WISTA 2008 Annual
Conference
International Financial Reporting StandardsImpacts and opportunities for your company
October 17, 2008
History
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IASB (International Accounting Standards Board) / IASC
(Committee) was formed in the early 1970‘s, about the
same time as the FASB
Early standards allowed many options
Efforts were made to harmonize standards in the early
1990s
Some early adopters came from countries with
multinational companies but few local accounting rules
(e.g., Switzerland, Australia)
IASB was restructured in 2001 and began issuing IFRSs
(International Financial Reporting Standards) in 2003
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Momentum for a Global GAAP
Enhances
Transparency and
Comparability
Facilitates Accounting
and Reporting
Global
GAAP
Reduces Cost
of Capital
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What are the global markets doing?
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Every major non-US capital market
is moving to IFRS
Adoption of IFRS in the EU
in 2005
► 8,000 companies
► Lead the transition to
IFRS globally
Over 100 countries around the
world require or permit IFRS
IFRS is becoming the predominant
accounting framework outside the
US
Page 3
Top 10 Global Capital Markets
US
US GAAP – moving
towards IFRS
Japan
Convergence to IFRS
UK
IFRS
France
IFRS
Canada
Convergence to IFRS
Germany
IFRS
Hong Kong
HKFRS (equivalent to
IFRS)
Spain
IFRS
Switzerland
IFRS or US GAAP
Australia
AIFRS (equivalent to
IFRS)
SEC IFRS proposed Roadmap
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On 27 August 2008, the SEC agreed to issue a proposed "Roadmap"
related to the use of IFRS by US companies
Comment period of 60 days begins when the actual proposal is
printed in Federal Register; SEC will consider comment letters and
then presumably finalize a roadmap
Roadmap will propose the following mandatory conversion
dates:
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Large accelerated filers – years ending after 12/15/14
Accelerated filers – years ending after 12/15/15
Non-accelerated filer – years ending after 12/15/16
Roadmap also expected to provide for early adoption of IFRS
in 2009 by a limited number of very large companies that meet
specified criteria
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SEC IFRS proposed Roadmap (cont’d)
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The SEC identified four milestones to be considered when
making a final decision in 2011 whether to proceed with
mandatory adoption of IFRS
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Improvements in accounting standards (i.e., convergence)
Accountability and funding of IASCF
Improvements in the use of XBRL (use of data)
Improvements in IFRS education and training
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Roadmap includes expectation of an SEC “call to
action” by 2011, which means voting on whether to
mandate the use of IFRS
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The timing of approval by the SEC could be affected by
new administration and Commissioners.
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What is the burning platform?
Timing is still critical (e.g., for large accelerated filer)
First quarter comparative
Fiscal
2009
Fiscal
2010
Fiscal
2011
Restate
opening
balance sheet
Fiscal
2012
Fiscal
2013
First
year of IFRS
Reporting 2014
Fiscal
2014
2012 and 2013 statements filed under US GAAP
Run US GAAP and IFRS parallel
Secure resources
Design and implementation of
process, control and systems
Awareness and
knowledge of IFRS
Modification of business operations,
tax, regulatory and HR programs
Impact assessment
Drafting new
accounting policies
Preparation of
convergence plan
IFRS statements are
published with
comparatives for 2013
and 2012
Training
New IFRS standards
Change management, project structure and governance (budget implications, resourcing, etc.)
Page 6
How a company might respond
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Presume that milestones will be met
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IASCF funding, continued convergence efforts and the use of XBRL
likely will be achieved because those activities are already being
addressed
Education may be more judgmental, but many activities to address this
are being planned
Anticipate eventual IFRS conversion
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Determine the company’s conversion date based on the proposed
conversion timetable and consider whether the company might elect to
adopt earlier (i.e., if SEC subsequently allows earlier adoption)
Perform diagnostic to determine scope and breadth of conversion
Begin to understand the implications and choices under IFRS 1 Firsttime Adoption of International Financial Reporting Standards
Begin the planning process and identify a skilled project management
team
Start preparing the company for the diagnostic/conversion
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IFRS conversion: questions to be answered
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How does the company plan to approach the conversion
to IFRS?
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IFRS conversion is a business-wide change management exercise
The full support of the board, audit committee and senior
management is critical
Boards and audit committees should pay close attention to
management’s approach to conversion
What are the key areas that need to be addressed during
conversion?
What is the timeline for the company’s IFRS conversion
project and what resources will be required?
What can we learn from the conversion experience in
Canada, Europe and other countries?
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How do we start?
Ask the right questions
Key questions
Key considerations
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If allowed by the SEC, should
we consider early voluntary
adoption?
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Are there tough
implementation challenges or
efficiency opportunities that we
should identify and address
now before there is a time
constraint?
Key indicators
of tough
challenges or
cost savings
opportunities
Are there existing or planned
initiatives/ projects that may be
significantly affected by IFRS?
Key initiatives
and projects
likely to be
significantly
affected by
IFRS
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Key decision
factors
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You may already be on IFRS in
international subsidiaries
Standardized
global statutory
IFRS reporting
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Potential for reporting harmonization with reduction in
different statutory reports (cost, speed, control)
Certain differences drive changes to financial results
(earnings, equity)
Competitors/peers may drive early adoption
Manually intensive accounting, consolidation, and financial
reporting processes
Multiple cross-GAAP reconciliation procedures
Inconsistent global chart of accounts
Consistency of global accounting policies and procedures
Shared service center deployment
Global ERP implementations
Trial balance/chart of account redesign
Global finance transformation
Process standardization
Global policy and procedure development/deployment
Tax strategies
First time application cannot be undone, so inefficiencies
may already be built-in to subsidiaries’ IFRS accounts
Possibility IFRS has been interpreted inconsistently in the
same group by different subsidiaries; needs to be rectified
in order to ultimately gain efficiencies
Centralize control over subsidiary locations to eliminate
future inconsistent policy choices
What is the impact of IFRS conversion?
More than an accounting exercise — many time-sensitive considerations
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Accounting and reporting represent approx. 20-30% of conversion efforts
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System changes for capturing and reporting data
Significant impact on all aspects of the tax cycle — planning, provision, compliance
and controversy
Important to the alignment of internal and external reporting
Increasing complexity of IFRS and speed of change requires more technical
resources
Changes to internal audit plans
Consider the impact on:
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Subsidiary decisions regarding IFRS accounting policies on the parent
Data capture for accounting and management reporting
Availability of technical resources
Investor relations – change management for shareholders
Acquisitions and dispositions
KPIs need to be recallibratted due to the basis of accounting changing
Executive compensation calculations and the basis of incentive pay
Debt covenants and potential impact of IFRS-reported results
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