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International Accounting and Financial Reporting Winter 2010 William F. O’Brien, MBA, CPA

International Accounting and Financial Reporting Winter 2010 William F. O’Brien, MBA, CPA Session V IFRS versus U.S. GAAP Session V Objectives IFRS versus U.S. GAAP IFRS Adoption Business Issues A View from 40,000 Feet F/S Presentation Revenue recognition Expenses Inventories

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International Accounting and Financial Reporting Winter 2010 William F. O’Brien, MBA, CPA

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  1. International Accounting and Financial Reporting Winter 2010 William F. O’Brien, MBA, CPA

  2. Session V IFRS versus U.S. GAAP

  3. Session V Objectives • IFRS versus U.S. GAAP • IFRS Adoption Business Issues INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

  4. A View from 40,000 Feet F/S Presentation Revenue recognition Expenses Inventories Capital assets Intangibles Research and development Income taxes Contingencies Pensions Segment reporting Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 4

  5. Ten Critical Business Issues Reporting systems overhaul User education Revised tax strategies New operating metric adoption Compensation and benefit program modification Lending agreement renegotiations Employee training Attentiveness to change management techniques Worldwide auditing and enforcement consistency Accounting professional availability and certification Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 5

  6. Reporting System Overhauls Much more than Y2K Numerous resources exist since IFRS is widely in use elsewhere Integration and implementation will be time consuming, distracting and costly Software, hardware, documentation and training Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 6

  7. User Education Financial statements will have a new look And contain new terminology Financial concepts will change The task will be similar to learning a new language Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 7

  8. Revised Tax Strategies Just one word: LIFO IRS congruence will be needed Other changes in earnings will drive a reassessment of your tax strategies Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 8

  9. New Operating Metric Adoption Changes will occur in revenue and earnings Traditional metrics will also change New operational drivers may be required to achieve desired financial results New operational decisions will surface, i.e.: Impairment risk Revenue recognition Inventory valuation Fair value focus Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 9

  10. Compensation and Benefit Program Effects Changes in financial outcomes will drive changes in the terms of compensation and benefit plans Revenue and earnings will be the primary drivers of these changes Potential union implications Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 10

  11. Lending Agreement Renegotiation A major red-flag Lenders have used accounting changes as an excuse for calling loans in the past Pay close attention to loan covenants Get your providers of capital involved early No surprises is the name of the game Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 11

  12. Employee Training The success of IFRS education is a key milestone in the SEC’s 2011 decision The better your global roll-out, the easier your adoption will be Be attentive to the input of your employees Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 12

  13. Attentiveness to Change Management Techniques Communicate and listen Recall the six steps for successful change management Gain consensus on the problem Provide the vision of the solution Pay attention to detail Listen to your people Select change facilitators carefully Communicate, communicate, communicate Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 13

  14. Worldwide Auditing and Enforcement Consistency The adoption of IFRS is not the only issue What about auditing consistency? What about enforcement consistency? Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 14

  15. Accounting Professionals Availability and Certification Colleges and universities have to shoulder their share of the load Can they facilitate the shift from rules to principles? Can they teach students to think? CPA firms will have to step up their internal training A principles based approach will be a challenging change Executive Education, Inc. © William F. O’Brien, 2009 INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010 15

  16. Key Points-Session V • IFRS and U.S. GAAP are different • Adoption is more than an accounting exercise INTERNATIONAL ACCOUNTING & FINANCIAL REPORTING-2010

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