International Financial Reporting Standards The views expressed in this presentation are those of the presenter, not necessarily those of the IASC Foundation or the IASB IASC Foundation World Federation of Exchanges October 2010 © 2010 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. Philippe Danjou, Member of the IASB

Financial information: less is more? The crisis has highlighted the importance of disclosure and transparency in financial reporting –Investors require more relevant and timely information –Brought forward the transparency vs. stability debate –Not mutually exclusive –Enhanced transparency enhances financial stability –Standard-setters and prudential regulators can cooperate closely, whilst recognising different objectives and the limitations of financial reporting © 2010 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. 2

Financial information: less is more? continued However, more disclosures can increase complexity and flow of information: –Too much information can ‘kill’ information –Financial reports are growing in length and are increasingly more difficult for users to navigate –Threat of regulatory arbitrage Financial reporting should not mask business complexity, rather it should describe it –Complex business structures will undoubtedly result in complex financial reporting 3

Financial information: less is more? continued The IASB’s response: –Potential burden of additional disclosures is reviewed every time a new standard or amendment is published –Future intention will be to undertake an entire review of disclosure framework –Key goal will be to ensure future disclosures are: –Not viewed as a ‘box ticking exercise’ –Used to provide investors with relevant information in a user-friendly format to highlight essential information about a company –Developed in collaboration with auditors and preparers of the need for such information –Cost / benefit approach of the IASB –XBRL may be a solution? 4

Importance of Convergence © 2010 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. 5 Convergence “facilitates and promotes” a single set of standards by reducing differences – a means not an end IFRS-US GAAP convergence is the first step and key to our strategy –Norwalk agreement; MoU (2006 – 2009) However, 2011 convergence target is not without its challenges Revised timeline retains June 2011 target for key projects, whilst responding to concerns for stakeholders to provide high quality input on a timely basis Focussed efforts on key projects, for example, Financial Instruments –Difficulties in converging financial instruments accounting due to FASB’s proposed full fair value model Convergence not limited to the US

Convergence not as an endpoint Ongoing convergence will lead to improvements, but… –Differences will persist, despite intense efforts to converge: continued possibility of regulatory arbitrage –Convergence without adoption entails cost of change without getting the full benefit of adoption –Appetite for endless US convergence diminishing internationally as consensus on IFRS emerges. In relation to large and emerging economies, the US could have a more limited voice 6

Interaction of financial reporting & prudential regulation Independence of the standard setting body is paramount – G20 & FCAG However, standards should not be set in a vacuum Consistent with G20 requests, the IASB has prioritised dialogue with prudential regulators –Eg. Basel participation in the development of an expected loss approach –Better understand interaction with Basel work on unexpected loss buffers through enhanced capital requirements 7

Global convergence Political interest in standard-setting Not all political interest is bad –G20 support for completing global convergence by 2011 –Regional and national support for IFRSs –IASB works in close cooperation with national authorities Key is respecting the decisions of an independent body, having followed an open, transparent and inclusive due process 8

Post-crisis standard-setting “The crisis has changed standard-setting forever, but in a good way. It is no longer acceptable to take more than a decade to develop a new standard, or to simply drop proposals on to our constituents and wait for the replies. Proactive, responsive and accountable – these are the attributes of modern-day standard setting.” David Tweedie, Chairman of the IASB, May

© 2010 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK Questions or comments? Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the presenter. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.