1. IFRS Professor Wayne H. Shaw May 26, 2011 IFRS

2. Where were we last year? Summary of SEC Position

3. SEC Comments on Convergence February 23, 2010 Directed staff to develop a Work Plan of Whether When, and How The United States should transition to IFRS Work Plan will be evaluated in 2011 New expected resolution date –2015

4. Perceived problems with IFRS Commenters who expressed this view noted that: IFRS is not sufficiently developed or applied in practice to be adopted as a single set of global standards (e.g., either IRDS lacks guidance in certain significant areas, or the guidance it does contain appears to or may allow too much latitude to achieve more comparable financial reporting than U.S. GAAP, Jurisdictional variants in the application of IRFS pose a significant challenge to the adoption of IRFS as a truly global reporting model; and The achievement of a genuine common global financial reporting model would require consistent application, auditing, and enforcement across countries.

5. Progress Report on Work Plan Sufficient development and application of IFRS for the U.S. domestic reporting system; The independence of standard setting for the benefit of investors; Investor understanding and education regarding IFRS; Examination of the U.S. regulatory environment that would be affected by a change in accounting standards; The impact on issuers, both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations, and litigation contingencies; and Human capital readiness.

6. Sufficient development and application of IFRS for the U.S. domestic reporting system The Work Plan identified the following three components of an evaluation of whether IFRS is sufficiently developed and applied to be the single set of globally accepted accounting standards for U.S. issuers: The comprehensiveness of IFRS; The auditability and enforceability of IFRS; and The comparability of IFRS financial statements within and across jurisdictions.

7. Sufficient development and application of IFRS for the U.S. domestic reporting system The Staff’s examination of IFRS as applied in practice involves a number of methods including: (1) constituent outreach, (2) research into the experiences of regulators in other jurisdictions that have incorporated or intend to incorporate IFRS into their financial reporting systems, and (3) a review of financial statements prepared under IFRS.

8. Sufficient development and application of IFRS for the U.S. domestic reporting system Comprehensiveness of IFRS Inventorying areas in which IFRS does not provide guidance or where it provides less guidance than U.S. GAAP. Analyzing how issuers, auditors, and investors currently manage these situations in practice. Identifying areas in which issuers, auditors, and investors would most benefit from additional IFRS guidance.

9. Sufficient development and application of IFRS for the U.S. domestic reporting system The auditability and enforceability of IFRS Analyzing factors that may influence the auditability of financial statements prepared under, and the enforceability of, IFRS. Evaluating factors that may influence the consistent audit of financial statements prepared under, and the enforcement of, IFRS. Identifying potential changes to improve the auditability and enforceability of financial statements prepared under IFRS and to facilitate their consistent audit and enforcement.

10. Sufficient development and application of IFRS for the U.S. domestic reporting system The comparability of IFRS financial statements within and across jurisdictions. Analyzing factors that may influence the degree of comparability of financial statements prepared under IFRS on a global basis. Assessing the extent to which financial statements prepared under IFRS may not be comparable in practice and how investors manage these situations. Identifying ways to improve the comparability of financial statements prepared under IFRS on a cross-border basis to provide the most benefit for investors.

11. Sufficient development and application of IFRS for the U.S. domestic reporting system Observations The majority of the Staff’s sample of jurisdictions has incorporated or intends to incorporate IFRS either in full or to some extent into their reporting requirements for listed companies.

12. Sufficient development and application of IFRS for the U.S. domestic reporting system Preliminary conclusion The FASB will continue to play a critical and substantive role in achieving the goal of global accounting standards. The FASB is the accounting standard setter for the U.S. capital markets, and it should continue to work with the IASB to improve accounting standards. Moreover, that role would remain critical after adoption of global standards.

13. The independence of standard setting for the benefit of investors The Staff is considering the following four components to provide the Commission with the information necessary to determine whether the IASB is sufficiently independent for IFRS to be the single set of high-quality globally accepted accounting standards for U.S. issuers: Oversight of the IFRS Foundation; Composition of the IFRS Foundation and the IASB; Funding of the IFRS Foundation; and IASB standard-setting process.

14. The independence of standard setting for the benefit of investors Oversight of the IFRS Foundation; –the extent to which the Monitoring Board is functioning as designed. Composition of the IFRS Foundation and the IASB; –extent to which the composition of the IFRS Foundation and the IASB promotes the independent development of accounting standards for the ultimate benefit of investors.

15. The independence of standard setting for the benefit of investors Funding of the IFRS Foundation – the extent to which the IFRS Foundation’s sources of funding promote the independence of the IASB, and (2) possible funding mechanisms to provide the U.S.-based contribution to the IFRS Foundation IASB standard-setting process. –(1) pre-eminence of investors, (2) timeliness, and (3) objectivity.

16. Major Continuing Projects Scheduled for Completion This Year Financial Instruments Revenue Recognition Leases Statement of Comprehensive Income Fair Value Measurement Balance Sheet netting Consolidations Financial Statement Presentation Discontinued Operations Debt/Equity IASB – Postemployment benefits IASB – Insurance contracts IASB – Contingencies

17. Examples of Continuing Differences Between US GAAP and IFRS

18. Impairment of long-lived assets You are testing long-lived assets for impairment. You find the one asset with a carrying value of $75,000, value in use of $60,000, potential sales price of $70,000 and undiscounted cash flows of $80,000. Do you take an impairment? Can you later recover the impairment if the price recovers?

19. Sale/Leaseback You realize a gain on a sale/leaseback transaction. Do you recognize the gain in the year of the sale?

20. Asset Securitizations You are concerned that financial assets securitizations you currently record through derecognition of the asset under U.S. GAAP may have different treatment under IFRS. Why?

21. Taxes You report current working that barely exceeds you covenant requirement. Included in current assets is a large balance of deferred tax assets. Could a change to IFRS cause you any problems?

22. Stock with a Put Option Your company has a significant amount of its equity in the form of a puttable preferred stock. 1) you a contemplating going public. 2) you are contemplating adopting IFRS. Would either of these decisions affect your equity classification of the stock?

23. Final Questions Are you beginning to prepare for adoption of IFRS? What are the implications of the new joint projects on your companies reporting process? Will there be a new FASB for nonpublicly traded firms? If so, may you possibly not have to worry about questions 1 and 2?

24. Thank You