Adoption of IFRS in U.S. - An Introduction

THE RESOURCE FOR CORPORATE FINANCE, ACCOUNTING & TREASURY PROFESSIONALS

Sunil Thukral, CPA, CFA

Technical Accounting Advisory

[email protected]

Adoption of IFRS in U.S.- An Introduction

IFRS in U.S.

• Where are we today?

• Rules vs. Principles - exercise

• What can I do today?

© 2012 Proformative. Proprietary and confidential

• What can I do today?

SEC Roadmap on IFRS


• Cost

– By far the two most common criticisms of the roadmap were the

cost of adoption and the belief that a more measured

convergence process was the best option.

• Convergence over Adoption

Comments on SEC Roadmap for IFRS

convergence:


– Continued convergence was a better option than adoption,

mostly because fuller convergence between both sets of

standards would be less complex and less costly than IFRS

adoption.

• Consistency Not Guaranteed

– Geographic bias

• Specific Concerns by Specific Industries

– IFRS does not have any industry specific guidance.

• IASB Funding

– Is IASB really independent?

Comments on SEC Roadmap for IFRS

convergence (Contd.):


– Is IASB really independent?

• What about Private Companies?

– Since the SEC regulates only public companies, comments also

pointed to concern that the SEC was not recognizing that most

companies in the U.S. are not SEC registrants (issuers).

Source: http://www.ifrs.com/updates/aicpa/IFRS_SEC.html

U.S. companies need to understand the impact of IFRS:

• Convergence of accounting standards (leasing, revenue

recognition, and financial instruments)

• IFRS is impacting business decisions

– Foreign subsidiaries of U.S. companies might be required to

IFRS is impacting U.S. companies today!


– Foreign subsidiaries of U.S. companies might be required to

report under IFRS for their local filings

– U.S. companies making foreign acquisitions (targets reporting

under IFRS)

– U.S. subsidiaries of foreign parent are required to report under

IFRS.

Comparability of IFRS financials:

• IFRS as issued by IASB

• IFRS with Carve-outs

(e.g. EU version of IFRS)

© 2012 Proformative. Proprietary and confidential7

• IFRS are principles based

rules. Hence, the

application of these rules

can be quite different as to

“who” applies them.

(e.g. geographic bias).

Which traffic light crossing will you prefer?



Rules Vs Principles exercise:

Sort the following shapes into two groups:


Sorted by shape

• A • B


Sorted by color:

• A • B


• By Color • By Shape


What if we add a green

colored circle – where

will it go?

Most people choose sorting by shapeC.Why?

• A • B


Additional Information – assume that:

Mixing BLUE (80%)

with

YELLOW (20%)


YELLOW (20%)

makes

GREEN

Based on fact green has more blue than yellow:

• A • B



IFRS in Canada -

[email protected]

Same facts can provide you with different

conclusions!


“But under a different accounting convention…..”

Source: cartoonstock.com

So, what does it all mean?

Applying different interpretation to

the same facts might result in a

different answer.


different answer.

Reality check: Life for the

accountants will not become easy

when applying simple rules

(principles) to complex transactions

Revenue Recognition Exposure Draft


Slides Source: www.SVACPA.com

Over 100 glossary terms

deleted and replaced with

only approx. 9 items in the

new revenue recognition

exposure draft.


STEPS IN IMPLEMENTING IFRS –

A HIGH LEVEL APPROACH

IFRS will impact all the areas of your

businesses:


Graphic Source: kpmg.com


STEP 1 – REVIEW YOUR

BUSINESS


STEP 2 – IDENTIFY THE IFRS

THAT WILL HAVE MATERIAL

IMPACT

Identifying which IFRS impacting your

organization

• Determine the IFRS are converged / not-converged, etc.

(e.g. – leasing, revenue, business combination, etc.)

• Apply the summarized IFRS summarized checklist to

identify which IFRS will impact your entities.

• Document your findings


• Document your findings

– maintain back-ups / draft preliminary white papers.


STEP 3 – DETAILED ANALYSIS

Detailed Analysis:

• Determine the STRATEGIC choices

• Update accounting policies


• System changes (IT)

• Review internal control over financial

reporting

IFRS in U.S. – Other challenges

• IFRS/ U.S. GAAP currently have a joint project for development of the accounting standardsCC.. RESULTCC. many more changes to come over in the next few years (e.g.: Revenue recognition, leasing , financial instruments).


instruments).

Bottom line: IFRS is constantly changing – so need to remain up to date with the changes!!

Tools to track your IFRS implementation:

• Regularly monitor the IFRS project:

– Excel spreadsheets or other project management software


Graphic source: www.SVACPA.com

• Conduct benchmarking

– www.DisclosureNet.com

– Search engines

THANK YOU!


QUESTIONS


QUESTIONS


[email protected]

LinkedIN: http://www.linkedin.com/in/sunilthukral

Proformative: http://www.proformative.com/questions/expert/sunil-thukral

Twitter: @SunilThukral

THE RESOURCE FOR CORPORATE FINANCE, ACCOUNTING & TREASURY PROFESSIONALS


Technical Accounting Advisory

[email protected]

Adoption of IFRS in U.S.- An Introduction

Business

Adoption of IFRS in U.S. - An Introduction