The Institute of Chartered Accountants of Sri Lanka National Conference 2011

1. The Institute of Chartered Accountants of Sri LankaNational Conference 2011 October 2011

2. Quest for BalanceIFRS – Theory, Practice and Transition

3. Quest for Balance

4. Update on Global IFRS Objective • One global set of standards for high-quality financial reporting • Why? • Common language • More understandable • Better comparability • Greater access to global capital • Greater trust in financial information • Lower cost of capital • However – must balance competing demands and address challenges

5. Update on Global IFRS Key features • Accounting for the substance of transactions • Multiple element arrangements • Embedded features - leases/derivatives • Contractual rights and obligations • Heavy use of current values • Fair values – financial instruments, biological assets, business combinations, • Current estimates – actuarial assumptions in pensions & insurance; cash flows in impairment testing • Comprehensive disclosures • Financial risks; Operating segment information; Related party transactions

6. Update on Global IFRS Challenges • Breadth of business impacts • Application of “global” standards in “local” environments • Alignment of regulatory impacts • Global interpretation/local enforcement • Loss of sovereignty and influence(?) over financial reporting • Local pressures • Conflicting objectives

7. Update on Global IFRS IFRS – a ‘business’ issue • IFRS is not just an “accounting” issue – it is a major “business” issue • Implications for functions, stakeholders, contractual arrangements, processes & systems etc. • Requires engagement across the business • Treasury; Human Resources; Investor Relations; IT; Internal Audit; Finance; Boards and Audit Committee

8. Business impacts

9. Update on Global IFRS Therefore....... • Transition is a strategic issue – Board, Audit Committee and Executive involvement needed • Pervasive effect across the organisation • Change management processes required • Project management/work streams • Stakeholder engagement • Training & implementation • Opportunity to enhance existing processes/systems

10. Application of Global StandardsGlobalLocal • Application • Regulation & enforcement • Interpretation? • Adaptability • Standards • Standard-setting & due process • Interpretation • Consistency

11. Balancing conflicting objectives • Principles • Reporting for capital markets • Transparency • Acceptable diversity • Global consistency • Rules • Use of reports for regulatory/tax purposes • Confidentiality • In-country comparability • Local practices

12. Update on Global IFRS Theory - “in” practice • Revenue recognition in multiple element arrangements • Leases embedded in supply/service contracts • Equity reclassified as debt and vice versa • Fair value of biological assets, investment property, financial instruments, • Determining fair value in emerging markets • Loan loss provisioning • Depreciation and component accounting of property, plant & equipment • Disclosures

13. Strive for balance

14. Thank you