How IFRS can impact U.S. financial statement …...1 How IFRS can impact U.S. financial statement preparers and users today Thursday, January 24, 2013 Administrative CPE regulations
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How IFRS can impact U.S. pfinancial statement preparers and users todayThursday, January 24, 2013
Administrative
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IFRS as issued by the IASB or national/regional variant of IFRS is either permitted or required in approximately 120 countries around the world including:
– European Union
Japan (option for certain companies)– Japan (option for certain companies)
1. IFRS, as issued by the IASB, has been adopted by approximately 120 countries around the globe.
2 IFRS as issued by the IASB or some regional/national variant has been adopted by2. IFRS, as issued by the IASB or some regional/national variant, has been adopted by approximately 120 countries around the globe.
3. Almost all of the largest public companies around the globe, based on market capitalization, are using IFRS.
4. Almost all of the largest public companies around the globe, based on market capitalization, are using U.S. GAAP.
1. A domestic SEC registrant with more than 50 percent of our operations conducted internationally
2 A domestic SEC registrant with more than 25 percent but less than 50 percent of our2. A domestic SEC registrant with more than 25 percent, but less than 50 percent, of our operations conducted internationally
3. A domestic SEC registrant with less than 25 percent of our operations conducted internationally
4. A private U.S. entity with more than 50 percent of our operations conducted internationally
5. A private U.S. entity with less than 50 percent of our operations conducted internationally
Acquisitions of foreign businesses and acquisitions by foreign registrants – Interaction with SEC filing requirements
SEC Regulation S-X Rule 1-02(1) defines a foreign business as a business that is majority-owned by persons who are not citizens or residents of the United States and either:
1. More than 50 percent of its assets are located outside the United States
2 The majority of its executive officers and directors are not U S citizens or residents2. The majority of its executive officers and directors are not U.S. citizens or residents.
SEC Regulation S-X Rule 3-05(b) and 8-04(e) contain special requirements when a domestic
Acquisitions of foreign businesses and acquisitions by foreign registrants – Interaction with SEC filing requirements (continued)
If a domestic or foreign registrant must file financial statements for an acquired foreign business, those financial statements may be prepared under IFRS as issued by the
IASB without reconciliation to U S GAAPIASB without reconciliation to U.S. GAAP.(Source: SEC Financial Reporting Manual – Division of Corporation Finance – 6350.1).
Applies equally to situations involving filing requirements in accordance with SEC Regulation S-X Rule 3-09 (Separate financial statements of subsidiaries not consolidated
and 50 percent or less owned persons) or S-X Rule 3-10 (Financial statements of
and 50 percent or less owned persons) or S-X Rule 3-10 (Financial statements of guarantors and issuers of guaranteed securities registered or being registered).
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Offerings in the United States in accordance with SEC rule 144A
Rule 144A is a safe harbor exemption from the registration requirements of Section 5 of the Securities Act of 1933 for certain offers and sales of qualifying securities by certain persons other than the issuer.
The securities eligible for resale under Rule 144A are securities of U.S. and foreign issuers that are not listed on a U.S. securities exchange or quoted on a U.S. automated interdealer quotation system.
There are certain conditions that a reseller of restricted securities must satisfy to rely on Rule 144A.
1. For purposes of SEC Rule 144A offerings, there is a requirement to prepare financial information in accordance with U.S. GAAP.
2 For purposes of SEC Rule 144A offerings there is a requirement to prepare financial2. For purposes of SEC Rule 144A offerings, there is a requirement to prepare financial information in accordance with IFRS.
3. SEC Rule 144A does not specify the accounting framework; therefore, the financial information can be prepared in accordance with either U.S. GAAP or IFRS.
4. For purposes of SEC Rule 144A offerings, domestic entities must use U.S. GAAP, and foreign entities may use either U.S. GAAP or IFRS.
Knowledge Check Question 4 – Debrief: Correct answer is C
Which of the following statements in correct?
1. Incorrect, SEC Rule 144A does not specify an accounting framework.
2. Incorrect, SEC Rule 144A does not specify an accounting framework.
3. Correct, SEC Rule 144A does not specify an accounting framework; therefore, either U.S. GAAP or IFRS can be used in the preparation of financial information.
4. Incorrect, SEC Rule 144A does not specify the accounting framework and, therefore, does not specify the basis of accounting for domestic or foreign entities.
1. My organization could derive significant benefits from aligning systems, processes, external financial reporting, etc. globally on an IFRS basis.
2. My organization would not achieve any benefits from aligning systems, processes, external financial reporting, etc. globally on an IFRS basis.
3. My organization has not yet evaluated whether there would be potential benefits from aligning systems, processes, external financial reporting, etc. globally on an IFRS basis.
What best describes the implications of accounting convergence on entities using U.S. stakeholders:
A. There are no direct implications to U.S. stakeholders from the accounting convergence initiative between the boards.
B. U.S. stakeholders are likely to be directly impacted by accounting convergence in the foreseeable future without regard to any decision by the SEC on use of IFRS by domestic filers.
C. Until the SEC makes a definitive decision about incorporating IFRS into the U.S. financial reporting system by domestic registrants, there are little or no implications from accounting convergence, but there could be an impact once such a decision is made.
Knowledge Question 6 – Debrief: Correct answer is B
What describes best the implications regarding accounting convergence:
A. Incorrect, Because the accounting convergence initiative is a joint effort between the IASB and FASB, U.S. GAAP, as well as IFRS, is likely to be impacted.
B Correct Because the accounting convergence initiative is a joint effort between the IASB andB. Correct, Because the accounting convergence initiative is a joint effort between the IASB and FASB, U.S. GAAP, as well as IFRS, is likely to be impacted.
C. Incorrect, Because the accounting convergence initiative is a joint effort between the IASB and FASB, U.S. GAAP, as well as IFRS, is likely to be impacted without regard to an IFRS decision by the SEC.
Communiqué G-20 finance ministers and central bank governors in November 2012 (Mexico)
“Concerns about the slow progress achieved toward a single set ofhigh-quality accounting standards”
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About the KPMG IFRS Institute
The KPMG IFRS Institute, part of the KPMG Institute Network, has been created as an open forum where board and audit committee members, executives, management, stakeholders, academia, and government representatives can share knowledge, gain insight, and access thought leadership about the evolving global financial reporting environment. To visit the IFRS Institute, go to: www.kpmginstitutes.com/ifrs-institute.
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