International Issues IASB, IFRS, SEC From KPMG web cast – particularly the first 10 or so slides

IFRS use in 2004

IFRS use in 2007

GAAP Hierarchy for IFRS IAS 8 establishes “hierarchy” when choosing IFRS accounting policies 1. Apply any specific IFRS; consider any relevant implementation guidance 2. Refer to other IFRSs dealing with similar or related issues 3. IFRS Framework 4. Consider pronouncement of other standard-setting bodies (with similar conceptual framework) or industry practices if consistent with above E.g., U.S. GAAP may be appropriate when IFRS is silent, Framework does not give additional guidance, and U.S. GAAP is not inconsistent with the guidance in standards or interpretations which deal with similar issues or the IFRS Framework

2009 Convergence Update IASB release IFRS No. 8 on segment reporting to converge with US GAAP Replaces IAS 14 Now uses a “management approach” like FAS131 Reports a profit/loss measure for each segment and segment assets Must disclose factors used to identify the entity’s operating segments Source: Journal of Accountancy article by B J Epstein and E A K Jermakowicz. April 2009 – accessed on-line 4/14/09

IFRS Time Table From 2008 AICPA brochure: International Financial Reporting Standards An AICPA Backgrounder Figures are from 2008 International Financial Reporting Standards (IFRS): An AICPA Backgrounder (no author listed)

Pretty small so I divided into two parts – next two slides

Latest developments (Mar 09) New chair of SEC, Mary Schapiro, says she does not feel bound by the roadmap published in 2008 Has concerns about IFRS standards and IASB governance and says she will proceed with great caution to avoid “a race to the bottom” Extended comment period on “roadmap” to April 2009 SEC estimates implementation cost for companies eligible for early adoption would be $32 million Given economic crisis, would many be willing to incur the transition costs? In short, shift to IFRS seems to have lost momentum! IASB Chair Meets with New SEC Chair Washington, D.C. (Feb. 12, 2009) By WebCPA staff | The International Accounting Standards Board wants the U.S. to remain committed to its roadmap for transitioning to International Financial Reporting Standards and is making the case directly to the new SEC chairman. IASB Chairman Sir David Tweedie (pictured) met with the new chair of the Securities and Exchange Commission, Mary Schapiro, in the past week and had what is described as an amicable meeting. Schapiro said in her confirmation hearing last month that she would not “feel bound” by the roadmap (see New SEC Chair May Delay IFRS Roadmap). “I would proceed with great caution so we don’t have a race to the bottom,” she said. “I have some concerns about IFRS standards generally.” She also criticized the IASB in a follow-up letter to Congress, saying that she “is not prepared to delegate standard-setting or oversight responsibility to the IASB.” However, the IASB has been continuing work with the U.S. Financial Accounting Standards Board on various convergence projects, including work on off-balance-sheet accounting, recognition and derecognition. Tweedie has also been participating with FASB, and other accounting regulators from around the world, in a series of meetings of the Financial Crisis Advisory Group. The next meeting is scheduled for New York on Friday and will discuss fair value accounting and other controversial matters. To address concerns about governance of the IASB, a monitoring group of government securities regulators has also been named to oversee the board’s parent organization (see New Board Will Monitor International Accounting). The IASB will have to work with not only the new SEC chair, but also a new chief accountant. James Kroeker, the former deputy chief accountant, was recently named acting chief accountant, succeeding Conrad Hewitt, who retired last month. However, the SEC is reportedly planning to select Charles Niemeier, one of the original members of the Public Company Accounting Oversight Board, for the permanent slot, according to Bloomberg News. Niemeier has also been critical of the move toward IFRS, but is said to have a good relationship with Tweedie.

Latest developments (Mar 09) New chair of SEC, Mary Schapiro, says she does not feel bound by the roadmap published in 2008 Has concerns about IFRS standards and IASB governance and says she will proceed with great caution to avoid “a race to the bottom” Extended comment period on “roadmap” to April 2009 SEC estimates implementation cost for companies eligible for early adoption would be $32 million Given economic crisis, would many be willing to incur the transition costs? In short, shift to IFRS seems to have lost momentum! IASB Chair Meets with New SEC Chair Washington, D.C. (Feb. 12, 2009) By WebCPA staff | The International Accounting Standards Board wants the U.S. to remain committed to its roadmap for transitioning to International Financial Reporting Standards and is making the case directly to the new SEC chairman. IASB Chairman Sir David Tweedie (pictured) met with the new chair of the Securities and Exchange Commission, Mary Schapiro, in the past week and had what is described as an amicable meeting. Schapiro said in her confirmation hearing last month that she would not “feel bound” by the roadmap (see New SEC Chair May Delay IFRS Roadmap). “I would proceed with great caution so we don’t have a race to the bottom,” she said. “I have some concerns about IFRS standards generally.” She also criticized the IASB in a follow-up letter to Congress, saying that she “is not prepared to delegate standard-setting or oversight responsibility to the IASB.” However, the IASB has been continuing work with the U.S. Financial Accounting Standards Board on various convergence projects, including work on off-balance-sheet accounting, recognition and derecognition. Tweedie has also been participating with FASB, and other accounting regulators from around the world, in a series of meetings of the Financial Crisis Advisory Group. The next meeting is scheduled for New York on Friday and will discuss fair value accounting and other controversial matters. To address concerns about governance of the IASB, a monitoring group of government securities regulators has also been named to oversee the board’s parent organization (see New Board Will Monitor International Accounting). The IASB will have to work with not only the new SEC chair, but also a new chief accountant. James Kroeker, the former deputy chief accountant, was recently named acting chief accountant, succeeding Conrad Hewitt, who retired last month. However, the SEC is reportedly planning to select Charles Niemeier, one of the original members of the Public Company Accounting Oversight Board, for the permanent slot, according to Bloomberg News. Niemeier has also been critical of the move toward IFRS, but is said to have a good relationship with Tweedie.

Does it Make a Difference? Data on IFRS vs. US GAAP impact on financial statements

FASB-IFRS Differences in 2006 A study of 130 reconciliations from foreign filers using IFRS in 2006 shows the differences between the two accounting systems can be quite large Impact to Earnings: Approximately 2/3 of the companies studied showed higher earnings under IFRS than U.S. GAAP (the median difference was 12.9%--however in some cases income more than double under IFRS) Approximately 1/3 of the companies studied showed lower earnings under IFRS than U.S. GAAP (the median difference was 9.1%--however in some cases income was less than 1/3 under IFRS compared to US GAAP) Only two of the companies studied showed the same earnings under both IFRS and U.S. GAAP From The Analyst’s Accounting Observer, Volume 16, No. 11, September 24, 2007

FASB-IFRS Differences in 2006 (continued) Impact to Equity: Slightly more than half of the companies studied showed greater equity under IFRS than U.S. GAAP (the median difference was 6.6%) Slightly less than half of the companies studied showed lower equity under IFRS than U.S. GAAP (the median difference was 12.7%) Only one company studied showed the same equity under both IFRS and U.S. GAAP The study noted the following areas contributed significantly to the above differences: Deferred taxes, property, plant and equipment, pensions, minority interests, capitalization of interest, purchase price accounting and asset impairment