How IFRS can impact U.S. financial statement preparers and users today

Transcription

1 How IFRS can impact U.S. financial statement preparers and users today Thursday, January 24, 2013 Administrative CPE regulations require online participants take part in online questions. Participants are required to respond to a minimum of four questions in order to be eligible for CPE credit. Results will be reviewed in aggregate and may be published as a pulse survey of the marketplace in the aggregate. Please note that no responses will be tracked back to any individual or organization. Send questions via the Ask a Question button. Help desk: or outside the United States at

2 Today s presenters Jonathan Guthart Audit Partner President of KPMG s U.S. Capital Markets Group John McGaw Partner Accounting Advisory Services Holger Erchinger Audit partner Department of Professional Practice Susan Callahan Manager Global Accounting Policy and Special Studies Ford Motor Company 2 Agenda U.S. subsidiaries of groups domiciled outside the United States IPOs and M&A transactions Global statutory alignment Implications of accounting convergence SEC IFRS-related activities 3 2

3 U.S. subsidiaries of groups domiciled outside the United States IFRS implementation around the world (2012) IFRS permitted or required U.S. GAAP and/or convergence intended Convergence plans No/unknown convergence plans 5 3

4 Facts about IFRS around the world IFRS as issued by the IASB or national/regional variant of IFRS is either permitted or required in approximately 120 countries around the world including: European Union Japan (option for certain companies) Canada Brazil Mexico Russia Korea U.S. subsidiaries report IFRS financial information to the group for consolidation purposes 6 Public companies registered with the U.S. securities and exchange commission Approximately 9,000 domestic registrants Approximately 1,000 foreign registrants Canada 340 Islands 270 Europe 110 Asia Pacific 90 Israel 70 Central and South America 55 Other 30 Foreign registrants using IFRS 2010: approximately : approximately

5 Polling Question 1 In my job, I am a: 1. Preparer 2. User 3. Auditor 4. Academic 5. Other 8 Knowledge Check Question 2 Which of the following statements in correct? 1. IFRS, as issued by the IASB, has been adopted by approximately 120 countries around the globe. 2. IFRS, as issued by the IASB or some regional/national variant, has been adopted by approximately 120 countries around the globe. 3. Almost all of the largest public companies around the globe, based on market capitalization, are using IFRS. 4. Almost all of the largest public companies around the globe, based on market capitalization, are using U.S. GAAP. 9 5

6 Knowledge Check Question 2 Debrief: Correct answer is B 1. Incorrect, Most countries have an endorsement mechanism for bringing IFRS into their local financial reporting framework. 2. Correct, IFRS, as issued by the IASB or some regional/national variant, has been adopted by approximately 120 countries around the globe. 3. Incorrect, companies representing approximately 45 percent of the global market capitalization use IFRS or a national/regional variant of IFRS. 4. Incorrect, companies representing approximately 35 percent of the global market capitalization use U.S. GAAP. 10 IPOs and M&A transactions 6

7 Public offerings outside the United States U.S. domiciled companies going public outside the United States 12 Cross-border M&A transactions Foreign companies acquiring U.S.-based entities or U.S.-based entities acquiring foreign companies 13 7

8 Cross-border joint venture structures U.S. entities entering foreign markets may do so on a joint-venture basis Prohibitions on majority foreign ownership Access to supply and distribution networks in the local markets Lower capital investment to enter market 14 Polling Question 3 My organization is: 1. A domestic SEC registrant with more than 50 percent of our operations conducted internationally 2. A domestic SEC registrant with more than 25 percent, but less than 50 percent, of our operations conducted internationally 3. A domestic SEC registrant with less than 25 percent of our operations conducted internationally 4. A private U.S. entity with more than 50 percent of our operations conducted internationally 5. A private U.S. entity with less than 50 percent of our operations conducted internationally 6. A foreign private issuer (SEC registrant) 7. N/A (users, academic, other) 15 8

9 Acquisitions of foreign businesses and acquisitions by foreign registrants Interaction with SEC filing requirements SEC Regulation S-X Rule 1-02(1) defines a foreign business as a business that is majorityowned by persons who are not citizens or residents of the United States and either: 1. More than 50 percent of its assets are located outside the United States 2. The majority of its executive officers and directors are not U.S. citizens or residents. SEC Regulation S-X Rule 3-05(b) and 8-04(e) contain special requirements when a domestic registrant acquires a foreign business. 16 Acquisitions of foreign businesses and acquisitions by foreign registrants Interaction with SEC filing requirements (continued) If a domestic or foreign registrant must file financial statements for an acquired foreign business, those financial statements may be prepared under IFRS as issued by the IASB without reconciliation to U.S. GAAP. (Source: SEC Financial Reporting Manual Division of Corporation Finance ). Applies equally to situations involving filing requirements in accordance with SEC Regulation S-X Rule 3-09 (Separate financial statements of subsidiaries not consolidated and 50 percent or less owned persons) ors-x Rule3-10 (Financial statements of guarantors and issuers of guaranteed securities registered or being registered). 17 9

10 Offerings in the United States in accordance with SEC rule 144A Rule 144A is a safe harbor exemption from the registration requirements of Section 5 of the Securities Act of 1933 for certain offers and sales of qualifying securities by certain persons other than the issuer. The securities eligible for resale under Rule 144A are securities of U.S. and foreign issuers that are not listed on a U.S. securities exchange or quoted on a U.S. automated interdealer quotation system. There are certain conditions that a reseller of restricted securities must satisfy to rely on Rule 144A. 18 Knowledge Check Question 4 Which of the following statements in correct? 1. For purposes of SEC Rule 144A offerings, there is a requirement to prepare financial information in accordance with U.S. GAAP. 2. For purposes of SEC Rule 144A offerings, there is a requirement to prepare financial information in accordance with IFRS. 3. SEC Rule 144A does not specify the accounting framework; therefore, the financial information can be prepared in accordance with either U.S. GAAP or IFRS. 4. For purposes of SEC Rule 144A offerings, domestic entities must use U.S. GAAP, and foreign entities may use either U.S. GAAP or IFRS

11 Knowledge Check Question 4 Debrief: Correct answer is C Which of the following statements in correct? 1. Incorrect, SEC Rule 144A does not specify an accounting framework. 2. Incorrect, SEC Rule 144A does not specify an accounting framework. 3. Correct, SEC Rule 144A does not specify an accounting framework; therefore, either U.S. GAAP or IFRS can be used in the preparation of financial information. 4. Incorrect, SEC Rule 144A does not specify the accounting framework and, therefore, does not specify the basis of accounting for domestic or foreign entities. 20 Global statutory alignment 11

12 Global statutory alignment Systems and processes Tax and statutory reporting IFRS financial statements Financing aspects HR-related 22 Polling Question 5 1. My organization could derive significant benefits from aligning systems, processes, external financial reporting, etc. globally on an IFRS basis. 2. My organization would not achieve any benefits from aligning systems, processes, external financial reporting, etc. globally on an IFRS basis. 3. My organization has not yet evaluated whether there would be potential benefits from aligning systems, processes, external financial reporting, etc. globally on an IFRS basis. 4. N/A (users, academic, other) 23 12

13 Implications of accounting convergence Implications of accounting convergence Higher priority joint projects Accounting Standards Advisory Forum (ASAF) Global regulatory cooperation 25 13

14 IASB-FASB MoU: Status of higher priority joint projects Areas Issues As of December 2012 Lease accounting Lessee obligations on balance sheet, new lessor model, reexposure Q1 2013; final standard 2013/14 Revenue e recognition o Single ge revenue e recognition o model, reexposed Q4 2011; final standard 2013 Financial instruments Classification and measurement, IASB ED Q4 2012, FASB ED Q Impairment, FASB ED Q4 2012, IASB ED Q Hedge accounting, no joint deliberations currently planned 26 Knowledge Question 6 What best describes the implications of accounting convergence on entities using U.S. stakeholders: A. There are no direct implications to U.S. stakeholders from the accounting convergence initiative between the boards. B. U.S. stakeholders are likely to be directly impacted by accounting convergence in the foreseeable future without regard to any decision by the SEC on use of IFRS by domestic filers. C. Until the SEC makes a definitive decision about incorporating IFRS into the U.S. financial reporting system by domestic registrants, there are little or no implications from accounting convergence, but there could be an impact once such a decision is made

15 Knowledge Question 6 Debrief: Correct answer is B What describes best the implications regarding accounting convergence: A. Incorrect, Because the accounting convergence initiative is a joint effort between the IASB and FASB, U.S. GAAP, as well as IFRS, is likely to be impacted. B. Correct, Because the accounting convergence initiative is a joint effort between the IASB and FASB, U.S. GAAP, as well as IFRS, is likely to be impacted. C. Incorrect, Because the accounting convergence initiative is a joint effort between the IASB and FASB, U.S. GAAP, as well as IFRS, is likely to be impacted without regard to an IFRS decision by the SEC. 28 SEC IFRS-related activities 15

16 SEC IFRS-related activities Next steps and timing?? SEC chair and SEC chief accountant IFRS foundation staff report in response to SEC staff report Communiqué G-20 finance ministers and central bank governors in November 2012 (Mexico) Concerns about the slow progress achieved toward a single set of high-quality accounting standards 30 KPMG Institutes and training About the KPMG IFRS Institute The KPMG IFRS Institute, part of the KPMG Institute Network, has been created as an open forum where board and audit committee members, executives, management, stakeholders, academia, and government representatives can share knowledge, gain insight, and access thought leadership about the evolving global financial reporting environment. To visit the IFRS Institute, go to: Executive education Group Live, instructor-led CPE credit accounting courses, seminars, workshops, and update conferences for corporate accountants and financial executives 31 16

17 The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough h examination of the particular situation. ti 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 17