IFRS presentation given by Steve Austin of Swenson Advisors, LLP at the 5th Annual Hot Topics Seminar on October 16, 2012.

1. Latest Developments in IFRS
5th Annual Hot Topics Seminar
October 16, 2012
Stephen G. Austin, CPA, MBA
Firm Managing Partner
Swenson Advisors, LLP

2. 2

3. BREAKING NEWS
Gregory Anton, AICPA Chairman:
“IFRS Adoption by the U.S. is not
coming any time soon”
Anton said the AICPA supports giving US companies
the option to use IFRS, and supports the issue of one
set of high-quality standards, but warned that the
"absolute soonest" IFRS will be seen in the US will be
in five to six years' time.
3 Accountancy Age, R. Crump, 8/10/2012

4. BREAKING NEWS
SEC Report Offers Lingering
Questions about IFRS
The SEC staff report released on July
13, 2012 is 127 pages of details on
how IFRS has been developed,
maintained and is performing globally,
and the potential challenges and
benefits of their use by U.S. public
companies.
SEC.gov, 7/13/12

5. BREAKING NEWS
SEC Shuts Down IFRS Decision Timeline
The SEC is making it clear that the staff’s long-
awaited final report will not contain any
recommendations for commission action. SEC
Chief Accountant, James Kroeker has announced
his plans to leave his position at the SEC in July to
return to the private sector.
Compliance Week, T. Whitehouse, 7/9/12
5

6. BREAKING NEWS
Accounting Panel Expresses ‘Regret’
Over U.S. Stance
The IFRS Foundation, which oversees the
IASB, said that while it recognizes the SEC’s
right to determine how and when IFRS should
be used in the U.S., but “we regret that the
staff report is not accompanied by a
recommendation action plan for the SEC.”
Wall Street Journal, 7/15/12
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7. Executive Summary
Summary Findings
1.Development of IFRS
• IASB has made significant progress in developing a
comprehensive set of accounting standards
• Standards are generally perceived to be high quality
by the global financial reporting community. However,
there continue to be areas that are underdeveloped
(extractive industries, insurance, rate-regulated industries)
2.Interpretive Process
• The staff’s outreach both domestically and internationally
indicates that the IFRS IC should do more to address
issues on a timely basis
• IFRS Foundation recently implemented changes to address
this concern, however, it is unknown at this point
whether they will be effective
7

8. Executive Summary, Continued
3. IASB’s Use of National Standard Setters
• The IASB needs to understand the intricacies of a
number of distinct domestic reporting and regulatory
systems in order to develop accounting standards that could
be incorporated in multiple jurisdictions
• The IASB should consider greater reliance on national
standard setters
4. Global Application and Enforcement
• To derive many of the key benefits of a single set of
accounting standards, it is critical that those standards are
applied and enforced on a consistent basis
• The SEC conducted a review of financial statements
prepared in accordance with IFRS, while financial
statements generally appeared to comply with IFRS, global
8
application of IFRS could be improved to narrow

9. Executive Summary, Continued
5. Governance of the IASB
• IASB does not have a mandate to consider the
establishment of standards with the focus of any single
capital market
• May be necessary to put in place mechanisms specifically to consider
and to protect the U.S. capital markets
Example, maintaining an active FASB to endorse IFRSs
6. Status of Funding
• IFRS Foundation has made progress in developing a funding
mechanism
• More than 100 countries around the world, but current funding is
provided to the IFRS Foundation by businesses, not-for-profits, and
governments in fewer than 30 countries
• Unsuccessful in obtaining funding for the portion of the IASB budget
allocated to the U.S.!!
• Financial Accounting Foundation – committed to participating in
9 discussions on the issue of funding from U.S. sources

10. Executive Summary, Continued
6. Status of Funding, continued
• Staff’s most significant concern about the funding
approach is the continued reliance on the large public
accounting firms to provide funds to the IASB
7. Investor Understanding
• Staff observed that investor education on accounting
issues and changes in the accounting standards is not
uniform
10

11. RECENT NEWS
David Tweedy:
“U.S. decision is a key to
future international standards.”
“Nations with significant economies
such as Japan, China and India might
not adopt IFRS if the U.S. doesn’t.”
11 Journal of Accountancy, K. Tysiac 4/25/2012

12. MoU Process
First MoU – February 2006
Second MoU – 2008
Third MoU – 2009
12

13. Subsequent Series of Progress
and Work Plan Reports
13

14. SEC Staff Released Reports Analyzing the
Current Reporting Practices and Comparing
U.S. GAAP & IFRS in Specific Areas
An Analysis of IFRS
in Practice
Shows the results of the analysis of the
most recent consolidated financial
statements of 183 companies, including
SEC registrants & non-registrants, that
prepare financial statements in
accordance with IFRS.
14

15. Reports, Continued
A Comparison of
U.S. GAAP and IFRS
Summary of similarities & differences
between two sets of reporting standards
in 29 FASB Accounting Standards
Codification subject areas. The report is
informal only and does not include
conclusions and recommendations.
15

16. IASB Work Plan
Projected targets as at October 1, 2012

17. IASB Work Plan
Projected targets as at October 1, 2012, Continued

18. IASB Work Plan
Projected targets as at October 1, 2012, Continued
18

19. FASB/IASB Status of Projects
19

20. Overview of
Convergence Process
20

21. IFRS for SMEs
21

22.  Progress report on Guide for micro-sized entities
applying for IFRS for SMEs
 New English-language training modules
 IFRS for SMEs translations: status report
 IFRS for SMEs ‘train the trainers’ workshop held
in Mongolia and Ukraine
22

23.  A fact sheet on the IFRS for SMEs that summarizes
activities since the IFRS for SMEs was issued has
been posted to the IASB’s website
 The fact sheet includes information about adoptions,
translations, training, Q&As, publications, and the
comprehensive review that is currently under way. It
also contains an up-to-date list of SME resources
that are available for free download from the IASB’s
website.
 The IFRS for SMEs fact sheet is available to
download at www.ifrs.org
23

24. Guidance for Micro-Sized Entities
Applying for IFRS for SMEs
 The IASB staff has started to develop guidance to
help micro-sized entities apply the IFRS for SMEs.
 The SME Implementation Group (SMEIG) will work
with the staff in developing this guidance.
 No fixed timetable for completion of guidance.
However, staff is aiming for publication in early
2013.
24

25. IFRS for SMEs Translation:
Status Report
 Current status of translations of the IFRS for SMEs
approved by the IFRS Foundation:
Completed: Albanian, Arabic, Armenian, Bosnian,
Chinese (simplified), Croatian, Czech, French,
Hebrew, Italian, Japanese, Kazakh, Lithuanian,
Macedonian, Mongolian, Polish, Portuguese,
Romanian, Russian, Serbian, Spanish, Turkish
In progress: Estonian, German, Khmer, and Ukrainian
Available for free download at www.ifrs.org
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26. Overview of the New Revenue
Recognition Model
26

27. Exposure Draft
Issued in June 2010
27

28. Key Components :
Revenue Recognition
Step 1 Identify the contracts with the customer
Step 2 Identify the separate performance
obligations
Step 3 Determine the transaction price
Step 4 Allocate the transaction price to the
performance obligations
Step 5 Recognize revenue when a performance
obligation is satisfied
28

29. Revision to Exposure Draft
Originally Issued in June 24, 2010
Re-Exposed in November 2011
The boards decided to
re-expose the proposed revenue
guidance to avoid unintended
consequences from the final
standard and to increase
transparency.
29

30. Summary of Changes from
Previous Exposure Draft
30

31. Summary of Changes from
Previous Exposure Draft, Continued
Journal of Accountancy “A new system for recognizing revenue”, Jan. 2012, M. Lamoreaux

32. IASB/FASB Meeting
September 2012
Topics discussed of revised Exposure Draft (ED)
“Revenue from Contracts with Customers”:
Constraining the cumulative amount of revenue recognized
Collectability, including accounting for contracts with
customers that contain nonrecourse, seller-based financing
Time-value of money
Contract issues—distribution networks
32

33. IASB/FASB Meeting
September 2012, Continued
Constraining the cumulative amount of revenue
recognized
The Boards tentatively decided:
That in keeping with the proposal in the 2011 ED, an
entity should evaluate whether to constrain the
cumulative amount of revenue recognized if the
amount of consideration to which an entity expects to
be entitled is variable
To clarify the meaning of ‘variable consideration’ to
indicate that the constraint should apply to a fixed price
contract in which there is uncertainty about whether
the entity would be entitled to that consideration after
satisfying the related performance obligation
33

34. IASB/FASB Meeting
September 2012, Continued
Collectability
The Board tentatively decided:
To approve the proposal in the 2011 ED that an entity
should adjust the amount of promised consideration for
the effects of the time-value of money if the contract
with a customer has a significant financing component
34

35. IASB/FASB Meeting
September 2012, Continued
Time-Value of Money
The Board tentatively decided:
To present any impairments recognized in the current
period or in a subsequent period in a consistent manner
To provide additional guidance in the Standard about
how to determine whether a contract with a customer
exists based on the customer’s commitment to perform
its obligations under the contract
35

36. IASB/FASB Meeting
September 2012, Continued
Contract Issues – Distribution Networks
The Boards discussed the application of the proposals in
the 2011 ED to arrangements that arise in distribution
networks
An entity (such as a manufacturer) may transfer
control of a product to its customer (who may be an
intermediary, such as a dealer or retailer)
The manufacturer may also promise other goods or
services as sales incentives to encourage the sales of
those products that have become part of the
intermediary’s inventory
36

37. Leases
Exposure Draft
Issued in August 2010
(Re-Exposed)
37

38. Work Plan for Remaining Priority
Convergence Projects
Leasing:
 The objective of this project is to improve financial reporting by
ensuring that all assets and liabilities arising from lease contracts are
recognized in the statement of financial position
 The boards published a joint exposure draft in August 2010
 The boards have been considering the feedback received from
comment letters and the boards’ extensive outreach activities
 They intend to develop a draft of the new standard, which will be:
a) Made generally available, via the boards’ websites, for interested
parties to review;
b) Used as the basis for outreach with parties that are most
affected by the proposed new requirements; and
c) Subjected to a detailed drafting review with selected parties, as
part of the fatal flaw review process each board is required to
undertake
38

39. Work Plan for Remaining Priority
Convergence Projects
Financial Instruments:
 Efforts to improve our requirements and to reach a
common solution have been complicated by differing
imperatives that pushed our respective development
timetables out of alignment
 Strategy for addressing those differences remains the
same – each board has been publishing its proposals
while also soliciting comment on those of the other board,
as a way of giving interested parties the opportunity to
compare and assess the relative merits of both boards’
proposals
39

40. Convergence Approach
China – Best Example
 Moving closer
 Not full incorporated
 Follow “ASBEs” – Accounting Standards for Business
Enterprises (Set by the Accounting Law of the PRC)
 Adopted 2006 standards in 2007
 September 2009 – new Roadmap (exposure draft)
 In state of “lull”
40

41. Endorsement Approach
(Vast Majority Follow this Approach)
 Degree of deviation varies by jurisdiction
 Translated into local language (not English)
 Modification based on “country specific issues”
 EU – largest example
Australia – 2nd largest example
2005 Must follow IAS adopted by European Commission for listed companies
2006 - New IFRS must go through multiple steps before its authorized by the
Present “EFRAG” (European Financial Reporting Advisory Group)
and then “SARG” (Standards Advice Review Group) and then..
“ARC” (Accounting Regulatory Commission) and finally...
the European Parliament has three months to oppose endorsement
If not opposed published in the Office Journal of the EU 41

42. IFRS Future
in the U.S.
42

43. Schapiro’s Tenure:
She’s Already Outlasted
Average SEC Chairman
It was reported on 9/18/12 that Schapiro is
considering resigning following the election.
The SEC says “she has no departure plans.”
Officially, Schapiro’s term expires in 2014.
43 Wall Street Journal, 9/19/12

44. Post Election Prediction
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45. Thank You
Stephen G. Austin, MBA, CPA
steve.austin@swensonadvisors.com
www.SwensonAdvisors.com
www.SwenAsia.com
www.swentrack.com
www.swensonforensic.com
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