International Financial Reporting Standards

Transcription

1 May 2011 International Financial Reporting Standards International Financial Reporting Standards Michael Wells, Director, Education Initiative, IFRS Foundation IFRS Foundation The views expressed in this presentation are those of the presenter, not necessarily those of the IFRS Foundation or the IASB 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

2 Outline 2 Why global standards? The progress Structure and governance Common misunderstandings IASB s work plan 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

3 International Financial Reporting Standards Why global standards? IFRS Foundation The views expressed in this presentation are those of the presenter, not necessarily those of the IFRS Foundation or the IASB

4 Information supply chain 4 Corporate governance (Ethics codes) Auditing (ISAs) Preparers Capital providers Accounting standards (IFRSs & the IFRS for SMEs) Enforcement

5 The reality 5 Capital markets are global New York, London, Luxemburg, Hong Kong, Singapore World s economies are interdependent the financial crisis SMEs integrated into the global economy Accounting and auditing needs strengthening World Bank ROSCs corporate failures standard setters work programmes High-quality information facilitates the allocation of global capital 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

6 Benefits of global standards 6 Efficient allocation of capital globally attracting investment through transparency reducing the cost of capital increasing world-wide investment Reducing costs and increased efficiency facilitates standardising information systems eliminates wasteful reconciliations audit efficiencies education and training 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

7 International Financial Reporting Standards The progress IFRS Foundation The views expressed in this presentation are those of the presenter, not necessarily those of the IFRS Foundation or the IASB

8 Status of IFRSs use around the world 8 Since 2001, over 120 countries have required or permitted the use of IFRSs. Remaining major economies have time lines to converge with or adopt IFRSs in the near future. Next wave of new joiners in 2011/2012: Argentina, Canada, Mexico, South Korea, etc Japan: IFRS permitted for a number of international companies since 2010; decision about mandatory adoption around IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

9 Fortune Global 500 (July 2009) 9 Fortune G500 Based on announced plans Which GAAP? Japan 2015? IFRSs and word-for-word IFRS equivalents US GAAP National GAAPs Total IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

10 US investors, companies depend on cross-border capital flows 10 Billions of US Dollars 6,000 Growing cross-border holdings of US companies and investors 5,000 4,000 3,000 2,000 1,000 0 Source: US treasury Year US Holdings of Foreign Equities Foreign Holdings of US Equities 2010 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

11 At the same time, US markets are diminishing in relative size 11 Billions of US Dollars The Globalization of Capital Markets: Domestic Market Capitalization Source: World Federation of Exchanges Asia-Pacific Europe, Africa and The Middle East Americas, excluding US United States 0 End 2001 End 2008 End IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

12 IFRS FASB Convergence Process Reaction to investor desire for improved, global standards following Asian crisis and US financial scandals IASB is established; enters Norwalk Agreement with FASB Growing IFRS adoption by major economies; continued US support and recognition of IFRSs as being high-quality standards MoU accelerating convergence SEC removes reconciliation requirement Financial crisis; G20 pressure for convergence leading to adoption; focus on remaining major joint projects Updates to MoU with 2011 targets and SEC roadmap MoU timetable adjusted to ensure critical issues are completed IASC Foundation. 30 Cannon Street London EC4M 6XH UK. Further SEC update to roadmap Modified convergence strategy prioritises major projects for 2011 completion

13 G20 Summit 25 September Redouble efforts to: achieve a single set of high quality, global accounting standards within the context of their independent standard setting process complete convergence project by June IASB s institutional framework should further enhance the involvement of various stakeholders. G20 acknowledge that there could be differences between capital requirements and accounting rules: to ensure comparability, the details of the leverage ratio will be harmonized internationally, fully adjusting for differences in accounting.

14 The importance of 2011 IASB commitment remains A number of countries adopting or converging to IFRS around that time (2011/2012) G20 target date MoU target date US (2011) / Japan (2012) decision on adoption However: Primary focus: achieve significant improvements to financial reporting without compromising due process 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

15 The Major Projects Crisis (MoU) Financial instruments Fair value measurement Consolidation Derecognition Other (Non MoU) Insurance contracts 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK. Other (MoU) Revenue recognition Leases Post-employment benefits Financial statement presentation Liability/Equity

16 International Financial Reporting Standards Structure and governance IFRS Foundation The views expressed in this presentation are those of the presenter, not necessarily those of the IFRS Foundation or the IASB

17 The vision 17 one single set of high quality global standards....used on the global capital markets.

18 Structure of IFRS Foundation 18 International Monitoring Board IFRS Foundation Trustees The standard-setting operation IFRS Advisory Council International Accounting Standards Board IFRS Interpretations Committee Advisory Groups Staff Education XBRL Publications Operations 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

19 Consultation process months 9 15 months months Discussion paper Comment analysis Exposure Draft Comment analysis Final standard Effective date Research: Standard setters, EFRAG, and others. Additional input Additional input Feedback statement 2 year post implementation review 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

20 Use of IFRSs the ideal 20 Ideally, adopt IFRSs as the reporting framework: IFRSs as issued by the IASB in full Audit report and basis of presentation note refer to conformity with IFRSs Without local endorsement Use of IFRSs means all standards and all interpretations Sometimes the ideal is hard to achieve 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

21 Use of IFRSs variations from ideal 21 Problems with local endorsement : Urge to tinker Time delay Politicisation Cost What does audit report refer to? If not IFRSs, will users understand? If carve-out, what is the replacement standard? 2011 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

22 International Financial Reporting Standards IASB s work plan IFRS Foundation The views expressed in this presentation are those of the presenter, not necessarily those of the IFRS Foundation or the IASB

23 IASB work plan Past and current focus 23 The Board s agenda to date has largely been shaped by three events: 1.by the need to upgrade the standards inherited by the IASB in time for European adoption of IFRSs in 2005; 2.by our G20-endorsed programme of work with the US FASB to improve IFRSs and US GAAP to bring about their convergence; and 3.by undertaking a comprehensive response to the financial crisis while supporting a second wave of economies preparing to adopt IFRSs.

24 Current work plan focus I. Completing convergence work 24 Modified work plan in place between US-based FASB and IASB since June 2010 Focus on completing key convergence areas (joint): Fair value measurement Financial instruments Leasing Presentation of OCI Revenue recognition Plus IASB focus on completing project on insurance accounting (joint since 2009) Boards agreed to publish regular progress updates

25 April 2011 progress update Conclusions 25 Since November 2010 progress report: Completion of five projects that are converged or substantially converged expected publication May 2011: IFRS 13 Fair Value Measurement IFRS 10 Consolidation (incl new standard on disclosures IFRS 12) IFRS 11 Joint arrangements (OCI) Amendments to IAS 1 Presentation of Financial Statements Amendments to IAS 19 Post-employment Benefits

26 April 2011 progress update Decisions 26 Extension of completion target beyond June 2011 to permit further work and consultation with stakeholders consistent with G20 recommendations completion of remaining three projects: H Prior to publication of standards, boards will consider: whether re-exposure is necessary; and whether outreach was sufficient to assure the boards that the standard is operational and will bring improvements to financial reporting

27 April 2011 progress update Decisions continued 27 Boards emphasise that effective dates of new standards will give entities and users sufficient time to implement changes Trustees of the IFRS Foundation are undertaking an enhanced oversight process to ensure that the IASB is meeting its due process requirements (similar oversight in place for US-based FASB)

28 April 2011 progress update Outstanding 28 Three remaining MoU projects to be completed Revenue recognition Leases Financial instruments Plus: completion of accounting for insurance contracts (joint project); IASB plans completion in H2 2011; FASB plans to issue ED around the same time

29 Remaining priority projects Revenue recognition 29 About the project Critical project for both boards Joint DP published in 2008 Objective: reduce FASB detailed guidance to principles and remove the need for IFRS users to refer to US GAAP What now? Boards are close to completing deliberations Assessment whether re-exposure is needed, if not needed then: Make draft standard publicly available Reach out to affected parties Undertake a detailed fatal-flaw review with selected parties Timing of publication dependent on feedback

30 Remaining priority projects: Leasing 30 About the project Objective: ensure that all assets and liabilities are recognised in the statement of financial position Standard applicable for lessors and lessees Joint ED in August 2010 What now? Boards are close to completing deliberations Feedback received resulted in changes to the ED Assessment whether re-exposure is needed, if not needed then: Make draft standard publicly available Reach out to affected parties Undertake a detailed fatal-flaw review with selected parties Timing of publication dependent on feedback

31 Remaining priority projects Financial instruments 31 Classification and Measurement Status IASB finalised new requirements for financial assets in 2009 Mandatory application 2013 November 2010 requirements on own credit issue added Convergence May 2010 FASB published comprehensive ED (including impairment and hedge accounting) with greater use of Fair Value FASB expects to make decisions about classification and measurement in Q3 2011; IASB will expose FASB conclusions to seek views from own constituents

32 Remaining priority projects Financial instruments 32 Impairment Status November 2009 IASB published an ED on an expected loss model Creation of an Expert Advisory Panel IASB is working through conclusions and feedback received on outreach Convergence Joint deliberations since November 2010 January 2011 publication of supplementary document on an impairment model Targeting completion of basic approach by the end of June, then assessment of additional steps required

33 Remaining priority projects Financial instruments 33 Offsetting Status Boards published joint ED in Q Feedback received so far indicates split views Round tables in London, Norwalk and Singapore planned for May Convergence Substantial completion targeted for Q3

34 Remaining priority projects Financial instruments 34 Hedge accounting Status IASB published ED in December 2010 followed by FASB DP on that ED in February 2011 IASB plans to develop general hedge accounting model in Q3; however further development of portfolio hedging required Convergence FASB continues deliberations on its own ED but will participate and consider feedback

35 Remaining priority projects Insurance contracts About the project Important IASB project because IFRSs permit a wide variety of accounting IASB issued DP in 2007 and ED in 2010; FASB added a project on insurance to its agenda in 2008 and published a modified version of the IASB DP in 2010 Boards have been considering feedback received together and have been conducting targeted outreach What now? Completion of discussions during H IASB aims for completion by the end of 2011; FASB will publish an ED with a view of completing the project in 2012 Prior to publishing a final standard boards will follow procedures outlined above IASB and FASB will consider any differences and how to address them 35

36 Work plan focus II. Responding to the financial crisis 36 In line with G20 requests, the IASB continued: its work on improving off balance sheet disclosures and the review of Consolidation requirements completing its Fair value measurement project, that includes addressing measurement uncertainties with FASB continuing to review accounting for Financial Instruments with FASB

37 Responding to the financial crisis Results 37 Off balance sheet review about to be completed (May 11) Review of derecognition requirements: Amendments to IFRS 7 Disclosures- Transfers of Financial Assets (October 2010) IFRS 10 Consolidated financial statements (May 2011) IFRS 12 Disclosure of Interests in Other Entities (May 2011) Measurement uncertainty addressed (May 11) Fair Value Measurement standard (IFRS 13) expected to be published in May Same definition and aligned measurement and disclosure requirements for fair value for US GAAP and IFRSs Additional guidance for measuring fair value when markets become inactive 2010 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

38 What comes next? 38 Agenda consultation document to help shaping the IASB s future agenda Strategic direction of the future work plan? Balancing of developing financial reporting with the maintenance of IFRSs? Request for Views planned for Q Broad input needed to help shaping the IASB s future agenda

39 Appendix Short-term convergence work - I 39 Project Milestone Share-based payments Substantially converged standards issued in Segment reporting IFRS 8 Operating Segments issued in Non-monetary assets FASB converged on the treatment of certain non-monetary exchanges to require recognition at fair value unless the transaction lacks commercial substance in FAS 153, Nonmonetary Assets issued in Inventory accounting FASB converged on the treatment of excess freight and spoilage in FAS 151, Inventory Costs issued in Accounting changes FASB converged on the treatment of voluntary changes in accounting policy by requiring retrospective application in FAS 154, Accounting Changes and Error Corrections issued in 2005.

40 Appendix Short-term convergence work - II 40 Fair value option FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, issued in 2007, introducing the fair value option into US GAAP. Borrowing costs Revised IAS 23 Borrowing Costs in Research costs FAS Non-controlling interests FAS 141R, Business Combinations issued in 2008, amending the accounting for acquired R&D. 160, Non-controlling Interests in Consolidated Financial Statements, issued in 2008, eliminating the use of mezzanine presentation of non-controlling interests. Joint ventures IFRS 11 Joint Arrangements published in May 2011 Income tax Reassessed as a lower priority project. IASB ED in Investment properties The FASB is developing proposals to align US GAAP with IFRSs. The boards also have a project in progress to develop a joint Conceptual Framework for Financial Reporting. In 2010 the boards published chapters on objectives and qualitative characteristics.

41 Appendix MoU projects 41 Project Status Milestone Business combinations Completed in Joint requirements for business combination accounting and noncontrolling interests. Derecogniton Completed in Reforms substantially aligned the disclosure requirements and brought US GAAP accounting requirements closer to IFRSs. Consolidated financial statements (including disclosure about off balance sheet risks) To be completed (IASB) in May FASB to expose proposals in relation to variable interest entities in May IFRSs will improve and substantially align the accounting and disclosure for SPEs with US GAAP.

42 Appendix MoU projects continued I 42 Project Status Milestone Fair value measurement IFRS 13 and FASB revisions to be issued in May 2011 Same definition and common measurement and disclosure requirements. Post-employment benefits Financial statement presentation other comprehensive income Final stages IFRS to be issued in May IFRS and US GAAP amendments to be issued in May Amendments to IAS 19 Employee Benefits to be issued in May Amendments align presentation requirements. Further consideration of other aspects of Financial Statement Presentation is not expected before December 2011.

43 Appendix MoU projects continued II 43 Project Status Milestone Financial instruments with the characteristics of equity Intangible assets Reassessed as a lower priority project. Further consideration is not expected before December 2011 The IASB decided not to proceed with the project, but will consider it as a potential project when setting its new agenda. Joint discussion paper published in The IASB considered an agenda proposal to add a project on intangible assets in December 2007.

44 Questions or comments? 44 Expressions of individual views by members of the IASB and their staff are encouraged. The views expressed in this presentation are those of the presenter. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.