This document provides an update on International Financial Reporting Standards (IFRS). Approximately 120 nations require or allow IFRS use for listed companies, with 90 having fully adopted IFRS. The EU requires IFRS for listed companies. While the US and IASB have committed to convergence, differences remain between US GAAP and IFRS. The SEC is still considering whether and when to require US companies to use IFRS, with a decision expected in the next few months. Private companies may also have IFRS adoption options to consider.

1. IFRS Update
Presented by: www.decosimo.com
Renee B. Ford, CPA, Assurance Principal
Joseph Decosimo and Company, PLLC

2. Worldwide use of IFRS
 Approximately 120 nations and reporting
jurisdictions permit or require IFRS for listed
companies.
 Of those, 90 have fully conformed with IFRS as
promulgated by the IASB.
 EU member nations require IFRS for listed
companies.
 Japan allows use of IFRS for certain entities but still
working through convergence and adoption.
 China is using mostly converged local GAAP.

3. US
GAAP
–
IFRS
Convergence
History
FASB
and
IASB
commit
to
2002
“Norwalk
Agreement”
compaEble
accounEng
standards;
joint
effort
FASB
and
IASB
develop
2006
“Memorandum
of
roadmap
for
convergence;
Understanding”
specific
milestones
by
2008
SEC
accepts
IFRS
statements
Result
of
European
Union
2007
from
foreign
issuers
requiring
its
listed
companies
to
use
IFRS.
2008
-­‐
2009
Ongoing
GAAP-­‐IFRS
FASB
and
IASB
reaffirm
convergence
projects;
update
commitment
to
converge
all
to
MoU
major
standards
by
2011.
2010
SEC
announces
Work
Plan
for
2011
decision
on
if/when
consideraEon
of
IFRS
IFRS
will
be
mandatory
for
US
adopEon
for
public
cos.
issuers
2011
SEC
issues
3
Staff
Papers
SEC
studies
IFRS
in
pracEce
and
inventories
areas
where
IFRS
guidance
<
GAAP

4. Convergence
vs.
Adop/on

5. “Convergence”
• Merging
two
separate
sets
of
standards
• Best
approach
of-­‐
– US
GAAP
– IFRS
– Jointly
developed
new
standard

6. Outstanding
Convergence
Projects
• Financial
instruments
–
priority
project
• Revenue
recogniEon
–
priority
project
• Leasing
–
priority
project
• Insurance
contracts
• ConsolidaEon
• All
others
delayed
indefinitely

7. Some
of
the
differences
remaining…
• Inventories
• Fixed
assets
• Income
taxes
• Measurement
of
conEngencies
• Financial
instrument
risk
disclosures
• PresentaEon
of
basic
financial
statements

13. Latest
SEC
AcEviEes
re:
IFRS
• Staff
Paper
–
May
2011
– Gradual
approach
via
convergence
– Endorsement
of
new
IFRS
on
case-­‐by-­‐case
basis
– SEC
to
conEnue
oversight
of
FASB
– FASB
would
provide
input/support
to
IASB
• Two
Staff
Papers
–
November
2011
– Comparison
of
US
GAAP
and
IFRS
– An
Analysis
of
IFRS
in
PracEce

14. Comparison
of
US
GAAP
and
IFRS
• ObjecEve
–
to
evaluate
if
IFRS
is
sufficiently
developed
• Inventory
areas
where
IFRS
doesn’t
provide
guidance
or
provides
less
than
US
GAAP
• Excluded
areas
undergoing
convergence
• Findings
–
– US
GAAP
–
more
consistency
within
industries
– IFRS
–
more
consistency
across
industries

15. Analysis
of
IFRS
in
PracEce
• Financial
statements
of
183
companies
• Findings
–
– Transparency
and
clarity
could
be
enhanced
– Diversity
in
applicaEon
of
IFRS
across
countries
and
industries
• OpEons
provided
by
IFRS
• Tendency
to
carry
over
country
guidance
– Diminishes
comparability
on
a
global
level

16. December
2011
• SEC
indicates
decision
is
sEll
“at
least
a
few
months
away.”
• FASB
Chair
announces
that
side-­‐by-­‐side
convergence
is
“not
the
opEmal
model
in
the
long
run.”
• FAF
recommends
FASB
(and
other
naEonal
bodies)
be
engaged
in
internaEonal
standard
sehng,
“U.S.
GAAP”
be
retained.

17. AICPA
RecommendaEon
“Whether
or
not
the
SEC
decides
to
incorporate
IFRS
into
the
U.S.
financial
reporEng
system
through
an
endorsement/
convergence
approach,
we
believe
U.S.
issuers
should
be
given
the
opEon
to
adopt
IFRS
as
issued
by
the
IASB,”
Paul
V.
Stahlin,
AICPA
chairman,
and
Barry
C.
Melancon,
AICPA
president
and
CEO,
said
in
a
four-­‐page
leker
to
the
SEC.

18. Private
Company
Scenarios
• Conversion
to
IFRS
or
IFRS
for
SMEs
• Private
company
US
GAAP
(“Blue
Ribbon
Panel”
report
in
early
2011
recommended
U.S.
GAAP
with
excepEons
and
modificaEons
for
private
companies,
with
separate
board.)
– FAF
rejected
recommendaEon
in
October
2011
• ExisEng
US
GAAP
maintained/updated
for
non-­‐public
enEEes.

19. Short-­‐term
Concerns
• Increased
awareness
of
and
readiness
for
standards
changes
resulEng
from
convergence
• Monitoring
and
managing
subsidiaries’
adopEon
of
IFRS
• Awareness
of
how/if
use
of
IFRS
by
non-­‐US
counterparEes
could
affect
structure
of
deals
and
transacEons

20. CONTACT INFORMATION
 Renee B. Ford, CPA
Assurance Principal
Joseph Decosimo and Company, PLLC
reneeford@decosimo.com
(423) 756-7100