, July 19, 2002 (regulation 1606/2002/EC, 4 pages)
+ From 2005 companies that are listed within the EU must prepare their consolidated accounts
conform to international accounting standards adopted by the EU
+ Each standard and interpretation from the IASB must be adopted by the EU before they can be
applied by the member states
+ An accounting regulatory committee shall assist the EU Commission (EFRAG)
27/2/1828
Regional Implementation – The EU (Step 2 of 3)
• Adopting certain international accounting standards, November 3, 2008
(regulation 1126/2008, 481 pages)
+ The Commission followed the advice of EFRAG and adopted all existing standards and interpretations
as of October 15, 2008 with one exception
+ Limited parts of IAS 39 “Financial Instruments: Recognition and Measurement” were omitted
+ The regulation itself contains of 2 pages, but it’s followed by an annex of 479 pages including every
adopted standard and interpretation in full text
EUR-Lex – the EU database with official translations in all member state languages
However the IFRS Framework is missing,
since it’s not an IFRS standard and not adopted by the EU
27/2/1829
Regional Implementation – The EU (Step 3 of 3)
• Accepting third countries accounting standards, December 12, 2008 (decision
2008/961/EC, 3 pages)
+ The following standards are considered equivalent to IFRS adopted by the EU, when preparing
consolidated financial statements annually and half-yearly
+ IFRS, in accordance with IAS 1
+ GAAP of Japan
+ GAAP of the USA
+ Third country company applying GAAP of China, Canada, South Korea and India
+ The Commission continue to monitor the efforts by third countries towards a changeover to IFRS
27/2/1830
Regional Implementation – The EU (EFRAG)
• Private organization established 2001 with support from the EU
+ Based in Brussels
+ Members are European parties and national organizations supporting the development of
IFRS
+ Develops and supports European views in the development of IFRS
+ Is an active member of, and contributor to, the IASB Accounting Standard Advisory Forum
+ EFRAG takes part in the public consultations preceding new or amended standards and
interpretations
+ Advices the EU on to which extent new or amended IFRS and IFRIC fulfills the criteria in the
IAS-regulation
+ Comment: The time from an issued IFRS to adoption by the EU can be substantial!
+ See the page “Endorsement Status” for link to up-to-date report
27/2/1831
Regional implementation – The ASEAN (1)
• Established 1967
• 10 Member states
+ Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand,
Viet Nam
• The ASEAN Economic Community (AEC) key characteristics
a) a single market and production base
b) a highly competitive economic region
c) a region of equitable economic development
d) a region fully integrated into the global economy
• World Bank on ASEAN 2016
+ Population/market 639 million, third largest in the world (EU 511 million)
+ 1) China 2) India
+ Economy, USD 2,555 trillion, fifths largest in the world (EU 16,398 trillion)
+ 1) USA 2) EU 3) China, 4) Japan
27/2/1832
27/2/1833
27/2/1834
Regional implementation – The ASEAN (2)
• World Bank Group Report “Current Status of the Accounting and Auditing
Profession in ASEAN Countries”, 88 pages (Sep 2014)
+ All ASEAN countries have aligned their financial reporting standards to a greater or lesser
degree with IFRS (p. 8)
+ Implementation of IFRS is quite weak in all except the more developed countries (p. 8)
+ Almost all countries have issued simplified financial reporting standards for SMEs, but with a
wide variation across the ASEAN countries (p. 9)
+ IFRS for SME is too burdensome for most SME in the lesser developed countries, ASEAN
should develop a common set of standards for SME
27/2/1835
National Implementation
• Finland
+ IFRS applies in Finland as member state of the EU
• Norway
+ IFRS applies in Norway as member state of the EEA treaty
• Sweden
+ IFRS applies to Sweden as member state of the EU
+ Every year the private organization RFR issues recommendations on how to apply by the
EU adopted standards and interpretations, with adjustments when needed to the Swedish
Annual Accounts Act and the Swedish tax laws
27/2/1836
Regional Financial Supervision
• ESMA is an independent EU authority
+ Safeguarding the stability of the financial system in the EU
+ Together with national supervisory authorities ensure that IFRS for listed companies are
applied uniformly within the EEA
+ Established 2009, began operating 2011
+ 1 mission: To enhance investor protection and promote stable and orderly financial market
+ 3 Objectives: Investor Protection, Orderly Markets, Financial Stability
27/2/1837
Regional Financial Supervision – Example
• ESMA have pointed out prioritized areas for the supervisory authorities in
the member states to review in the listed companies financial reports for
2017
+ Disclosures of expected effects of applying new standards first time
+ IFRS 9 Financial Instruments (amended 2017)
+ IFRS 15 Revenue from Contracts with Customers (clarified 2017)
+ IFRS 16 Leases (new 2017)
+ Specific issues regarding
+ IFRS 3 Business Combinations
+ IAS 7 Statement of Cash Flows (amended 2017)
27/2/1838
Källor
• Litteratur
+ Peter Berg, IFRS Work Plan consultjourney.com/2017/01/10/iasb-plan-for-2017-2021/
• Hemsidor
+ IFRS ifrs.org
+ IFRS Work Plan ifrs.org/projects/work-plan/
+ OECD oecd.org
+ BEPS Project oecd.org/tax/beps
+ EU europa.eu
+ EUR-Lex eur-lex.europa.eu/homepage.html
+ EFRAG efrag.org
+ ESMA esma.europa.eu
+ ASEAN asean.org
+ World Bank Group worldbank.org
+ The Consultant’s Journey consultjourney.com
27/2/1839
”Know the origin and process of the standards and you’ll improve significantly”
- Peter Berg
27/2/1840
KNOWLEDGE HELPS YOU SEE POSSIBILITIES AND AVOID TRAPS