A change from U.S. GAAP to IFRS is desirable.

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A change from U.S. GAAP to IFRS is desirable.

• Adrienne Lott
• Rashid Koja
• Brett Wainger
• Rene VanWalsem

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www.youtube.com/watch?vLagdwuwGNsE
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Intro Pro-ifrs

• Team Position
• A change from US GAAP to IFRS IS desirable.
• Ultimate Goal
• A single, consolidated set of the best global
  accounting standards
• IFRS merely end result

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Perspective on Convergence

• The emphasis on high-quality means that if an
  IASB standard or a FASB standard is deemed to be
  the better one, then convergence will be to the
  superior standard. If neither standard is of
  sufficient quality, the boards would then work
  together jointly to develop a new standard.
• Gary Illiano, Partner in Charge of Accounting
  and Auditing in Grant Thornton, LLPs New York
  National Office.

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Timeline

• 1981 SEC Release No. 33-6360 (November 20,
  1981)
• 1988 SEC Policy Statement
• 1994 - FASB and IASC co-op on common EPS
  standard
• 2002 Norwalk Agreement

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Timeline

• 2004 - European Commission Equivalence
  Project
• 2007 - SEC accepts IFRS Financial Statements
• 2008 - Release of Roadmap
• 2009 - Dr. Spiceland teaches IFRS in ACCT 7120

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Pro-arguments

• Enhanced comparability for U.S. investors
• Increased access to international capital markets
• Eradication of dual sets of books
• Eliminates race to the bottom
• Enhanced implementation of XBRL
• (extensible business reporting language)
• Principles-based accounting is superior to
  rules-based accounting

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Enhanced comparability

• Accuracy
• Efficiency
• Significance
• XRBL

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Enhanced comparability

• Accuracy
• Current assets
• Current ratio -----------------------
• Current liabilities
• Discontinued operations
• Inventories
• Lower of Cost and Market
• Asset Retirement Obligations (ARO)

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Enhanced comparability

• Efficiency
• . . . Savings of some magnitude for us . . .
• Philip Ameen, CPA
• VP and Comptroller
• General Electric Company

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Enhanced comparability

• Significance

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Enhanced comparability

• IFRS is now used for public reporting purposes
  in over 100 countries, ranging from Australia to
  the United Kingdom. Others countries are expected
  to follow in the next few years, including Israel
  (2008), Chile (2009), Korea (2009), Brazil
  (2010), and Canada (2011).
• Deloitte
• IFRS is well on its way to becoming the global
  language the rest of the world uses. The US has
  to get with it.
• Senator Charles Schumer, NY
• Vice-Chairman of the Joint Economic Committee

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Enhanced comparability

• Usability of XBRL data
• Creating common taxonomy for XBRL

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• More comparable reporting across firms from
  different countries facilitates cross-border
  investment and the integration of capital
  markets. Recent evidence supports this notion
• FASB Chairman John J. Brennan
• FAF Chairman, Robert H. Herz

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Increased access to international capital markets

• Simplified evaluation by foreign investors
• equity markets
• debt markets
• Capital market efficiency creates expanded
  cross-border capital flows
• Important potential benefits of high-quality and
  more comparable corporate reporting practices are
  greater market liquidity, a lower cost of capital
  and a better allocation of capital.
• Hail, Leuz Wysocki
• FASB commissioned study

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Eradication of dual sets of books

• Subsidiary / Parent accounting methods
• Streamlined/centralized accounting operations
  shared services approach
• Reduced training, software costs
• Increased consistency / reduced errors / reduced
  penalties and fines

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Eliminates race to the bottom

• FASB Relaxation of fair value requirements
• IASB pressured to follow suit
• Predictable result Race to the bottom
• We need to arrive at a level playing field on
  this matter
• Christine Lagarde, French Finance Minister

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Eliminates race to the bottom

• The presence of real or perceived differences
  between these standards enable the pursuit of
  accounting arbitrage that, if unchecked, could
  result in a race to the bottom in financial
  reporting.
• FASB Chairman John J. Brennan
• FAF Chairman, Robert H. Herz

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Implementation of XBRL(extensible business
reporting language)

• XBRL and financial reporting
• IFRS XBRL tags updated annually
• Global standards maximize XBRL usefulness
• XBRL facilitates principle-based accounting
  because it reduces the need to worry about where
  the item is reported, but only that it is.
• AICPA

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Principles-based accounting is superior to
rules-based accounting

• Previous arguments are ancillary
• Big question
• Does the end result provide the USA
• with a solid accounting framework?

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Principles-based accounting is superior to
rules-based accounting

• Substance over form
• Judicial doctrine in US legal system
• Widely used in US GAAP as is.
• Accrual vs. Cash based
• Percentage-of-completion
• Deferred sales (magazine subscriptions)
• Deferred tax expense

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Principles-based accounting is superior to
rules-based accounting

• Substance over form
• Other areas in US GAAP might benefit from fewer
  bright lines.
• Leasing
• Insurance contracts
• Pension expense

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Final Statement from (arguably) the best
accounting firm today

• We believe that the existing body of IFRS has
  proven to be of high quality, is developed
  through a robust standard-setting process and is
  thus being used for reporting by foreign private
  issuers in the US without reconciliation to US
  GAAP.
• Ernst Young, LLP 4 March 2009