1. Member of Iranian Association of Certified Public Accountants(IACPA)
What is IFRS
Gholamhossein Davani
Member of New York State Society of Certified Public Accountants(NYSSCPA)
Member of Iranian Association of Certified Public Accountants(IACPA)
November 2009

2. What is IFRS?
IFRS is a set of established accounting standards that is rapidly gaining worldwide acceptance
Standards are promulgated by the London-based International Accounting Standards Board (IASB)–IASB includes representatives from major countries, including the U.S.
Generally more focused on objectives and principles and less reliant on detailed rules and interpretations than U.S. GAAP– IFRS currently consists of a single volume of approximately 40 standards and 25 interpretations
Standards include IASs and IFRSs
Interpretations include SICs and IFRICs

3. Consensus on the use of a “principle-based” approach
The Big Picture
A new perspective on financial reporting –Focus on “transparency” of financial information versus uniformity of practices
General movement toward global standards–Growing consensus among regulators and standard setters on need for global standards
Consensus on the use of a “principle-based” approach
Shift in how standards are developed, written and applied–Will involve a new way of thinking about accounting and financial reporting
Reducing complexity and simplifying standards

4. The Global Move Towards IFRS
Canada
2009/11
Europe
2005
United States
(2011?)
China 2007
Japan (?)
India 2011
Brazil
2010
Chile
2009
South Africa
2005
Australia
2005
Current or anticipated requirement
or option to use IFRS (or equivalent) 4

5. IFRS Today and Tomorrow
Today IFRS is used in over 100 countries:
Required across all EU countries, starting in 2005
Argentina, Brazil, Canada and India have announced mandated use
Ongoing convergence efforts between FASB and IASB
By 2014, it is expected that:
All major countries will have adopted IFRS to some extent
China and Japan will be substantially converged to IFRS
U.S. public companies will begin to be required to use IFRS
Accounting Standards Used by Global Fortune 500 5

6. Global IFRS reporting trends
IFRS quickly picking up share of Global F500 companies
300
268
250
203
204
200
183
US GAAP
150
Other
113
IFRS
100 50 29
2004
2007
IFRS Drivers
Enhances transparency/comparability
Eases flow of capital globally, thus possible reduction in cost of capital
Facilitates accounting and reporting

7. Recent Regulatory Developments
SEC Concept Release on allowing U.S. issuers a choice between IFRS and U.S. GAAP
Elimination of U.S. GAAP reconciliation for Foreign Private Issuers using IFRS
FASB panel discussion of U.S. moving to IFRS
Encouragement from stakeholders for the SEC to set a definitive timeline for conversion to IFRS
SEC IFRS Roundtable –August 2008
Discussion on performance of IFRS and U.S. GAAP during credit crisis
Consensus that IFRS held up well, if not better than U.S. GAAP
Fair value still remains a challenge under both standards
Discussion on areas where continued convergence is needed

8. Recent Regulatory Developments
􀂃SEC Proposing Release sets the stage for possible mandatory adoption of IFRS by U.S. issuers beginning with fiscal years ending after December 15, 2014 for large accelerated filers
􀂃Roadmap contains certain milestones to be achieved–SEC Commission to review milestone progress in 2011 before issuing a final rule for mandatory adoption
􀂃Proposed rule to permit certain U.S. issuers the option to use IFRS for fiscal years ending after December 15, 2009– Three years of financial statements must be presented
–Issuers must be in the top 20 companies in their industry based on market capitalization, andtheir industry peer groupmustpredominantly report under IFRS

9. US GAAP – IFRS Convergence
Convergence is to be achieved through:
Formal liaison relationships
Monitoring of FASB and IASB major projects
Short-term convergence projects
Joint projects 9

10. Ongoing Convergence Efforts
IASB and FASB reaffirm convergence efforts
Updating of the “Norwalk Agreement”
Focus is on the process and converging general principles
Less focus on converging details
Involves several projects
“Short-term” convergence projects
Joint conceptual framework projects
Other Joint convergence projects
Other IASB projects
Future prospects
In 2002 the FASB and IASB entered into an agreement (dubbed the “Norwalk Agreement”) that set forth each board’s commitment to converging U.S. GAAP and IFRS. This agreement was updated in 2006 and includes a specific work plan targeted at converging a number of major topical areas. Under this plan, the FASB will amend certain U.S. GAAP standards to conform with IFRS and the IASB will amend IFRS to conform with U.S. GAAP. There also are a number of “joint” projects where new standards will be developed.
It’s important to keep in mind that convergence is really a process – the result of which are standards that are similar, but not necessarily identical. The major focus has been on converging the general principles versus detailed guidance.
The Norwalk Agreement involves several detailed projects over a number of years. There are ten “short-term” projects that are targeted toward completion by There are several other projects, which are longer term in nature and involve major topics (such as revenues, liabilities, consolidation, leasing). Most of these are “joint” projects.
Recent changes to U.S. GAAP related to converge efforts include, FAS 123R, FAS 132R, FAS 151, FAS 153, FAS 154, FAS 158, and FAS FAS 141R is expected soon. 10

11. Recent FASB/IASB Standards “High Level” Convergence
Description
FASB Issuances
IASB Issuances
Share-based payments
FAS 123R
IFRS 2
Business combinations
FAS 141R
IFRS 3 (2008)
Goodwill and other intangible assets
FAS 142
IAS 36 and IAS 38
Long-lived assets held for sale and discontinued operations
FAS 144
IFRS 5
Fair value option and measurement guidance
FAS 155, FAS 157 and FAS 159
IAS 39
Even though these were joint projects, key differences still remain. 11

12. US GAAP – IFRS Convergence – Where are we now?
Boards have achieved “high-level” convergence in some areas
Examples include income taxes, business combinations, share-based payments, etc.
Other areas, models are very different
Examples include debt/equity classification, de-recognition, consolidation, etc. 12

13. US GAAP – IFRS Convergence – Where are we now?
A study of 130 reconciliations from foreign filers using IFRS in showed the differences between the two accounting systems can be quite large:
Approx. 2/3 of the companies showed higher earnings under IFRS
Only two companies in the study showed the same earnings under both IFRS and US GAAP 13

14. US GAAP – IFRS Convergence – Where are we now?
Impact to Equity
Slightly more than half of the cos. Showed greater equity under IFRS
1 company had the same equity
The following areas contributed significantly to the differences
Deferred taxes, PP&E, pensions, minority interest, capitalization of interest, purchase price accounting and asset impairment 14

15. First Time Adoption of IFRS

16. Terminology Differences
IFRS U.S. GAAP
Shares Stock
Stock Inventory
Reserves Equity
Associate Investee
Provision Accrual
True and fair Presents fairly

17. Overview of IFRS 1
Applicable when an entity makes its first explicit and unreserved reference to IFRS
Generally apply retrospectively all IFRS effective at reporting date
Certain exemptions can be elected
Some exceptions that must be followed
Requires one year of comparative financial information
Transition adjustments recognized in retained earnings
Must explain effect of transition to IFRS

18. Scope
An entity is a “first-time adopter” if the most previous financial statements were prepared:
In conformity with IFRS in all respects, except that an explicit and unreserved statement of compliance was not presented
Stating compliance with some, but not all of IFRS
With a reconciliation of some amounts to IFRS
On an IFRS basis for internal use only

19. Terms to Remember
􀂃First IFRS financial statements–First annual financial statements in which an “explicit and unreserved” reference to compliance with IFRS
􀂃Date of transition to IFRS–Beginning of the earliest comparable period presented in an entity’s first IFRS financial statements
􀂃Reporting date–The end of the latest period covered by financial statements or by an interim financial report

20. Compliance with IFRS Compliance with IFRS includes:
All active standards (IASs and IFRSs)
All active interpretations (SICs and IFRICs)
IFRS requires presentation of comparative period
Must make explicit and unreserved statement of compliance 20

21. The Good, the Bad, and the Ugly
The good–You know more about IFRS than you think
Many areas are similar to U.S. GAAP
The bad–There are significant areas of difference
New way of thinking about standards
Just plain ugly–There has been historically lax practices in applying IFRS (“IFRS lite”)

22. Overview of Key Concepts
Concept Discussion
Accounting policies Specific principles, bases, conventions,
rules and practices
Estimates Adjustments in the carrying amount of assets or liabilities
Result from new information or developments
Errors Material omissions or misstatements in financial statements
Include clerical errors, mistakes in application, oversight or misinterpretation of facts, fraud
Material Omissions or misstatements that individually or collectively influence the economic decisions of users
Consider the size and nature of the item

23. IFRS Accounting Policies – IAS 8
IAS 8 established “hierarchy” when choosing IFRS accounting policies
Apply any specific IFRS; consider any relevant implementation guidance
Refer to other IFRSs dealing with similar or related issues
IFRS Framework
Consider pronouncement of other standard-setting bodies or industry practices if consistent with the above steps 23

24. Consistency of Accounting Policies – IAS 8
If one or more alternative methods are available:
Choose and apply one method for the consolidated entity
For all transaction/items; or
If expressly permitted, for all transactions/items, etc. in a category of items
If expressly permitted on a transaction by transaction basis 24

25. IFRS Timeline

26. What will happen

27. IFRS Solution

28. IFRS will integrate domestic businesses with the global investor
Why world going IFRS
IFRS will integrate domestic businesses with the global investor
Financial community so that there is no language gap and barrier
IFRS is acceptable globally and provides a common accounting/reporting language to the world

29. Because of longstanding convergence projects between the IASB and the FASB, the extent of the specific differences between IFRS and GAAP has been shrinking. Yet significant differences do remain, most any one of which can result in significantly different reported results, depending on a company's industry and individual facts and circumstances. For example: • IFRS does not permit Last In, First Out (LIFO). • IFRS uses a single-step method for impairment write-downs rather than the two-step method used in U.S. GAAP, making write-downs more likely. • IFRS has a different probability threshold and measurement objective for contingencies. • IFRS does not permit debt for which a covenant violation has occurred to be classified as non-current unless a lender waiver is obtained before the balance sheet date.
What are some of the most important specific differences between IFRS and U.S. GAAP?

30. Structure of IFRS(1)
IFRS are considered a "principles based" set of standards in that they establish broad rules as well as dictating specific treatments.
International Financial Reporting Standards (IFRS) - standards issued after 2001
International Accounting Standards (IAS) - standards issued before 2001
International Financial Reporting Standards comprise:
Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) - issued after 2001
Standing Interpretations Committee (SIC) - issued before 2001

31. A Principles-based Approach
Less detailed guidance to consider
More of a focus on the “substance” of transactions
Evaluate whether the accounting presentation reflects the “economic reality”
More use of professional judgment
Impact on risk
Possibility of second-guessing by regulators
More of a focus on the “process” around making judgments
CIFR recommendations

32. Other Accounting Policy Considerations
In considering the applicability of U.S. GAAP pronouncements, must consider consistency with the overall IFRS “principle”
Generally no “bright lines”–Need to establish “benchmarks” for analysis
Transitional provisions in U.S. standards and interpretations may not be applicable under IFRS
On first-time adoption would need to apply retrospectively unless related to exemption

33. Sources : 1-NYSCPA. org 2-aicpa. org 3-IFRS. org 4-iasb
Sources : 1-NYSCPA.org 2-aicpa.org 3-IFRS.org 4-iasb.org 5-Wikipedia.org 6-CFO.org