IFRS_Road to Conversion

8/7/2019 IFRS_Road to Conversion

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IFRS: The Road toIFRS: The Road to

ConversionConversion


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ObjectivesObjectives

What is IFRS?

What Are the Goals of the IASB?

Who Uses IFRS?

What Are the Potential Benefits of Adopting

IFRS?

What Are the Potential Challenges When

Adopting IFRS? What Costs Should be Considered?

What Are the Implications?


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What Is IFRSWhat Is IFRS

An accounting framework similar

in character and scope to U.S.

GAAP (and Indonesian GAAP?)


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A suite of globally accepted, high

quality financial reporting

standards promulgated by theIASB and its predecessor, the

IASC


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Principles-based rather than

rules-based


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The future of world-wide financial

reporting


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Goals of the IASBGoals of the IASB

To increase financial reporting

transparency and comparability


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To encourage worldwide

convergence to one global set of

standards


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To facilitate lower costs of capital

due to improved world-wide

capital allocations


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Who Uses IFRS?Who Uses IFRS?

Over 130 countries currently

require the use of or have a policy

of convergence with IFRS


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Increased globalization of capital

and trade markets have led to

increased pressures to harmonize


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Companies with an international footprint*

are finding IFRS to be preferable or

necessary in many instances

*Trail, track, footstep, path, trace, marks, paw marks, hoof marks,

imprints, trajectory


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Most public U.S. companies are

beginning to think about IFRS,

and the impact it will have on theirorganizations in the coming years


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Potential BenefitsPotential Benefits of Adoptingof Adopting

IFRSIFRS

Eliminate dual reporting for

foreign subsidiaries using IFRS

locally


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IFRSIFRS

Comparability of financial

information with international

competitors


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IFRSIFRS

Easier access to foreign capital

markets


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IFRSIFRS

Potentially lower cost of capital


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IFRSIFRS

Increased flexibility in choosing

accounting policies that match the

economic substance of particulartransactions


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Potential Challenges When AdoptingPotential Challenges When Adopting

IFRSIFRS

Training IT system changes

Changes to policies, procedures and controls

Contractual and legal obligations

Different type of professional judgment Communications with users

Compensation plans and performance measurement

Accounting policy selection issues

Divergent management, income tax and inter-group

reporting bases Corporate governance issues

Risks of short-term financial reporting quality shortfalls

Increased risk of misstatement, error, omission and fraud

A learning curve


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Costs Should be ConsideredCosts Should be Considered

Costs will vary considerably among companieswho adopt IFRS

Migration to IFRS will probably result in sizable

cash outlays and resource dedication for: IT systems

Training

Retooling of policies, processes and controls

Personnel costs

Outside advisory fees

Risk mitigation

Opportunity costs


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ImpliImpliccationsations

Auditor Independence Concerns

System modifications

Accounting and Disclosure Compilation

Involvement in Project Management

Board members may be asked to provide oversightoutside of their traditional comfort zones

Audit committees need to become sufficientlyeducated and knowledgeable about IFRS

Many risks will need to be reassessed:

Risks of misstatement,

Inability to report in a timely fashion

Injudicious accounting policy selections


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Fair Value ConceptFair Value Concept

Fair values are relevant and reliableenough to be reflected in investorsvaluations

Reliability of changes in fair values canbe eroded by estimation error

Managers opportunistically exercise

discretion Changes in fair value of liabilities can

be important to investors


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Fair Value (continued...)Fair Value (continued...)

Effects on management discretion indetermining fair values

How will use of more fair values affectinvestor or management behaviour?

What are implications of incorporatingmore expectations about the future in

financial statements today? What does profit or loss mean in such

a world?


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How Is Indonesia?How Is Indonesia?

Indonesia 2012 will fully adopt andimplement IFRS

Compared to some coutries:

Korea 2011: IFRS mandatory for listed businesses 2009: IFRSpermitted

Japan Goal of full convergence by 2011

China Align Chinese GAAP with IFRS by 2011

Israel Required for public companies from 2008 India Convergence with IFRS for public companies for 2011

Brazil Banks to be required to use IFRS starting from 2010

Canada Timeframe set 2011: Reporting under IFRS for publiclyaccountable entities


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Constraint for Adopting andConstraint for Adopting and

Implementing IFRSImplementing IFRS

Training programs and university are not readyyet.

Lack of communication between DSAK and the

accounting society

Lack of Expertise in IFRS

Accounting policy selection issues

Risks of short-term financial reporting qualityshortfalls

Increased risk of misstatement, error, omissionand fraud


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IFRS/IASIFRS/IAS that have been adopted tothat have been adopted to PSAKPSAK untiluntil

December 31,December 31, 20082008

1. IAS 2 Inventories2. IAS 10 Events after balance sheet date3. IAS 11 Construction contracts

4. IAS 16 Property, plant and equipment5. IAS 17 Leases6. IAS 18 Revenues7. IAS 19 Employee benefits8. IAS 23 Borrowing costs

9. IAS 32 Financial instruments: presentation10. IAS 39 Financial instruments: recognition

and measurement11. IAS 40 Investment property


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IFRS/IASIFRS/IAS that will be adopted tothat will be adopted to PSAKPSAK duringduring

20092009

1. IFRS 2 Share-based payment2. IFRS 4 Insurance contracts3. IFRS 5 Non-current assets held for sale and discontinued operations4. IFRS 6 Exploration for and evaluation of mineral resources5. IFRS 7 Financial instruments: disclosures6. IAS 1 Presentation of financial statements7. IAS 27 Consolidated and separate financial statements8. IAS 28 Investments in associates9. IFRS 3 Business combination10. IFRS 8 Segment reporting11. IAS 8 Accounting policies, changes in accounting estimates and errors12. IAS 12 Income taxes13. IAS 21 The effects of changes in foreign exchange rates

14. IAS 26 Accounting and reporting by retirement benefit plans15. IAS 31 Interests in joint ventures16. IAS 36 Impairment of assets17. IAS 37 Provisions, contingent liabilities and contingent assets18. IAS 38 Intangible assets


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IFRS/IASIFRS/IAS that will be adopted tothat will be adopted to PSAKPSAK duringduring

20201010

1. IAS 7 Cash flow statements2. IAS 20 Acc. for government grants and

disclosure of government assistance3. IAS 24 Related party disclosures4. IAS 29 Financial reporting in

hyperinflationary economies

5. IAS 33 Earning per share6. IAS 34 Interim financial reporting7. IAS 41 Agriculture


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Current ConditionCurrent Condition??

By the end of 2007:

28 standards based on IAS/IFRS

20 standards based on US GAAP

8 standards self-developed

1 standard in Sharia Banking (based on

AAOIFI and Local Regulations)

Documents

IFRS_Road to Conversion