Converting to, and reporting under, IFRS John Kent 2 October 2007 IFRS Conversion Services Audit.

Converting to, and reporting under, IFRSJohn Kent

2 October 2007

IFRS Conversion Services

Audit

2© 2007 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.



Contents

What are the main impacts of IFRS compared to UK GAAP?

How to plan a conversion to IFRS

The ongoing effects of IFRS on reporting and on the audit process



What are the main impacts of IFRS compared to UK GAAP?

Business combinations

Financial instruments

Deferred tax

Leases

Development costs

Segmental reporting

Pensions

OtherShare options (FRS 20deals with from 2006)

Source: KPMG survey of FTSE 100 companies 2005 IFRS accounts



How to plan a conversion to IFRS

Question 1:Question 1:

What are the key What are the key accounting and accounting and disclosure differences disclosure differences between current between current GAAP and IFRS?GAAP and IFRS?


What is the estimated What is the estimated directional impact on directional impact on profit and equity, if profit and equity, if reported under IFRS?reported under IFRS?


What is the impact What is the impact on systems and on systems and

processes – quick processes – quick fix or major fix or major

overhaul?overhaul?

Question 4: Question 4:

Who is impacted by Who is impacted by the conversion and the conversion and

what are their training what are their training needs?needs?


What would a high level conversion plan look What would a high level conversion plan look like and what is its likely impact on resources?like and what is its likely impact on resources?



The ongoing effects of IFRS on reporting and on the audit process

More information to be disclosed

More information to be audited



The growth of the international standards (by number of pages in the bound volume)

Year Pages

2003 1,952

2004 2,250

2005 2,304

2006 2,385

2007 2,513

1500

1700

1900

2100

2300

2500

2003 2004 2005 2006 2007 Source: IASB bound volumes



The changing size of financial statements (in pages)

Last UK GAAP 1st IFRS 2nd IFRS

BP 131 180 (49p / 37%) 228

Tesco 68 116 (48p / 70%) -

HSBC 378 424 (46p / 12%) 458

Kingfisher 72 108 (36p / 50%) 108

GSK 184 192 (8p / 4%) 192

Source: published accountsKey: (additional no. pages / % increase)



Financial Reporting Review Panel comments

Tendency to use “boiler-plate” descriptions for disclosure of accounting policies

Disclosures relating to subjective or complex judgements made by management were sometimes bland and uninformative

“The Panel encouragescompanies to describe the

accounting policies applied in practice, including

information specific to their particular circumstances.”

Source: FRRP PRELIMINARY REPORT: IFRS IMPLEMENTATION

“The Panel encourages companies to avoid

“boiler-plate” descriptions and to include specific information relevant to

understanding key sources of estimation uncertainty.




Financial Reporting Review Panel comments

Goodwill / intangible assets

explain the factors giving rise to goodwill, and describe, for any intangible assets that were not recognised, why their value could not be reliably measured

Impairment testing

“The Panel reminds preparers of this new disclosure requirement which in

some cases was not met, and in others, was addressed by a

bland statementwith little specific information

content.”Source: FRRP PRELIMINARY REPORT: IFRS IMPLEMENTATION

“Preparers are advised to review the sufficiency of their disclosure to

support their impairment testing of goodwill and intangible assets with

indefinite useful lives.”




Man Group plc report and accounts 2006



Man Group plc report and accounts 2006

John Kent

KPMG LLP (UK)

+44 (0)20 7694 8792

[email protected]

www.kpmg.co.uk

Converting to, and reporting under, IFRS John Kent 2 October 2007 IFRS Conversion Services Audit.

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