1. The Prospects for Global Convergence of Accounting Standards
ICAEW (Brussels) April 05
The Prospects for Global Convergence of Accounting Standards
Sir David Tweedie IASB Chairman

2. Key Forces for Convergence
Desire for strong, stable and liquid capital markets
Unfamiliar standards lead to risk premium
Differing accounting standards affect confidence
Investor confidence greater if accounting standards subject to due process and are accepted
Lowers cost

3. IFRS Around the World 2004 2005 Total IFRSs permitted 22 -1 21
IFRSs required
(for all domestic companies)
IFRS required
(for some domestic companies)

4. FASB/IASB Agreement
Remove differences
Align Agendas
Interpretation

5. Convergence Short-term Differences IASB –
- Business combinations (goodwill/brands, acquisitions, IPR&D)
- Asset Disposals and Discontinued Operations (IFRS 5)
Provisions (soon)
Segments

6. Convergence FASB - - EPS - Voluntary changes in accounting policy
- Exchanges of non-monetary assets
- Inventory spoilage and idle capacity

7. Convergence IASB and FASB - Income taxes - R&D - Interim Reporting
- Investment Properties
- Borrowing costs
- Impairment
- Joint ventures
- Classification of liabilities

8. Issues on Agenda Conceptual framework Consolidation
Financial Instruments
Insurance
Revenue Recognition
Performance Reporting

9. Performance Reporting
Early days
4 Statements
Statement of financial position
Statement of comprehensive income (2?)
Statement of changes in equity
Statement of cash flows

10. Performance Reporting
Comparatives – current year and prior year date to be sufficient
Statement of cash flows
Concerns raised by direct method
tie in with the line items in the income statement?
Support of operating/business and financing categories – more work to be done on a disaggregation of line items

11. Potential New Issues
Leases
Intangibles
Employee Benefits

12. Pensions £m Deficit 10 Less 10% of liabilities 4 6
Spread over 10 year working life
Deficit per accounts - £600,000

13. Convergence with US Will not produce identical statements
Will result in close alignment of accounting
Will be clear understanding of significant differences

14. Research Agenda Extractive industries Joint ventures MD&A Concessions
Hyperinflation
Investment group

15. Problems for Convergence
“It’s not for me - its for them”
Many changes to existing standards
Principles v rules

16. Principles v Rules Objectives Clearly defined scope No exceptions
Few bright lines
Sufficient implementation guidance

17. Principles v Rules Role of CFO/Auditor Interpretations Q&A’s
Litigation

18. A New IAS 39? What to change? Mixed attribute system
4 treatments for financial instruments
2(3?) Treatments for hedges