International Accounting Standards Board Update Mary E. Barth IAAER Bordeaux September, 2005 The views expressed in this presentation are those of the speaker. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.

IASB … is committed to develop, in the public interest, a single set of high quality, global accounting standards… …to help users to make economic decisions.

Our priorities are Promoting adoption of IFRSs Convergence Improving standards, filling gaps

Projects on the agenda Business Combinations II Revenue Recognition Gilbert: Business Combinations II Katherine Revenue Recognition Performance Reporting Me: Short-term Convergence Conceptual Framework

Projects on the agenda Consolidations SMEs Fair Value Measurement Gilbert: Consolidations SMEs Katherine Fair Value Measurement Liabilities and Equity Me: Insurance Contracts Emission Rights

Short-term Convergence with FASB Income Taxes Several detailed changes to eliminate as many differences as possible Definition of tax base, temporary difference, substantially enacted, undistributed rate for subsidiaries, balance sheet classification, recognition of deferred tax assets, … Uncertain tax positions – new to both IAS 12 and SFAS 109 Conform Definition of tax base and temporary difference Eliminate several US/IAS differences relating to exceptions Clarify substantially enacted Conform recognition of deferred tax assets and impairment

Short-term Convergence with FASB Government Grants IAS 20 is outdated, need new model Related to revenue recognition project Use IAS 41 model in IAS 20? Conditional versus unconditional grants What about related assets? Related to Emissions Trading

Short-term Convergence with FASB Segments Will propose to adopt SFAS 131 Segments and segment results based on how entity reports to management Research and discussions with analysts support SFAS 131 approach Also permits more timely information IAS 37 Not quite converged, but closer Comments due 28 October

Short-term Convergence with FASB Nonfinancial liabilities ED Formerly provisions Related to business combinations Focus on converging restructuring liabilities Clarifies contingent and stand ready IAS 37 Not quite converged, but closer Comments due 28 October

Conceptual Framework Phased approach Based on and builds on existing frameworks Converge, complete, and improve Standards projects will inform CF project and vice versa Will issue documents as phases complete and revisit all when complete The main technical issues are: How to measure uncertain long-term liabiities When to recognise related revenue How policyholder options to cancel an insurance contract affects measurement by the insurer. The project will mainly affect insurers, but some aspects may affect other entities: Some long-term service contracts meet our definition of an insurance contract, but issuers of these contracts do not view them as insurance contracts. The project will address accounting by policyholders, not just by insurers. Entities with long-term service commitments Policyholder accounting DP -05/06, ED -07, STD -08 Mandatory -10?

Conceptual Framework Objective Qualitative characteristics Provide information to a wide range of external decision-makers in making economic decisions about the entity Qualitative characteristics Relevance, representational faithfulness Iterative process, not hierarchical The main technical issues are: How to measure uncertain long-term liabiities When to recognise related revenue How policyholder options to cancel an insurance contract affects measurement by the insurer. The project will mainly affect insurers, but some aspects may affect other entities: Some long-term service contracts meet our definition of an insurance contract, but issuers of these contracts do not view them as insurance contracts. The project will address accounting by policyholders, not just by insurers. Entities with long-term service commitments Policyholder accounting DP -05/06, ED -07, STD -08 Mandatory -10?

Insurance Contracts Measuring uncertain long-term liabilities Revenue recognition Liabilities and equity Not just for insurers? The main technical issues are: How to measure uncertain long-term liabiities When to recognise related revenue How policyholder options to cancel an insurance contract affects measurement by the insurer. The project will mainly affect insurers, but some aspects may affect other entities: Some long-term service contracts meet our definition of an insurance contract, but issuers of these contracts do not view them as insurance contracts. The project will address accounting by policyholders, not just by insurers. Entities with long-term service commitments Policyholder accounting DP -05/06, ED -07, STD -08 Mandatory -10?

Financial Instruments Disclosures New disclosures for credit risk, liquidity risk, market risk Quantitative and qualitative Includes IAS 32 disclosures Applies to all entities IFRS 7 released in August, effective 1 January 2007 IFRS 7 FIWG

Research agenda – what the future holds Measurement objectives Extractive industries Financial Instruments Leases Investment entities Joint Ventures Hyperinflation Management commentary Intangible assets Measurement objectives (Canada) – coming soon Concessions (?) Extractive industries (Australia plus others?) Hyperinflation (Mexico, Argentina) Intangible assets (Australia or NZ?) Investment entities (EFRAG) Joint Ventures (Australia) Leases (UK) Management commentary (NZ)

SEC Roadmap Convergence with US has been a priority since inception of the IASB Goal to eliminate differences Takes a long time SEC has laid out a roadmap to accept IFRS reporting by 2007 to 2009

SEC Roadmap 2005-2007 2007-2009 Application of IFRS Investors gain knowledge All share implementation experiences 2007-2009 Status of IFRS/GAAP convergence SEC review additional filings Evaluate significance of differences Recommend elimination of reconciliation Before entering into the future, want to get your views on the past

Shorter-term projects FASB Fair value option Investment properties Research and development Income taxes Impairment IASB Borrowing costs Government grants Joint ventures Segment reporting Income taxes Impairment

Longer-term projects Current Projects SEC/CESR interest Business combinations Fair value measurement Performance reporting Derecognition Financial instruments Liabilities and equity Revenue recognition SEC/CESR interest Consolidations Pensions Leases Intangible assets

The world is getting smaller

Don’t understand Europe Threatening stability of … The Critics US dominated Fair value fixated Don’t understand Europe Not listening Threatening stability of … Too theoretical

The Vision quality global standards.. ..used on the global …one single set of high quality global standards.. ..used on the global capital markets.

Thank you