1. The Current State of IFRS

2. The Current State of IFRS Objectives & Agenda
Recognize what IFRS is and when it will become important
What is IFRS?
Convergence
Resources

3. What is IFRS? IASB Structure
Trustee
Appointments
Advisory
Group
advises
IASC
Foundation
appoints
appoints
oversees
funds
appoints
reports
reports
SAC
advises
IASB
interprets
IFRIC
creates
IFRS
high quality, enforceable and global

4. What is IFRS? IASB Standards and History
1973 International Accounting Standards (IAS) ↓
2001 SIC Interpretations (SIC)
2001 International Financial Reporting Standards (IFRS) ↓
Present IFRIC Interpretations (IFRIC)

5. IASB Standards RESEARCH Jurisdictional adoption process
Agenda Decision
Discussion Paper (DP)
(Optional)
PROPOSALS
PROPOSALS
Input from:
Advisory Council
Working Group
International Groups; Analysts; Preparers; Audit technical partners
Special interest groups
Local standard-setters
Regulators
Political groups
Public Consultation
Exposure Draft (ED)
Published IFRS
Public Consultation
Feedback Statement
Jurisdictional adoption process
IASB two year post-implementation review

6. What is IFRS? 8 IFRSs in effect at 1 January 2008
First-time Adoption of International Financial Reporting Standards
IFRS 2
Share-based Payment
IFRS 3
Business Combinations
IFRS 4
Insurance Contracts
IFRS 5
Non-current Assets Held for Sale and Discontinued Operations
IFRS 6
Exploration for and Evaluation of Mineral Resources
IFRS 7
Financial Instruments: Disclosures
IFRS 8
Operating Segments

7. What is IFRS? 29 IASs in effect at 1 January 2008
Presentation of Financial Statements
IAS 2
Inventories
IAS 7
Statement of Cash Flows
IAS 8
Accounting Policies, Changes in Accounting Estimates & Errors
IAS 10
Events After the Reporting Period
IAS 11
Construction Contracts
IAS 12
Income Taxes
IAS 16
Property, Plant and Equipment
IAS 17
Leases
IAS 18
Revenue

8. What is IFRS? 29 IASs in effect at 1 January 2008, continued
Employee Benefits
IAS 20
Accounting for Government Grants and Disclosure of Government Assistance
IAS 21
The Effects of Changes in Foreign Exchange Rates
IAS 23
Borrowing Costs
IAS 24
Related Party Disclosures
IAS 26
Accounting and Reporting by Retirement Benefit Plans
IAS 27
Consolidated and Separate Financial Statements
IAS 28
Investments in Associates
IAS 29
Financial Reporting in Hyperinflationary Economies

9. What is IFRS? 29 IASs in effect at 1 January 2008, continued
Interests in Joint Ventures
IAS 32
Financial Instruments: Presentation
IAS 33
Earnings per Share
IAS 34
Interim Financial Reporting
IAS 36
Impairment of Assets
IAS 37
Provisions, Contingent Liabilities and Contingent Assets
IAS 38
Intangible Assets
IAS 39
Financial Instruments: Recognition and Measurement
IAS 40
Investment Property
IAS 41
Agriculture

10. What is IFRS? 24 Interpretations of the IFRIC and its predecessor, the SIC, in effect at 1 January 2008
SIC 7
Introduction of the Euro
SIC 10
Government Assistance – No Specific Relation to Operating Activities
SIC 12
Consolidation – Special-Purpose Entities
SIC 13
Jointly Controlled Entities – Non-Monetary Contributions by Venturers
SIC 15
Operating Leases – Incentives
SIC 21
Income Taxes – Recovery of Revalued Non-Depreciable Assets
SIC 25
Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders
SIC 27
Evaluating the Substance of Transactions Involving the Legal Form of a Lease

11. What is IFRS? 24 Interpretations of the IFRIC and its predecessor, the SIC, in effect at 1 January 2008, continued
SIC 29
Service Concession Arrangements: Disclosures
SIC 31
Revenue – Barter Transactions Involving Advertising Services
SIC 32
Intangible Assets – Web Site Costs
IFRIC 1
Changes in Existing Decommissioning, Restoration and Similar Liabilities
IFRIC 2
Members’ Shares in Cooperative Entities and Similar Instruments
IFRIC 4
Determining whether an Arrangement contains a Lease
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
IFRIC 6
Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment

12. What is IFRS? 24 Interpretations of the IFRIC and its predecessor, the SIC, in effect at 1 January 2008, continued
IFRIC 7
Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies
IFRIC 8
Scope of IFRS 2
IFRIC 9
Reassessment of Embedded Derivatives
IFRIC 10
Interim Financial Reporting and Impairment
IFRIC 11
IFRS 2 – Group and Treasury Share Transactions
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
IFRIC 14
IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements, and their Interaction

13. What is IFRS? Current State
Countries that require or permit IFRSs for domestic entities
Countries seeking convergence with, or pursuing adoption of, IFRSs
Source: Deloitte –

14. Activity 1 Principles vs. Rules
Take 5 minutes to complete
Activity 1 Principles vs. Rules
Discuss the advantages for a more or less principles-based standard for each category.
Category
Fewer Rules
(more principles-based)
More Rules
(less principles-based)
Clients
Regulators
Litigation
Skill Set
Work Satisfaction

15. Group check
IFRS are pure principles-based standards
True
False

16. Group check Debrief IFRS are pure principles-based standards True
False

17. Group check
U.S. GAAP are not based on sound, accepted accounting principles
True
False

18. Group check Debrief
U.S. GAAP are not based on sound, accepted accounting principles
True
False

19. What is IFRS? Principles vs. Rules
Principles Only
U.S.
GAAP
Rules Only
IFRS

20. Financial Statement Comprise: IFRS GAAP
Balance sheet
Income statement
A statement showing either:
All changes in equity; or
Changes in equity other than those arising from capital transactions with owners and distributions to owners (called a Statement of Recognised Income and Expense (SORIE))
Cash flow statement (no exemptions)
Accounting policies and explanatory notes (IAS 1.8)
Balance sheet
Income statement
Statement of comprehensive income. This statement may be combined with the income statement or the statement of changes in stockholders’ equity (SFAS130.22)
Statement of changes in stockholders’ equity.
Alternatively, disclosure of changes in the separate accounts comprising stockholders' equity (in addition to retained earnings) could be made in the notes to financial statements (APB 12.10)
Statement of cash flows (limited exemptions; see Section 2.5)
Notes to financial statements

21. Comparison of IFRS and US GAAP IFRS GAAP
A finance lease is not determined by a bright lines test. Instead, IAS 17 lists factors normally indicating a finance lease, including any of the following (IAS 17.10):
Transfer of ownership by end of lease term
Lessee has option to purchase asset on such favourable terms such that option exercise is reasonably certain at inception
Lease is for major part of asset's life, even if no purchase option exists
Present value of minimum lease payments at inception amounts to at least substantially all of the fair value of the leased asset
Leased assets are specialised such that only the lessee can use them without major modification
A capital lease is one that meets one or more of the following criteria (SFAS 13.7):
Lease transfers ownership of the property to the lessee by the end of the lease term
Lease contains a bargain purchase option
Lease term is equal to 75 percent or more of the estimated economic life of the leased property.*
Present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at the inception of the lease over any related investment tax credit retained by the lessor and expected to be realized by the lessor.*
For the lessor to classify a lease as a capital lease, the following additional criteria must also be met (SFAS 13.8):

22. What is IFRS? Principles vs. Rules
Industry accounting not adequately addressed
Insurance contracts
Extractive activities
No IFRS equivalent
In absence of a standard that specifically applies,
Management should use judgment
Should not conflict with IFRS
May also consider other GAAP

23. The Current State of IFRS Objectives & Agenda
Recognize what IFRS is and when it will become important
Communicate key points about IFRS to your clients
What is IFRS?
Convergence
Resources

24. Convergence Definition
Where transactions or events are the same or similar, the accounting should be the same, or there should be enough transparency in the disclosures to allow the reader to understand the differences.
(Plus a continuing effort by standard setters to
reduce differences between systems over time.)

25. Convergence Movement toward one set of standards - benefits
Investor confidence and understanding
Lower risk premium
Lower cost of capital

26. Convergence Movement toward one set of standards - benefits
Greater transparency
Greater credibility
Greater comparability between companies wherever they are
Greater cross-border capital flows
Most efficient allocation of capital
Thriving economies

27. Convergence Movement toward one set of standards - obstacles
National pride
Endorsement process
Legal issues
Standard setters
Language
<<Speaker (host, expert, auditor)>>: <<Replace with narrative script for this character>>
<<Speaker (host, expert, auditor)>> : <<Replace with narrative script for this character>>
Note: Add "Click the flashing button when you are ready to continue" to the scrip in when you want to pause the program for class discussion or activites.

28. Group check Which of the following is most correct?
U.S. GAAP and IFRS are already converged
U.S. GAAP and IFRS are not converged but will be eventually
U.S. GAAP and IFRS will never be converged
U.S. GAAP and IFRS are sufficiently converged to be acceptable in the U.S. capital markets
<<Speaker (host, expert, auditor)>>: <<Replace with narrative script for this character>>
<<Speaker (host, expert, auditor)>> : <<Replace with narrative script for this character>>
Note: Add "Click the flashing button when you are ready to continue" to the scrip in when you want to pause the program for class discussion or activites.

29. Group check Debrief Which of the following is most correct?
U.S. GAAP and IFRS are already converged
U.S. GAAP and IFRS are not converged but will be eventually
U.S. GAAP and IFRS will never be converged
U.S. GAAP and IFRS are sufficiently converged to be acceptable in the U.S. capital markets
Debrief answer

30. Convergence U.S. Convergence – FASB/IASB
2002 Norwalk Agreement
2006 Memorandum of Understanding (MOU)
2008 Memorandum of Understanding (MOU)
Debrief answer

31. Convergence U.S. Convergence – FASB/IASB
FASB adopts IASB standard
Fair value option (SFAS 159)
Research and development assets acquired in a business combination (SFAS 141 – revised 2007)
IASB adopts FASB standard
Borrowing costs (IAS 23 – revised 2007)
Segment disclosures (IFRS 8)

32. Convergence U.S. Convergence - FASB/IASB
Short–term convergence
Short-term projects deferred
Government grants
Impairment
To be examined by the FASB
To be examined by the IASB
Income taxes (joint project)
Investment properties
Joint arrangements (joint ventures)
Research and development
Subsequent events

33. Convergence U.S. Convergence – FASB/IASB
Major joint projects
Consolidations
Derecognition
Fair value measurement
Financial instruments
Financial statement presentation
Leases
Liabilities and equity distinctions
Post-employment benefits (including pensions)
Revenue recognition

34. Convergence U.S. Convergence – FASB/IASB
Conceptual Framework – joint project
Mentioned in the 2008 MOU; however no specific timetable
Major joint projects will take account of ongoing Conceptual Framework projects

35. Convergence U.S. Convergence - SEC
Roadmap – 7 milestones
Improvements in accounting standards
Funding and accountability of IASCF
Improved ability to use XBRL for IFRS
Education and training on IFRS in the U.S.
Limited early use by select few
Anticipated future rulemaking
Potential implementation sequence – FYE on or after 15 December
Large Accelerated Filers 2014
Accelerated Filers 2015
Non-Accelerated Filers 2016

36. What’s your opinion?
Within the next few years the FASB will be irrelevant and should disband
True
False

37. Convergence U.S. Convergence - SEC
Policy issues
International Organization of Securities Commissions (IOSCO)
August 2007
Proposing Release
2000 Concept Release
April 2005 Roadmap
December 2007 Final Rule
March 2007
Roundtables
July 2007 Proposing Release
December 2007 Roundtables

38. Convergence Rest of the world
Country
Status
Europe
Required (as adopted by EU)
Argentina
Required starting 2011 (awaiting approval)
Australia and
New Zealand
National standards described as IFRS equivalent
Include unreserved statement of compliance
Brazil
Required starting 2010; optional before
Canada
Required starting 2011
Chile
Required starting 2009
China
Must use Accounting Standards for Business Enterprises, which are close but not exactly IFRS. Companies listed in Hong Kong have choice of IFRS or HK FRS
India

39. Convergence Rest of the world, continued
Country
Status
Japan
Japanese GAAP to converge to IFRS by 2011
South Korea
Required starting 2011; permitted 2009
Mexico
Permitted
Peru
Required
Russia
Required for banks
Singapore
Singapore IFRS – changed several IFRSs and did not adopt others
South Africa
Switzerland
Turkey
Uruguay
Must use IFRS in existence at 19 May 2004
USA
Not permitted; concept release out for comment

40. Convergence Application
Jurisdictional variations
Different interpretations
Small and Medium-sized Entities (SMEs)

41. What’s your opinion? Choose either View A or View B View A View B
The SEC should allow market forces to determine when to allow IFRS in the U.S.
The SEC should decide what is best for the U.S. markets and mandate IFRS when it is ready
<<Speaker (host, expert, auditor)>>: <<Replace with narrative script for this character>>
<<Speaker (host, expert, auditor)>> : <<Replace with narrative script for this character>>
Note: Add "Click the flashing button when you are ready to continue" to the scrip in when you want to pause the program for class discussion or activites.

42. Activity 2 Are companies ready for IFRS?
Take 2 minutes to complete
Activity 2 Are companies ready for IFRS?
Discuss the characteristics of a company that is unprepared to adopt IFRS and one that is prepared.
Unprepared Company
Prepared Company

43. Activity 2 Debrief Unprepared Client Prepared Client
Waits until the switch to IFRS is mandatory
Has the accounting staff prepare excel spreadsheets to support top-level adjustments to its U.S. GAAP statements
Misses some items that are caught at the last minute by the GT audit team
Disclosures are so poorly written it gets several comment letters from the SEC on its late filing
Budgets for a project to evaluate what will change if it switches to IFRS
Project team includes accounting, reporting, operations and IT
Produces pro forma statements two years prior to changeover
Highlights how reported results will change
Allows better evaluation of transition options
Highlights needed changes in information requirements & IT

44. Next Steps What you need to know
Whether and when to switch to IFRS
Required
Competition
Cost / benefit
Future developments

45. How will movement to IFRS impact Financial Reporting? Concerns:
Data collection
Potential impact on tax liability
Potential increased volatility in reporting
Potential change in patter of earnings
Potential increased financial disclosures

46. How will movement to IFRS impact Financial Reporting? Benefits:
Potential cost savings
Opportunity to review and improve process
Potential impact on tax liability
Increased access to funds and markets

47. Top Twenty Issues to Consider
1 IAS 1 Presentation issues: judgments and estimates
2 IAS 1 Presentation issues: primary statement formats
3 IAS 36 Impairment disclosures
4 IFRS 3 Goodwill justification disclosure
5 IFRS 3 Other business combination issues and disclosures
6 IFRS 7 Financial instruments: disclosures
7 IAS 12 Deferred tax accounting and disclosure
8 Accounting policies general messages
9 Accounting policies specific problems: revenue
10 Accounting policies specific problems: financial instruments
11 IFRS 1 Explanation of transition to IFRS
12 IFRS 5 Non-current assets held for sale and discontinued operations
13 IAS 14 Segment information
14 IAS 37 Provisions disclosure
15 IAS 39 Financial instruments: recognition and measurement
16 Standards in issue not yet effective
17 Operating items and exceptional items
18 Comparative information
19 IAS 19 Employee Benefit Disclosures
20 Detail counts don't forget

48. The Current State of IFRS
Objectives
Agenda
Recognize what IFRS is and when it will become important
Communicate key points about IFRS to your clients
What is IFRS?
Convergence
Resources

49. Grant Thornton Resources
IFRS Resource Center

50. For additional information, visit these Web sites:
AICPA
International Financial Reporting Standards (IFRS) – An AICPA Backgrounder at
For the latest information on the status of IFRS and educational opportunities visit
IASB
Memorandum of Understanding with the FASB:
IFRS summaries:
FASB
Overview of International Activities:
SEC
International Financial Reporting Standards Road Map: