IFRS As of April 2011 Presented by Teri Willoughby Deters.

IFRSIFRS

As of April 2011As of April 2011

Presented byPresented by

Teri Willoughby DetersTeri Willoughby Deters

IFRSIFRS

Who Impacted?Who Impacted? Differences between IFRS & US GAAPDifferences between IFRS & US GAAP IFRS for SMEsIFRS for SMEs TransitionTransition Other considerationsOther considerations

Who Impacted?Who Impacted?

IFRS – Who Impacted?IFRS – Who Impacted?

Who needs to be thinking about IFRSWho needs to be thinking about IFRS• Public companiesPublic companies• Non-public with international Non-public with international

subsidiariessubsidiaries


Securities Exchange Commission Securities Exchange Commission (“SEC”) believes a single set of high-(“SEC”) believes a single set of high-quality globally accepted accounting quality globally accepted accounting standards will benefit U.S. investors standards will benefit U.S. investors and the goal is consistent with their and the goal is consistent with their mission to protect the investors.mission to protect the investors.

SEC currently analyzing and decision SEC currently analyzing and decision to be announced by end of 2011to be announced by end of 2011


CountryCountry YearYear Accounting Standard to ApplyAccounting Standard to Apply

CanadaCanada 20112011 International Accounting StandardsInternational Accounting Standards

OROR

Accounting Standards for Private Accounting Standards for Private EnterprisesEnterprises

United United Kingdom and Kingdom and IrelandIreland

20142014 International Accounting Standards International Accounting Standards as adopted by EU, ORas adopted by EU, OR

Financial Reporting Standards for Financial Reporting Standards for Medium-sized EntitiesMedium-sized Entities

IndiaIndia 2011-2014 2011-2014 (depending on (depending on

net worth)net worth)

India equivalent IFRS (recently India equivalent IFRS (recently issued)issued)


CountryCountry YearYear Accounting Standard to ApplyAccounting Standard to Apply

ChinaChina ContinuousContinuous China equivalent IFRSChina equivalent IFRS

SingaporeSingapore ContinuousContinuous Singapore equivalent IFRS, ORSingapore equivalent IFRS, OR

Singapore Financial Reporting Singapore Financial Reporting Standards for Small EntitiesStandards for Small Entities

MexicoMexico ContinuousContinuous Mexico equivalent IFRSMexico equivalent IFRS

Differences between Differences between IFRS & US GAAPIFRS & US GAAP

Differences between IFRS & US GAAPDifferences between IFRS & US GAAP

Areas for consideration in adopting Areas for consideration in adopting IFRSIFRS• Tangible and intangible assetsTangible and intangible assets• LiabilitiesLiabilities• PensionPension• Financial instrumentsFinancial instruments• Income taxesIncome taxes• ConsolidationConsolidation


Tangible and intangible assets under IFRSTangible and intangible assets under IFRS• Prohibits costing of inventory using the LIFO Prohibits costing of inventory using the LIFO

methodmethod• Allows for revaluation Allows for revaluation • Requires de-recognition of components of Requires de-recognition of components of

assetsassets• Level in which impairments performed at the Level in which impairments performed at the

cash-generating unit and involves only 1 stepcash-generating unit and involves only 1 step• Allows for reversal of impairment lossesAllows for reversal of impairment losses


Liabilities under IFRSLiabilities under IFRS• Contingencies recognized when an obligation Contingencies recognized when an obligation

“more likely than not” exists“more likely than not” exists• When a range of possible outcomes exists, the When a range of possible outcomes exists, the

mid point of the range would be recognizedmid point of the range would be recognized• Asset retirement obligations recorded at the Asset retirement obligations recorded at the

present value of the best estimatepresent value of the best estimate• Provision should be recognized at the present Provision should be recognized at the present

value of the expected expenditurevalue of the expected expenditure


Pensions under IFRS (Pensions under IFRS (under under evaluationevaluation))• Allows for recognition of actuarial gains Allows for recognition of actuarial gains

and losses in equity, without subsequent and losses in equity, without subsequent recycling to net incomerecycling to net income

• Vested past service costs recognized Vested past service costs recognized immediately in net incomeimmediately in net income

• Curtailment gain recognized when Curtailment gain recognized when commitment to reduce employees is commitment to reduce employees is demonstrateddemonstrated


Pensions under IFRS (Pensions under IFRS (under under evaluationevaluation))• Classification of pension expense in Classification of pension expense in

operating and non-operating income operating and non-operating income (i.e., interest)(i.e., interest)

• Plan assets recognized at fair value; Plan assets recognized at fair value; calculated value is not allowablecalculated value is not allowable

• Recognition of an overall plan asset Recognition of an overall plan asset subject to a ceiling testsubject to a ceiling test

IFRSIFRS

Financial instruments under IFRS (Financial instruments under IFRS (under under evaluationevaluation))• Instruments measured at fair value, including Instruments measured at fair value, including

equity instruments that do not have quoted equity instruments that do not have quoted market pricemarket price

• Reclassification between categories availableReclassification between categories available• Previous losses on debt instruments may be Previous losses on debt instruments may be

reversedreversed• High threshold for de-recognition of financial High threshold for de-recognition of financial

assets under securitization agreementsassets under securitization agreements


Financial Instruments and EquityFinancial Instruments and Equity• Those items classified as mezzanine would be Those items classified as mezzanine would be

classified as a financial liabilityclassified as a financial liability• Financial instruments issued between related Financial instruments issued between related

parties should be recognized at time of parties should be recognized at time of issuance at fair value with an offsetting issuance at fair value with an offsetting earnings impactearnings impact

• Effective yield method based upon expected Effective yield method based upon expected cash flows—not contractual cash flowscash flows—not contractual cash flows

• Transaction costs should be reported net of the Transaction costs should be reported net of the financial liabilities, instead of a non-current financial liabilities, instead of a non-current assetasset


Hedge accounting (Hedge accounting (under evaluationunder evaluation))• Generally different definitions used and Generally different definitions used and

differences in application of the methodologiesdifferences in application of the methodologies• Application of hedge accounting, specific to Application of hedge accounting, specific to

foreign currency risk with a firm commitment foreign currency risk with a firm commitment to enter a business combination, is permissibleto enter a business combination, is permissible

• A parent company may apply hedge A parent company may apply hedge accounting on foreign currency exposure of a accounting on foreign currency exposure of a subsidiary, regardless of the parent company’s subsidiary, regardless of the parent company’s functional currencyfunctional currency

• Shortcut method that assumes no Shortcut method that assumes no ineffectiveness is not available under IFRSineffectiveness is not available under IFRS


Income taxes Income taxes • Current and deferred taxes recognized using Current and deferred taxes recognized using

the enacted the enacted or substantively enactedor substantively enacted tax rate tax rate• Timing of recognition of deferred tax assetsTiming of recognition of deferred tax assets• Recognition of deferred tax assets on the Recognition of deferred tax assets on the

following:following: Items relating to equityItems relating to equity Items not part of a business combinationItems not part of a business combination Translation of non-monetary assets measured using Translation of non-monetary assets measured using

historical rateshistorical rates Inter-company transfersInter-company transfers


Income taxes Income taxes • A separate tax valuation allowance is A separate tax valuation allowance is

not maintainednot maintained• Uncertain tax positions recognized using Uncertain tax positions recognized using

probability-weighted average methodprobability-weighted average method• Entire balance classified as non-currentEntire balance classified as non-current


Functional currencyFunctional currency• Same premise—primary economic Same premise—primary economic

environment. Be sure analysis is environment. Be sure analysis is consistent at the subsidiary and consistent at the subsidiary and consolidated level. consolidated level.

Consolidations (Consolidations (under evaluationunder evaluation))• Requires consolidation of all subsidiariesRequires consolidation of all subsidiaries• Point at which control is assessedPoint at which control is assessed• Option for proportional consolidation of Option for proportional consolidation of

jointly controlled entitiesjointly controlled entities

IFRS for SMEsIFRS for SMEs


Entities that qualify to use IFRS for Entities that qualify to use IFRS for SMEs:SMEs:• Entities that do not have public Entities that do not have public

accountability, andaccountability, and• Publish general purpose financial Publish general purpose financial

statements for external users.statements for external users.


Section 1 of IFRS for SMEs:Section 1 of IFRS for SMEs:• ““A subsidiary whose parent uses full A subsidiary whose parent uses full

IFRSs, or that is part of a consolidated IFRSs, or that is part of a consolidated group that uses full IFRSs, is not group that uses full IFRSs, is not prohibited from using IFRS for SMEs in prohibited from using IFRS for SMEs in its own financial statements if that its own financial statements if that subsidiary by itself does not have public subsidiary by itself does not have public accountability.”accountability.”

IFRS for SMEsIFRS for SMEsIFRSIFRS IFRS for SMEsIFRS for SMEs

Investments in Affiliates (IAS 28.13)Investments in Affiliates (IAS 28.13)

Use of equity method required, when Use of equity method required, when applicableapplicable

Investment in affiliates (Section 14.4)Investment in affiliates (Section 14.4)

Accounting policy election: cost, equity Accounting policy election: cost, equity or fair valueor fair value

Joint ventures (IAS 31.30 and 31.38)Joint ventures (IAS 31.30 and 31.38)

Proportionate consolidation or equity Proportionate consolidation or equity method may be usedmethod may be used

Joint venture (Section 15.9)Joint venture (Section 15.9)

Same as investment in affiliates. Same as investment in affiliates. Proportionate consolidation not availableProportionate consolidation not available

Intangibles (IAS 38.88)Intangibles (IAS 38.88)

Useful lives may be finite or indefiniteUseful lives may be finite or indefiniteIntangibles (Section 18.19)Intangibles (Section 18.19)

All intangible assets shall be considered All intangible assets shall be considered to have a finite useful lifeto have a finite useful life

Goodwill (IFRS 3.B63(a))Goodwill (IFRS 3.B63(a))

Measured at acquisition date less Measured at acquisition date less accumulated impairment losses (under accumulated impairment losses (under IAS 36)IAS 36)

Goodwill (Section 19.23)Goodwill (Section 19.23)

Measure at cost less accumulated Measure at cost less accumulated amortization and accumulated amortization and accumulated impairment lossesimpairment losses

Borrowing costs (IAS 23.8)Borrowing costs (IAS 23.8)

Borrowing costs shall be capitalized Borrowing costs shall be capitalized when directly attributable to the when directly attributable to the acquired assetacquired asset

Borrowing costs (Section 25.2)Borrowing costs (Section 25.2)

Borrowing costs are expensed as Borrowing costs are expensed as incurredincurred


• Completed contract method for revenue Completed contract method for revenue recognition is prohibited.recognition is prohibited.

• Hedge accounting is limited under IFRS Hedge accounting is limited under IFRS for SMEs. Only permitted for the for SMEs. Only permitted for the following hedge risks:following hedge risks:

Interest rate risk of a debt instrument Interest rate risk of a debt instrument Foreign exchange interest rate risk in a firm Foreign exchange interest rate risk in a firm

commitment or highly probable forecasted commitment or highly probable forecasted transactiontransaction

Foreign exchange risk in a net investmentForeign exchange risk in a net investment Price risk of a commodityPrice risk of a commodity

IFRS for SMEsIFRS for SMEsIFRSIFRS IFRS for SMEsIFRS for SMEs

Consolidated financial statementsConsolidated financial statements(IAS 27.9 and 27.10)(IAS 27.9 and 27.10)

*Most likely will not meet exemption as the *Most likely will not meet exemption as the ultimate or intermediate parent’s financial ultimate or intermediate parent’s financial statements are NOT publicly availablestatements are NOT publicly available

Consolidated financial statementsConsolidated financial statements(Section 9.3)(Section 9.3)

*May not meet the exemption if the *May not meet the exemption if the intermediate parent does not produce intermediate parent does not produce consolidated general purpose financial consolidated general purpose financial statements that comply with full IFRSstatements that comply with full IFRS

Receivables Receivables (IFRS 7.37)(IFRS 7.37)

Aging of receivablesAging of receivablesReceivablesReceivablesNo similar disclosure requirementsNo similar disclosure requirements

Investment in Associates Investment in Associates (IAS 28.37(b))(IAS 28.37(b))

Disclose summarized financial data, Disclose summarized financial data, including assets liabilities, revenues and including assets liabilities, revenues and profit (loss)profit (loss)

Investment in Associates Investment in Associates (Section 14.12 and (Section 14.12 and 14.15)14.15)

No similar disclosure requirementsNo similar disclosure requirements

Income taxes Income taxes (IAS 12.81)(IAS 12.81)

Numerical tax rate reconciliationNumerical tax rate reconciliationIncome taxes Income taxes (Section 29.32)(Section 29.32)

Explanation of changes in applicable tax Explanation of changes in applicable tax raterate

Capital management and risk Capital management and risk management management (IAS 1.134 and IFRS 7.31)(IAS 1.134 and IFRS 7.31)

Capital management and risk Capital management and risk managementmanagementNo similar disclosure requirementsNo similar disclosure requirements

TransitionTransition

TransitionTransition

Regardless of adopting IFRS or IFRS Regardless of adopting IFRS or IFRS for SMEs, the respective transition for SMEs, the respective transition standard shall be applied:standard shall be applied:• IFRS 1, orIFRS 1, or• Section 35 of IFRS for SMEsSection 35 of IFRS for SMEs

Comparable financial statements will Comparable financial statements will need to be providedneed to be provided

Accounting policies shall be re-Accounting policies shall be re-established and consistently appliedestablished and consistently applied

TransitionTransitionActivityActivity Policy Elections Available at AdoptionPolicy Elections Available at Adoption

Business Business CombinationsCombinations

Elect to apply standards to acquisitions that occurred prior to Elect to apply standards to acquisitions that occurred prior to adoption OR apply to acquisitions from the transition date adoption OR apply to acquisitions from the transition date going forwardgoing forward

PropertyProperty Property, plant and equipment may be recorded at either:Property, plant and equipment may be recorded at either: Fair valueFair value Historical costs less accumulated depreciation (after assets Historical costs less accumulated depreciation (after assets lives have been analyzed under newly-elected GAAP)lives have been analyzed under newly-elected GAAP)

Investments Investments in subsidiaries, jointly in subsidiaries, jointly controlled entities and controlled entities and associates associates

Investments may be recorded at either:Investments may be recorded at either: Cost (under cost or equity method, as appropriate)Cost (under cost or equity method, as appropriate) Deemed costs: fair value or previous GAAP carrying Deemed costs: fair value or previous GAAP carrying amountamount

Employee future Employee future benefitsbenefits

All cumulative actuarial gains and losses and past services All cumulative actuarial gains and losses and past services costs may be recognized in opening retained earningscosts may be recognized in opening retained earnings

Cumulative translation Cumulative translation differencedifference

If reporting entity maintains CTA at the local level, this If reporting entity maintains CTA at the local level, this amount may be recorded to retained earningsamount may be recorded to retained earnings

TransitionTransition Re-assess designation of financial assets Re-assess designation of financial assets

and liabilitiesand liabilities Retrospective application at time of Retrospective application at time of

adoption:adoption:• De-recognition of financial assets and De-recognition of financial assets and

liabilities: prospective application for liabilities: prospective application for transactions occurring on or after date of transactions occurring on or after date of transitiontransition

• Hedging: elimination all deferred gains Hedging: elimination all deferred gains (losses)(losses)

• Non-controlling interest: prospective Non-controlling interest: prospective application for changes in ownershipapplication for changes in ownership

Other ConsiderationsOther Considerations

Other ConsiderationsOther Considerations

Implementation team needsImplementation team needs System capabilities for financial System capabilities for financial

reporting purposesreporting purposes• U.S. GAAPU.S. GAAP• Parallel reportingParallel reporting• Future statutory reporting Future statutory reporting • TaxTax

Communication with Tax and Communication with Tax and Treasury teamsTreasury teams

Q & AQ & A

IFRS As of April 2011 Presented by Teri Willoughby Deters.

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