By: Evan, Kelsey, Adrian, Vivi, & Jordan 1. The Big Bang Approach The problem at hand: The Big Bang...
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Transcript of By: Evan, Kelsey, Adrian, Vivi, & Jordan 1. The Big Bang Approach The problem at hand: The Big Bang...
By: Evan, Kelsey, Adrian, Vivi, & Jordan
1
The Big Bang Approach
The problem at hand:
The “Big Bang” approach vs. “Staggered Transition”
Our Decision:
The Big Bang approach is best method
Companies start accounting in accordance with IFRS beginning January 1, 2015
2
IFRS: Big and Small Business
Complete understanding by date of adoption
Principles = 2,500 pages (IFRS) vs. 25,000 pages (USGAAP)
Comparative statements: current and prior year only
Potential need for additional employees to convert 2014 financials during 2015
International understanding
Adoption regardless of company need
“...a single set of high-quality global standards.” – Arleen Thomas, AICPA
3
Big Bang: Big Business
Pros:
Consistent statements throughout quarters
Less hassle for businesses already engaging in international affairs
Less interaction with the SEC, the better
Cons:
For some companies, having to switch all at once might take away from their current tasks
No way to ensure that big businesses are going to be ready to convert under the big bang
4
Staggered Transition: Big Business
Pros:
Series of checkpoints to ensure progress
Less pressure and more confidence in transition to IFRS
Large companies can spend more time to become proficient in IFRS
Cons:
Inconsistent statements throughout quarters
Increases SEC interaction
More costly for the SEC to continually monitor conversion
5
Big Bang: Small Business
Pros:
Transition to IFRS for small and medium enterprises (SME’s)
Modified version of IFRS – less encompassing
Less costly
Less interaction with the SEC during transition phase
Cons:
Pressure and expectations with SEC
Unnecessary switch
6
Staggered Transition: Small Business
Pros:
Guidance throughout the process
Less confusion
Cons:
Transition period will yield inconsistency for business owners
Difficult for SME’s to meet demanding checkpoints
“Babysitting Effect”
Unnecessary switch
7
PwC: Big Bang and Staggered
Overall effects on PwC should not vary much between approaches
Training is in accordance with PwC’s schedule
Staggered transition, PwC will need to teach employees in concert with the SEC checkpoints
Opportunity to increase revenue through training companies
Ernst & Young significantly aided Coca-Cola in implementing IFRS
Cost to teach additional employees vs. future revenue increase
8
Big Bang Time Line
Implement IFRS standards beginning January 1, 2015
Issue 10-Q statements for 2015, supplemented with quarterly figures from 2014, all of which are in accordance with IFRS
9
present 01/01/2016
01/01/2014
Prepare for Big Bang (IFRS)
01/01/2015
Q1-15 Q2-15
Q3-15
10Q filings, also including 2004 quarterly figures, in accordance with IFRS
Other Factors Supporting Time Line
Investor knowledge of IFRS
Substantial time needed for investors to become fluent in IFRS
Investors need to fully understand IFRS before it is implemented
Initial Public Offerings
SEC currently requires five years of audited historical financial
Adjusted IPO deadline
Time needed to adjust legal contracts
10
Questions?
11
By: Evan, Kelsey, Adrian, Vivi, & Jordan
present 01/01/2016
01/01/2014
Prepare for Big Bang (IFRS)
01/01/2015
Q1-15
Q2-15
Q3-15
10Q filings, also including 2004 quarterly figures, in accordance with IFRS
Big Bang ApproachMore consistency among financial statements until date of adoption (01/01/2015)Less interacting with the SECNo way to ensure that companies will be ready for the transition on the Big Bang date
Staggered TransitionSeries of checkpoints to ensure participationIncreased interaction with the SECInconsistent financial statements during transition period
Effects on PwCLess variability of effects from two approachesOpportunity for increased revenue
Additional Support for Time LineInvestor knowledge of IFRSInitial Public OfferingsLegal documents