1. Impact of convergence on unlisted companies Richard Martin
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation

2. ACCA Leading global accountancy qualification
300,000 members and students in 160 countries
UK origins and base
Examining in IAS since 1997
Certificate and diploma in IFRS
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation

3. Unlisted companies & IFRS
What is the problem?
Issues that arise
Ways forward
This is the summary of what I would like to cover
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation

4. Why is there a problem? Increasing take up of IFRS
One language for a global capital market
EU and 2005
Others - Australia, Russia
Direct application by listed companies
New constitution of IASB focussed on capital markets
Length and complexity of IFRS
Increasing disclosure requirements
The situation has existed for some time that the results and financial position of businesses can be different according to which set of rules you use. In other words the same facts will be reported differently under different national rules or GAAPs. This situation became particularly evident during the 1990’s when investment became increasingly a global business and equity an increasingly important way for capital raising. Many European companies applied for listings on the NYSE. The next slide reminds us of some of the more notorious instances of these differences that became apparent via the US GAAP reconciliations needed for the NYSE.
These different GAAPs were producing significant costs for multi-national companies in terms of the preparation of financial information and reports on differing bases. This was especially true for regulated activities like banking and insurance, where the amount of reporting is high.
On a lesser scale perhaps is the duplicated cost of standard setting. National standard setters have been established in each of the major economies of the World as well as in many smaller ones.
The most significant benefits would come from lower costs of capital, because investors will be less uncertain and confused by the financial information they are being given.
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation

5. Why is there a problem?
Member state options to extend - allow or require
Majority of companies are SMEs
Are IFRS relevant to SMEs?
How much harmonisation for SMEs?
Two systems in one country?
Communication, training etc. for more
The situation has existed for some time that the results and financial position of businesses can be different according to which set of rules you use. In other words the same facts will be reported differently under different national rules or GAAPs. This situation became particularly evident during the 1990’s when investment became increasingly a global business and equity an increasingly important way for capital raising. Many European companies applied for listings on the NYSE. The next slide reminds us of some of the more notorious instances of these differences that became apparent via the US GAAP reconciliations needed for the NYSE.
These different GAAPs were producing significant costs for multi-national companies in terms of the preparation of financial information and reports on differing bases. This was especially true for regulated activities like banking and insurance, where the amount of reporting is high.
On a lesser scale perhaps is the duplicated cost of standard setting. National standard setters have been established in each of the major economies of the World as well as in many smaller ones.
The most significant benefits would come from lower costs of capital, because investors will be less uncertain and confused by the financial information they are being given.
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation

6. Key issues raised Scope: entities covered - all unlisted or SMEs?
Conceptual issues
stewardship or decision making?
Users and needs
relevance
understandability
costs and benefits
The differences arise because of different treatments of items in accounts. Here were the most significant ones in the mid 90’s when the impetus for a single set of rules really got going.
The difference on dividends is because only dividends declared before the year end are recognised under US GAAP, whereas UK GAAP includes those proposed to be paid out of this year’s results.
We shall look at one of these - goodwill.
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation

7. Key issues raised Approach specific exemptions stand alone document
standard or guidance
Disclosure reductions
The differences arise because of different treatments of items in accounts. Here were the most significant ones in the mid 90’s when the impetus for a single set of rules really got going.
The difference on dividends is because only dividends declared before the year end are recognised under US GAAP, whereas UK GAAP includes those proposed to be paid out of this year’s results.
We shall look at one of these - goodwill.
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation

8. Key issues raised
Recognition and measurement differences - e.g. fair values, historical cost, discounting, deferred tax
less common subjects
group accounting
sectors
complexities - IAS39 and IAS19
The differences arise because of different treatments of items in accounts. Here were the most significant ones in the mid 90’s when the impetus for a single set of rules really got going.
The difference on dividends is because only dividends declared before the year end are recognised under US GAAP, whereas UK GAAP includes those proposed to be paid out of this year’s results.
We shall look at one of these - goodwill.
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation

9. Ways forward UNCTAD IASB research project Choices Keep 2 systems
Extend IFRS to all companies (including SME standard?)
National standards based on Directives & IFRS (using UNCTAD system or others?)
The differences arise because of different treatments of items in accounts. Here were the most significant ones in the mid 90’s when the impetus for a single set of rules really got going.
The difference on dividends is because only dividends declared before the year end are recognised under US GAAP, whereas UK GAAP includes those proposed to be paid out of this year’s results.
We shall look at one of these - goodwill.
21/11/ :22
© ACCA presentation
21/11/ :22
© ACCA presentation