Accounting Standards the International Setting

Transcription

1 International Financial Reporting Standards Accounting Standards the International Setting Sir David Tweedie IASB Chairman The views expressed in this presentation are those of the presenter, not necessarily those of the IASC Foundation or the IASB

2 The IFRS Objective 2 Goal to be the single set of accounting standards used worldwide Aimed at providing high-quality, transparent, and comparable information for investors and other users of financial information 2010 IASC Foundation. 30 Cannon Street London EC4M 6XH UK.

3 Why Global Standards are Needed 3 Accounting standards evolved nationally Globalisation hindered by national comparisons

4 Benefits to Capital Markets 4 Credibility of local market to foreign investors Greater cross-border investment Efficient capital allocation Comparability across political boundaries Facilitates global education and training

5 Benefit to companies 5 Lower cost of capital Integrated IT systems Easier consolidation One set of books Assist in raising capital overseas Understand financial statements of overseas suppliers, customers, subsidiaries

6 Independent and accountable governance 6 Similar governance to the FASB Domestic model Global model Securities and Exchange Commission (SEC) Public accountability to securities regulators Monitoring Board (inc. SEC Chair) FAF Trustees Overseen by Trustees IASC Foundation Trustees (5/22 US) Financial Accounting Standards Board Independent standard-setter International Accounting Standards Board (4/15 US)

7 IFRS Around the World 7 Total IFRSs permitted 25 IFRSs required 91 (for all domestic companies) IFRS required 6 (for some domestic companies) 122

8 or are converging with the IASB s standards. The World is Getting Smaller 8 Countries that require or permit IFRSs Countries seeking convergence with the IASB or pursuing adoption of IFRSs Source of information (adapted from):

9 US investors, companies depend on cross-border capital flows 9 90,000 Growing cross-border holdings of US companies and investors Trillions of US Dollars 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Source: US treasury Year Foreign Holdings of US Equities US Holdings of Foreign Equities 2010 IASC Foundation. 30 Cannon Street London EC4M 6XH UK.

10 At the same time, US markets are diminishing in relative size 10 35,000,000 The Globalization of Capital Markets: Domestic Market Capitalization Source: World Federation of Exchanges 30,000,000 9,443,561 (28%) 29% 28% Million of US Dollars 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 7,775,273 (29%) 3,968,483 (15%) 15% 4% 1,025,942 (4%) 52% 9,959,311 (30%) 2,158,633 (6%) 13,826,485 (52%) 11,737,646 (35%) 30% 6% 35% Europe, Africa, and the Middle East Asia-Pacific Americas, excluding US United States 0 End 2001 End IASC Foundation. 30 Cannon Street London EC4M 6XH UK.

11 Fortune Global 500 (July 2009) 11 Fortune G500 Based on announced plans Which GAAP? Japan 2015? IFRSs and word-for-word IFRS equivalents US GAAP National GAAPs Total IASC 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 Growing IFRS adoption by major economies; continued US support and recognition of IFRSs as being high-quality standards Financial crisis; G20 pressure for convergence leading to adoption; focus on remaining major joint projects MoU timetable adjusted to ensure critical issues are completed IASC Foundation. 30 Cannon Street London EC4M 6XH UK. IASB is established; enters Norwalk Agreement with FASB MoU accelerating convergence SEC removes reconciliation requirement Updates to MoU with 2011 targets and SEC roadmap Further SEC update to roadmap Modified convergence strategy prioritizes major projects for June 2011 completion

13 FASB/IASB Agreement Remove differences Align Agendas Interpretation

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16 Conceptual Framework Issues 16 The objectives of financial reporting Qualitative characteristics Definitions of assets and liabilities Recognition Measurement Presentation

17 Roadmap Short term - remove major differences 2. Medium term - new joint standards where significant improvement required

18 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.

19 Major MoU Projects 2010 Standard 19 Derecognition Consolidations

20 Major MoU Projects Q Standards 20 Fair Value Measurement Pensions

21 Pensions 21 m Deficit 10 Less 10% of liabilities 4 6 Spread over 10 year working life Deficit per accounts - 600,000

22 Major MoU Progress Q Standards 22 Revenue Recognition Leases Financial Instruments

23 Leases Total Annual leasing volume $644bn N. America 21% Europe 49% Asia 19% Rest of world 11%

24 Financial Instruments 24 Classification and Measurement Assets Liabilities Impairment Hedging

25 Changing Standard Setting Deadlines quality paramount 2. More time taken does not mean better standards 3. World and standard setting changed since crisis Proactive engagement Globally consistent answers New ways of working 4. Support for post-implementation reviews

26 Possible Agenda Issues 26 Old Standards - Agriculture - Share based payments - Income Taxes - Pensions - Associates - Government Grants - Intangibles - Foreign currency translation - Performance reporting - Disclosure Framework

27 Possible Agenda Issues (Cont.) 27 Post-implementation Review - Segments - Business Combinations Other - Extractive Industries - Common Control

28 Current Debates Transparency v Financial Stability 2. Ideology Fair value v historical cost IFRS v US GAAP Performance presentation 3. IFRS international or regional? 4. ADOPT don t ADAPT 5. Principles v rules

29 Principle based standards 29 Can we do it?

30 Principle-based standards 30

31 A principle based standard 31 No exceptions Core principles (objectives) No inconsistencies Tied to conceptual framework Judgement Minimum guidance

32 Rule-based Standards 32 If don t act with integrity If attack reasonable judgement in court If ask for voluminous interpretations If raw economic facts are unacceptable If regulators want one answer

33 Other Projects 33 Insurance SMEs Management Commentary Emission Rights

34 The IFRS for SMEs (Private Entities) 34 Good Financial Reporting Made Simple. Just 230 pages (full IFRSs > 3,000) Simplified IFRSs, but built on an IFRS foundation Completely stand-alone Internationally recognised Final standard was issued July 2009 Any entity is eligible to use except publicly traded and financial institutions

35 The IFRS for SMEs (Private Entities) 35 To date, 61 jurisdictions have adopted or announced a plan to adopt Why would a private entity want to adopt? Improved access to capital Improved comparability Improved quality of reporting as compared to existing national GAAP for SMEs Less of a burden where full IFRSs or full national GAAP are now required

36 The future IFRS in +120 countries and US convergence programme 2012 IFRS in +150 countries and US broadly converged Vision A single set of high quality global accounting standards

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