International Financial Reporting Standards

1
International Financial Reporting Standards

• D.J. Gannon, Partner
• Deloitte Touche LLP
• Deloitte/FSA Faculty Consortium
• May 15, 2008

2
Agenda
3
(No Transcript)
4
(No Transcript)
5
A Point of View

• IFRS is inevitable in the U.S.
• Convergence landscape is changing
• Timelines are accelerating

• Involves a new way of thinking
• Regulatory perspectives are changing
• Infrastructure changes are underway

• IFRS may already be applicable
• Impacts and potential benefits beyond accounting
• Pro active assessment of impact

6
The Global Move Towards IFRS
Canada 2009/11
Europe 2005
United States (2011?)
China 2007
Japan(?)
India 2011
Brazil 2010
Chile 2009
South Africa 2005
Australia 2005
7
IFRS Today and Tomorrow

• Today IFRS is used in over 100 countries
• Required across all EU countries, starting in
  2005
• Brazil, Canada and India have announced mandated
  use
• Ongoing convergence efforts between FASB and IASB
• By 2011, it is expected that
• All major countries will have adopted IFRS to
  some extent
• China and Japan will be substantially converged
  to IFRS
• U.S. public companies will likely have the option
  of using either IFRS or U.S. GAAP

8
Regulatory Developments

• Considerable movement towards mutual recognition
  of financial reporting frameworks between the
  U.S. and the EU
• U.S. GAAP in EU - Equivalence Initiative
• IFRS in U.S. - IFRS Roadmap
• SEC developments
• Elimination of U.S. GAAP reconciliation for
  Foreign Private Issuers using IFRS effective for
  12/31/07 year ends
• Concept release allowing U.S. companies a choice
  of IFRS is gathering support
• IFRS roadmap on use in the U.S. expected this
  year
• Ongoing evolution of regulatory practices
• Greater cooperation amongst regulators on IFRS
  application issues including agreed upon work
  plans

9
Ongoing Convergence Efforts

• IASB and FASB reaffirm convergence efforts
• Updating of the Norwalk Agreement
• Focus is on the process and converging general
  principles
• Less focus on converging details
• Involves several projects
• Short-term convergence projects
• Joint conceptual framework projects
• Other Joint convergence projects
• Other IASB projects
• Future prospects

10
(No Transcript)
11
Drivers of Interest in IFRS
12
Recent Deloitte Survey Would You Consider
Adopting IFRS?
13
A Perspective on IFRS

• Will require a change in mindset
• More of a focus on thinking about the answer
• Less detailed guidance to consider
• More of a focus on the substance of
  transactions
• Evaluate whether the accounting presentation
  reflects the economic reality
• Grater use of professional judgment
• More of a focus on the process around making
  judgments
• CIFR recommendations
• Impact on risk
• Possibility of second-guessing by regulators?
• Will litigation increase?

14
What Were Doing at Deloitte

• Established an IFRS project management office
• Focused resources to help coordinate and lead
  firm-wide response to IFRS
• Coordination and oversight of strategic IFRS
  activities
• Deloitte Learning actively involved and driving
  training effort
• Plan underway to provide IFRS training needed for
  DTT accreditation to an estimated 1,500
  professionals in 2008
• Focus on level of convergence between IFRS and
  U.S. GAAP
• Based on current assignment to IFRS clients
• Scheduled seminars in the Spring and Fall
• Course to highlight IFRS (and explain future
  changes) has been developed for all professionals
• Three to five-year plan under development to
  address long-term training implications for
  professionals

15
Impact on Academia

• When should IFRS be taught?
• Students in the system today
• New students coming into the system
• What will the movement to IFRS mean for
  curriculum?
• Not just about accounting
• Greater need to understand other disciplines
• How will the approach to testing and
  certification change?
• Objective versus subjective analysis
• Focus on problem solving and decision making
  process

16
Deloitte IFRS University Consortium

• Dedicated to helping to bring IFRS to the
  classroom
• Focus on providing solutions
• Open to any institution
• No cost to institutions
• Simply agree to participate and provide feedback
• Activities and benefits
• Providing input in the direction, goals and
  resources available from the consortium
• Participation in periodic webcasts and sharing of
  best practices used in the classroom
• Involvement in defining the academic needs to be
  addressed by the development of materials
• Access to the support and guidance from Deloitte
  professionals
• Access to Deloitte IFRS information resources,
  publications and training sessions.
• Register at USDeloitteIFRSUniversityConsortium_at_del
  oitte.com

17
(No Transcript)
18
From Current State to End State
Current State
Corporate Reporting
Statutory Reporting
Migration to IFRS
Standardize IFRS to US GAAP adjustments
End State
Chart Key
US GAAP
Merge corporate and statutory IFRS reporting
IFRS
19
Key Impacts of IFRS Implementation
20
First-time Adoption of IFRS Overview of IFRS 1

• Applicable when an entity makes its first
  explicit and unreserved reference to IFRS
• Generally apply retrospectively all IFRS
  effective at reporting date
• Certain exemptions can be elected
• Some exceptions that must be followed
• Only requires one year of comparative financial
  information
• Transition adjustments recognized in retained
  earnings
• Must explain effect of transition to IFRS

21
IFRS 1 Considerations
22
Thoughts on The EU Experience
23
(No Transcript)
24
Summary

• IFRS has become a dominant force globally and is
  coming, sooner or later, to the U.S.
• The movement to IFRS will result in a new way of
  thinking
• A significant number of U.S. companies are
  planning IFRS adoption
• Now is the time to begin addressing the impact of
  IFRS

25
About Deloitte Deloitte refers to one or more of
Deloitte Touche Tohmatsu, a Swiss Verein, and its
network of member firms, each of which is a
legally separate and independent entity. Please
see www.deloitte.com/about for a detailed
description of the legal structure of Deloitte
Touche Tohmatsu and its member firms. Please see
www.deloitte.com/us/about for a detailed
description of the legal structure of Deloitte
LLP and its subsidiaries.