ACCOUNTING STANDARDS : PLAYING BY THE SAME RULES? REPARIS 27 October 2010 Philippe DANJOU, Member of IASB

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1 International Financial Reporting Standards ACCOUNTING STANDARDS : PLAYING BY THE SAME RULES? REPARIS 27 October 2010 Philippe DANJOU, Member of IASB The views expressed in this presentation are those of the presenter, not necessarily those of the IFRS Foundation or the IASB 2010 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

2 The Tower of Babel is behind us? 2

3 Who we are and what we do 3 The IFRS Foundation and the International Accounting Standards Board Our objective To develop a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles. Take account of the needs of a range of sizes and types of entities in diverse economic settings How do we do this? An independent standard-setting board, overseen by a geographically and professionally diverse body of trustees, publicly accountable to a Monitoring Board of public capital market authorities Supported by an external IFRS Advisory Council and an IFRS Interpretations Committee to offer guidance where divergence in practice occurs A thorough, open, participatory and transparent due process Engagement with investors, regulators, business leaders and the global accountancy profession at every stage of the process Collaborative efforts with the worldwide standard-setting community

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5 The IASB members as of 1 st October 5 Members are appointed by the Trustees. Following a decision at the January 2009 Trustees meeting, the IASB will be expanded to 16 members by 2012 with a required balance of geographic origins and professional backgrounds. Sir David Tweedie * Stephen Cooper Philippe Danjou * Jan Engström Patrick Finnegan Amaro Luiz de Oliveira Gomes Prabhakar Kalavacherla ( PK ) Dr Elke König Patricia McConnell Warren McGregor* Paul Pacter Darrel Scott John Smith Tatsumi Yamada * Zhang Wei-Guo (*) denotes that term expires on 30 June 2011

6 International Financial Reporting Standards Status of IFRS in the world

7 The move towards global standards 7 Progress toward this goal has been steady. All major economies have established time lines to converge with or adopt IFRSs in the near future. USA last in the line to fully adopt IFRS but significant step made in 2007 In 2012, approximately 2/3 of the Fortune Global 500 companies will report under IFRS ; investors worldwide will become accustomed to IFRS

8 Country Status for listed companies as of April Argentina Required for fiscal years beginning on or after 1 January 2011 Australia Required for all private sector reporting entities and as the basis for public sector reporting since 2005 Brazil Required for consolidated financial statements of banks and listed companies from 31 December 2010 and for individual company accounts progressively since January 2008 Canada Required from 1 January 2011 for all listed entities and permitted for private sector entities including not-for-profit organisations China Substantially converged national standards European Union All member states of the EU are required to use IFRSs as adopted by the EU for listed companies since 2005 India India is converging with IFRSs over a period beginning 1 April 2011 Indonesia Convergence process ongoing; a decision about a target date for full compliance with IFRSs is expected to be made in 2012 Japan Permitted from 2010 for a number of international companies; decision about mandatory adoption by 2016 expected around 2012 Mexico Required from 2012 Republic of Korea Required from 2011 Russia Required for banking institutions and some other securities issuers; permitted for other companies Saudi Arabia Not permitted for listed companies South Africa Required for listed entities since 2005 Turkey Required for listed entities since 2008 United States Allowed for foreign issuers in the US since 2007; target date for substantial convergence with IFRSs is 2011 and decision about possible adoption for US companies expected in 2011.

9 The World is Getting Smaller 9 Source of information (adapted from):

10 IFRS in Japan The IASB and the Accounting Standards Board of Japan (ASBJ) have been working together to achieve convergence of IFRSs and Japanese Generally Accepted Accounting Principles (GAAP) since Formalised in 2007 with the Tokyo Agreement. The Tokyo Agreement set 2008 as a target date for eliminating major differences between IFRSs and Japanese GAAP (as defined by the July 2005 CESR assessment of equivalence) with the objective of eliminating the remaining differences by 30 June Having achieved the 2008 target date, the boards are continuing their regular meetings and are now working to address the outstanding issues by In June 2009 the Business Accounting Council (BAC), a key advisory body to the Commissioner of the Financial Services Agency (FSA), approved an interim report - Application of International Financial Reporting Standards (IFRSs) in Japan (Interim Report). In the interim report the BAC proposes to allow certain listed companies an early adoption of IFRS followed by a final decision about the mandatory adoption of IFRSs around The interim report also recommends that the ASBJ continues and accelerates the convergence of accounting standards. In accordance with the interim report, the Japanese FSA amended in December 2009 its regulations permitting certain qualifying domestic companies to apply IFRSs from fiscal years ending on or after 31 March 2010.

11 Continuous progress IFRS-US convergence efforts Growing interest in IFRSs following US financial scandals Growing IFRS use, concerns regarding US position in global markets Norwalk agreement remove differences align agendas 2006 IASB-FASB Roadmap Short-term: remove major differences Medium-term: new joint standards where significant improvements required SEC reconciliation requirement removed for FPI s 2010 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

12 - continued Consideration US adoption and a date certain 12 Update of MoU with 2011 targets and SEC roadmap Nov 2009 Renewed commitment to MoU achieving 2011 target Joint statements by IASB- FASB and Trustee bodies monthly meetings and quarterly progress updates June 2010 Statement on convergence work Recognition of challenges regarding effective global stakeholder engagement on a large number of projects Prioritization of major convergence projects Target date for main projects remains June IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

13 Modified joint strategy and work plan 13 Target date for priority projects remains June 2011 Prioritise major projects to permit sharper focus on those areas in most urgent need for improvement in both IFRS and US GAAP Phasing of publication of EDs and related consultations to enable broad-based, effective stakeholder participation Publication of separate consultation document seeking stakeholder input about effective dates and transition methods 2010 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

14 The major joint projects Financial Crisis (MoU) Financial instruments Fair value measurement Consolidation Derecognition Other (MoU) Revenue recognition Leases 14 Post-retirement benefits Financial statement presentation Liability/Equity Other (Non MoU) Insurance contracts 2010 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

15 The major projects 15 Derecognition - disclosures Project ED issued Completion Q Consolidation Q Financial statement presentation (OCI) Q Fair value measurement Q Post-employment benefits (Defined benefit plans) Q IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

16 The major projects 16 Project ED issued Completion Financial instruments (phases 2 & 3) Q Q Revenue recognition Q Leases Q Insurance (FASB will publish IASB ED as a Discussion Paper with a FASB wrap-around) Q IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

17 International Financial Reporting Standards IFRS for SME and developping economies

18 IFRS for SME s 18 After 6 years of work July pages, self-contained standard tailored to the needs and capabilities of smaller businesses around the world Simplified approach focusing on essential disclosures and accounting for transactions that are usually found in SME s Any jurisdiction can decide to adopt IFRS-SME regardless of plans for full IFRS adoption As of today, 60 jurisdictions have decided to adopt or stated their intention to do so Specific IFRS-SME Implementation Group established (P.Pacter) Comprehensive self-study materials (free download) being developed by Education initiative; Regional Train the Trainers workshops in emerging markets

19 The importance of IASB commitment remains A number of countries adopting or converging to IFRS around that time (2011/2012) MoU 2011 target date US (2011) / Japan (2012) decision on adoption However: Primary focus: achieve significant improvements to financial reporting without compromising due process 2010 IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

20 Challenges to a worldwide adoption of IFRS 20 Convergence / adoption / adaptation? Convergence helps adotion in second step Different economic environments and sophistication of markets-quality of standards vs. complexity Principle - based vs Rules-based standards National sovereignty issues/ Adoption / adaptation of IFRS IFRS Foundation a private organization Governance of the organization Independence of standard setting / political interference with standard setting Confusion about respective role of financial and prudential standards the financial crisis raised issues that were looked at by the FCAG created jointly by IASB and FASB

21 Questions or comments? 21 Expressions of individual views by members of the IASB and its 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.