Adoption of IFRS in U.S. - An Introduction
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Transcript of Adoption of IFRS in U.S. - An Introduction
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?
© 2012 Proformative. Proprietary and confidential
• What can I do today?
SEC Roadmap on IFRS
© 2012 Proformative. Proprietary and confidential
• 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:
© 2012 Proformative. Proprietary and confidential
– 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!
© 2012 Proformative. Proprietary and confidential
– 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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© 2012 Proformative. Proprietary and confidential
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
© 2012 Proformative. Proprietary and confidential
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