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International Issues

International Issues. IASB, IFRS, SEC. 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

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International Issues

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  1. International Issues IASB, IFRS, SEC

  2. IFRS use in 2004

  3. IFRS use in 2007

  4. 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

  5. 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

  6. IFRS Time Table From 2008 AICPA brochure:International Financial Reporting Standards An AICPA Backgrounder

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

  8. 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!

  9. 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!

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

  11. 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

  12. 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

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