Accounting and Accountability for Regional Economic Growth Challenges and Benefits in Adopting International Financial Reporting Standards Roberto Truque-Harrington, CFO Mexico City, Mexico, June 13th, 2007
Who we are? Atlas Eléctrica, S.A. Based in Costa Rica. Manufacturer and distributor of refrigerators, electric and gas ovens; also a distributor of microwave ovens, washing machines, air conditioners, electronic goods. Employees: 1,500 Market position: Leader with over 50% market share in Central America with the brand names Atlas and Cetron, also sales in the Caribbean, Mexico and the USA. Financial information: Listed in Bolsa Nacional de Valores (BNV) since 1976 Sales 2006: US$ 113 million. Assets US$ 81 million. Market Cap: US$ 37 million (March/07) 2
IFRSs challenges in Costa Rica Prior to the year 2001 the financial information was done in Costa Rica using a mix of different standards. The Mexican, the Costa Rican, as well as the USGAAP. Those are my principles, and if you don't like them... well, I have others. (Groucho Marx) El Colegio de Contadores Públicos de Costa Rica adopted in full the IASs in 2001, which it had partially begun since 1999. In 2005 it again ratified its use. In 2001, the CONASSIF, the supervisory body of financial institutions in Costa Rica, also began making it mandatory for non-financial institutions to adopt the International Accounting Standards (Atlas case). In 2001 the Dirección General de Tributación (IRS), published the criteria to be considered during the transition from local GAAP to the IAS. 3
IFRSs challenges for Atlas Challenges Solutions The implementation of the IFRSs is an extensive, complex, sophisticated and costly task with constant changes. Complex because learning cannot be done by oneself. Sophisticated: because it has to be properly understood to avoid grave misinterpretations. The implementation of IFRSs has been a learning experience for Atlas in the last three years. The burden of this teaching process temporarily has fallen on our external auditors, whom have had the expertise and up-to-date knowledge of the relevant changes in the standards. Audit fees have gone up because of the new expertise required by their staff. 4
IFRSs challenges.. (cont.) Challenges Solutions Training There are not enough trained professionals who can keep abreast of the changes in the IFRSs and be able to teach them on a timely manner. In the land of the blind, the one-eyed man is King Our staff required constant training to be able to keep up to date on all the changing subjects. We are looking for new sources of information that will help update them in similar ways to the training received by the auditors in the big 4 auditing firms. This training included our personnel in different countries, where IAS has not been implemented (DR, Hon, Sal, Nic.) 5
IFRSs challenges.. (cont.) Challenges Solutions Disclosure: correct and complete revelations Better quality information in the notes to the financial statements produced. Companies are obliged to reveal information not required previously. This was another area where we initially teamed up with the external auditor firm, analyzing up to what extent new revelations of information were required due to the implementation of IFRSs. The notes to the financial statements are now produced by the administration after extensive analysis and later reviewed by the auditors. 6
IFRS benefits for Atlas Benefits Credibility to stakeholders: Publicly posted financial information allows for open and transparent discussion with clients and suppliers. Our employees understand better the financial health and direction of the company. Creditor banks receive new and ample information. The audited financial information produced with IFRSs is used by the risk analysis firm that analyzes Atlas performance. The financial community receives our annual audited financial statements, and interim reports without problems of interpretation of the figures reported, which are also disseminated through different web sites to be seen by the general public. 7
IFRS benefits.. (cont.) Benefits Higher qualified accounting professionals New accounting requirements in a global economy demand better skills of the accounting professionals. Using one set of standards allows for the specialization of our professionals in IFRSs. This being the benchmark, our challenge is to train them in a timely manner according to the new rules as they become available, making them better skilled in their profession. 8
IFRS benefits.. (cont.) Benefits Higher quality information The IFRSs demand better disclosure in certain areas, which was left before to the company s own judgment. Better financial notes allow stakeholders to make more indepth analysis of the company. More analysis is done and revealed through the notes, and in certain cases this allows a glimpse to the future of certain accounts of the company (asset valuation, intangible assets, etc.). 9
IFRS benefits.. (cont.) Benefits Comparability of financial statements IFRSs being an International Standard, allows for its use in different latitudes. The financial statements produced and disseminated to our stakeholders in different parts of the world, can be used by them without having to reconcile the figures. What you see is what you get! 10
Atlas Eléctrica S.A. is a member of the Companies Circle of the Latin American Corporate Governance Roundtable www.atlas.co.cr www.oecd.org www.ifc.org/corporategovernance www.gcgf.org roberto.truque@atlas.co.cr