IFRS IFRS As of April 2011 As of April 2011 Presented by Presented by Teri Willoughby Deters Teri Willoughby Deters
Dec 20, 2015
IFRSIFRS
As of April 2011As of April 2011
Presented byPresented by
Teri Willoughby DetersTeri Willoughby Deters
IFRSIFRS
Who Impacted?Who Impacted? Differences between IFRS & US GAAPDifferences between IFRS & US GAAP IFRS for SMEsIFRS for SMEs TransitionTransition Other considerationsOther considerations
Who Impacted?Who Impacted?
IFRS – Who Impacted?IFRS – Who Impacted?
Who needs to be thinking about IFRSWho needs to be thinking about IFRS• Public companiesPublic companies• Non-public with international Non-public with international
subsidiariessubsidiaries
IFRS – Who Impacted?IFRS – Who Impacted?
Securities Exchange Commission Securities Exchange Commission (“SEC”) believes a single set of high-(“SEC”) believes a single set of high-quality globally accepted accounting quality globally accepted accounting standards will benefit U.S. investors standards will benefit U.S. investors and the goal is consistent with their and the goal is consistent with their mission to protect the investors.mission to protect the investors.
SEC currently analyzing and decision SEC currently analyzing and decision to be announced by end of 2011to be announced by end of 2011
IFRS – Who Impacted?IFRS – Who Impacted?
CountryCountry YearYear Accounting Standard to ApplyAccounting Standard to Apply
CanadaCanada 20112011 International Accounting StandardsInternational Accounting Standards
OROR
Accounting Standards for Private Accounting Standards for Private EnterprisesEnterprises
United United Kingdom and Kingdom and IrelandIreland
20142014 International Accounting Standards International Accounting Standards as adopted by EU, ORas adopted by EU, OR
Financial Reporting Standards for Financial Reporting Standards for Medium-sized EntitiesMedium-sized Entities
IndiaIndia 2011-2014 2011-2014 (depending on (depending on
net worth)net worth)
India equivalent IFRS (recently India equivalent IFRS (recently issued)issued)
IFRS – Who Impacted?IFRS – Who Impacted?
CountryCountry YearYear Accounting Standard to ApplyAccounting Standard to Apply
ChinaChina ContinuousContinuous China equivalent IFRSChina equivalent IFRS
SingaporeSingapore ContinuousContinuous Singapore equivalent IFRS, ORSingapore equivalent IFRS, OR
Singapore Financial Reporting Singapore Financial Reporting Standards for Small EntitiesStandards for Small Entities
MexicoMexico ContinuousContinuous Mexico equivalent IFRSMexico equivalent IFRS
Differences between Differences between IFRS & US GAAPIFRS & US GAAP
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Areas for consideration in adopting Areas for consideration in adopting IFRSIFRS• Tangible and intangible assetsTangible and intangible assets• LiabilitiesLiabilities• PensionPension• Financial instrumentsFinancial instruments• Income taxesIncome taxes• ConsolidationConsolidation
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Tangible and intangible assets under IFRSTangible and intangible assets under IFRS• Prohibits costing of inventory using the LIFO Prohibits costing of inventory using the LIFO
methodmethod• Allows for revaluation Allows for revaluation • Requires de-recognition of components of Requires de-recognition of components of
assetsassets• Level in which impairments performed at the Level in which impairments performed at the
cash-generating unit and involves only 1 stepcash-generating unit and involves only 1 step• Allows for reversal of impairment lossesAllows for reversal of impairment losses
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Liabilities under IFRSLiabilities under IFRS• Contingencies recognized when an obligation Contingencies recognized when an obligation
“more likely than not” exists“more likely than not” exists• When a range of possible outcomes exists, the When a range of possible outcomes exists, the
mid point of the range would be recognizedmid point of the range would be recognized• Asset retirement obligations recorded at the Asset retirement obligations recorded at the
present value of the best estimatepresent value of the best estimate• Provision should be recognized at the present Provision should be recognized at the present
value of the expected expenditurevalue of the expected expenditure
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Pensions under IFRS (Pensions under IFRS (under under evaluationevaluation))• Allows for recognition of actuarial gains Allows for recognition of actuarial gains
and losses in equity, without subsequent and losses in equity, without subsequent recycling to net incomerecycling to net income
• Vested past service costs recognized Vested past service costs recognized immediately in net incomeimmediately in net income
• Curtailment gain recognized when Curtailment gain recognized when commitment to reduce employees is commitment to reduce employees is demonstrateddemonstrated
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Pensions under IFRS (Pensions under IFRS (under under evaluationevaluation))• Classification of pension expense in Classification of pension expense in
operating and non-operating income operating and non-operating income (i.e., interest)(i.e., interest)
• Plan assets recognized at fair value; Plan assets recognized at fair value; calculated value is not allowablecalculated value is not allowable
• Recognition of an overall plan asset Recognition of an overall plan asset subject to a ceiling testsubject to a ceiling test
IFRSIFRS
Financial instruments under IFRS (Financial instruments under IFRS (under under evaluationevaluation))• Instruments measured at fair value, including Instruments measured at fair value, including
equity instruments that do not have quoted equity instruments that do not have quoted market pricemarket price
• Reclassification between categories availableReclassification between categories available• Previous losses on debt instruments may be Previous losses on debt instruments may be
reversedreversed• High threshold for de-recognition of financial High threshold for de-recognition of financial
assets under securitization agreementsassets under securitization agreements
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Financial Instruments and EquityFinancial Instruments and Equity• Those items classified as mezzanine would be Those items classified as mezzanine would be
classified as a financial liabilityclassified as a financial liability• Financial instruments issued between related Financial instruments issued between related
parties should be recognized at time of parties should be recognized at time of issuance at fair value with an offsetting issuance at fair value with an offsetting earnings impactearnings impact
• Effective yield method based upon expected Effective yield method based upon expected cash flows—not contractual cash flowscash flows—not contractual cash flows
• Transaction costs should be reported net of the Transaction costs should be reported net of the financial liabilities, instead of a non-current financial liabilities, instead of a non-current assetasset
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Hedge accounting (Hedge accounting (under evaluationunder evaluation))• Generally different definitions used and Generally different definitions used and
differences in application of the methodologiesdifferences in application of the methodologies• Application of hedge accounting, specific to Application of hedge accounting, specific to
foreign currency risk with a firm commitment foreign currency risk with a firm commitment to enter a business combination, is permissibleto enter a business combination, is permissible
• A parent company may apply hedge A parent company may apply hedge accounting on foreign currency exposure of a accounting on foreign currency exposure of a subsidiary, regardless of the parent company’s subsidiary, regardless of the parent company’s functional currencyfunctional currency
• Shortcut method that assumes no Shortcut method that assumes no ineffectiveness is not available under IFRSineffectiveness is not available under IFRS
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Income taxes Income taxes • Current and deferred taxes recognized using Current and deferred taxes recognized using
the enacted the enacted or substantively enactedor substantively enacted tax rate tax rate• Timing of recognition of deferred tax assetsTiming of recognition of deferred tax assets• Recognition of deferred tax assets on the Recognition of deferred tax assets on the
following:following: Items relating to equityItems relating to equity Items not part of a business combinationItems not part of a business combination Translation of non-monetary assets measured using Translation of non-monetary assets measured using
historical rateshistorical rates Inter-company transfersInter-company transfers
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Income taxes Income taxes • A separate tax valuation allowance is A separate tax valuation allowance is
not maintainednot maintained• Uncertain tax positions recognized using Uncertain tax positions recognized using
probability-weighted average methodprobability-weighted average method• Entire balance classified as non-currentEntire balance classified as non-current
Differences between IFRS & US GAAPDifferences between IFRS & US GAAP
Functional currencyFunctional currency• Same premise—primary economic Same premise—primary economic
environment. Be sure analysis is environment. Be sure analysis is consistent at the subsidiary and consistent at the subsidiary and consolidated level. consolidated level.
Consolidations (Consolidations (under evaluationunder evaluation))• Requires consolidation of all subsidiariesRequires consolidation of all subsidiaries• Point at which control is assessedPoint at which control is assessed• Option for proportional consolidation of Option for proportional consolidation of
jointly controlled entitiesjointly controlled entities
IFRS for SMEsIFRS for SMEs
IFRS for SMEsIFRS for SMEs
Entities that qualify to use IFRS for Entities that qualify to use IFRS for SMEs:SMEs:• Entities that do not have public Entities that do not have public
accountability, andaccountability, and• Publish general purpose financial Publish general purpose financial
statements for external users.statements for external users.
IFRS for SMEsIFRS for SMEs
Section 1 of IFRS for SMEs:Section 1 of IFRS for SMEs:• ““A subsidiary whose parent uses full A subsidiary whose parent uses full
IFRSs, or that is part of a consolidated IFRSs, or that is part of a consolidated group that uses full IFRSs, is not group that uses full IFRSs, is not prohibited from using IFRS for SMEs in prohibited from using IFRS for SMEs in its own financial statements if that its own financial statements if that subsidiary by itself does not have public subsidiary by itself does not have public accountability.”accountability.”
IFRS for SMEsIFRS for SMEsIFRSIFRS IFRS for SMEsIFRS for SMEs
Investments in Affiliates (IAS 28.13)Investments in Affiliates (IAS 28.13)
Use of equity method required, when Use of equity method required, when applicableapplicable
Investment in affiliates (Section 14.4)Investment in affiliates (Section 14.4)
Accounting policy election: cost, equity Accounting policy election: cost, equity or fair valueor fair value
Joint ventures (IAS 31.30 and 31.38)Joint ventures (IAS 31.30 and 31.38)
Proportionate consolidation or equity Proportionate consolidation or equity method may be usedmethod may be used
Joint venture (Section 15.9)Joint venture (Section 15.9)
Same as investment in affiliates. Same as investment in affiliates. Proportionate consolidation not availableProportionate consolidation not available
Intangibles (IAS 38.88)Intangibles (IAS 38.88)
Useful lives may be finite or indefiniteUseful lives may be finite or indefiniteIntangibles (Section 18.19)Intangibles (Section 18.19)
All intangible assets shall be considered All intangible assets shall be considered to have a finite useful lifeto have a finite useful life
Goodwill (IFRS 3.B63(a))Goodwill (IFRS 3.B63(a))
Measured at acquisition date less Measured at acquisition date less accumulated impairment losses (under accumulated impairment losses (under IAS 36)IAS 36)
Goodwill (Section 19.23)Goodwill (Section 19.23)
Measure at cost less accumulated Measure at cost less accumulated amortization and accumulated amortization and accumulated impairment lossesimpairment losses
Borrowing costs (IAS 23.8)Borrowing costs (IAS 23.8)
Borrowing costs shall be capitalized Borrowing costs shall be capitalized when directly attributable to the when directly attributable to the acquired assetacquired asset
Borrowing costs (Section 25.2)Borrowing costs (Section 25.2)
Borrowing costs are expensed as Borrowing costs are expensed as incurredincurred
IFRS for SMEsIFRS for SMEs
• Completed contract method for revenue Completed contract method for revenue recognition is prohibited.recognition is prohibited.
• Hedge accounting is limited under IFRS Hedge accounting is limited under IFRS for SMEs. Only permitted for the for SMEs. Only permitted for the following hedge risks:following hedge risks:
Interest rate risk of a debt instrument Interest rate risk of a debt instrument Foreign exchange interest rate risk in a firm Foreign exchange interest rate risk in a firm
commitment or highly probable forecasted commitment or highly probable forecasted transactiontransaction
Foreign exchange risk in a net investmentForeign exchange risk in a net investment Price risk of a commodityPrice risk of a commodity
IFRS for SMEsIFRS for SMEsIFRSIFRS IFRS for SMEsIFRS for SMEs
Consolidated financial statementsConsolidated financial statements(IAS 27.9 and 27.10)(IAS 27.9 and 27.10)
*Most likely will not meet exemption as the *Most likely will not meet exemption as the ultimate or intermediate parent’s financial ultimate or intermediate parent’s financial statements are NOT publicly availablestatements are NOT publicly available
Consolidated financial statementsConsolidated financial statements(Section 9.3)(Section 9.3)
*May not meet the exemption if the *May not meet the exemption if the intermediate parent does not produce intermediate parent does not produce consolidated general purpose financial consolidated general purpose financial statements that comply with full IFRSstatements that comply with full IFRS
Receivables Receivables (IFRS 7.37)(IFRS 7.37)
Aging of receivablesAging of receivablesReceivablesReceivablesNo similar disclosure requirementsNo similar disclosure requirements
Investment in Associates Investment in Associates (IAS 28.37(b))(IAS 28.37(b))
Disclose summarized financial data, Disclose summarized financial data, including assets liabilities, revenues and including assets liabilities, revenues and profit (loss)profit (loss)
Investment in Associates Investment in Associates (Section 14.12 and (Section 14.12 and 14.15)14.15)
No similar disclosure requirementsNo similar disclosure requirements
Income taxes Income taxes (IAS 12.81)(IAS 12.81)
Numerical tax rate reconciliationNumerical tax rate reconciliationIncome taxes Income taxes (Section 29.32)(Section 29.32)
Explanation of changes in applicable tax Explanation of changes in applicable tax raterate
Capital management and risk Capital management and risk management management (IAS 1.134 and IFRS 7.31)(IAS 1.134 and IFRS 7.31)
Capital management and risk Capital management and risk managementmanagementNo similar disclosure requirementsNo similar disclosure requirements
TransitionTransition
TransitionTransition
Regardless of adopting IFRS or IFRS Regardless of adopting IFRS or IFRS for SMEs, the respective transition for SMEs, the respective transition standard shall be applied:standard shall be applied:• IFRS 1, orIFRS 1, or• Section 35 of IFRS for SMEsSection 35 of IFRS for SMEs
Comparable financial statements will Comparable financial statements will need to be providedneed to be provided
Accounting policies shall be re-Accounting policies shall be re-established and consistently appliedestablished and consistently applied
TransitionTransitionActivityActivity Policy Elections Available at AdoptionPolicy Elections Available at Adoption
Business Business CombinationsCombinations
Elect to apply standards to acquisitions that occurred prior to Elect to apply standards to acquisitions that occurred prior to adoption OR apply to acquisitions from the transition date adoption OR apply to acquisitions from the transition date going forwardgoing forward
PropertyProperty Property, plant and equipment may be recorded at either:Property, plant and equipment may be recorded at either: Fair valueFair value Historical costs less accumulated depreciation (after assets Historical costs less accumulated depreciation (after assets lives have been analyzed under newly-elected GAAP)lives have been analyzed under newly-elected GAAP)
Investments Investments in subsidiaries, jointly in subsidiaries, jointly controlled entities and controlled entities and associates associates
Investments may be recorded at either:Investments may be recorded at either: Cost (under cost or equity method, as appropriate)Cost (under cost or equity method, as appropriate) Deemed costs: fair value or previous GAAP carrying Deemed costs: fair value or previous GAAP carrying amountamount
Employee future Employee future benefitsbenefits
All cumulative actuarial gains and losses and past services All cumulative actuarial gains and losses and past services costs may be recognized in opening retained earningscosts may be recognized in opening retained earnings
Cumulative translation Cumulative translation differencedifference
If reporting entity maintains CTA at the local level, this If reporting entity maintains CTA at the local level, this amount may be recorded to retained earningsamount may be recorded to retained earnings
TransitionTransition Re-assess designation of financial assets Re-assess designation of financial assets
and liabilitiesand liabilities Retrospective application at time of Retrospective application at time of
adoption:adoption:• De-recognition of financial assets and De-recognition of financial assets and
liabilities: prospective application for liabilities: prospective application for transactions occurring on or after date of transactions occurring on or after date of transitiontransition
• Hedging: elimination all deferred gains Hedging: elimination all deferred gains (losses)(losses)
• Non-controlling interest: prospective Non-controlling interest: prospective application for changes in ownershipapplication for changes in ownership
Other ConsiderationsOther Considerations
Other ConsiderationsOther Considerations
Implementation team needsImplementation team needs System capabilities for financial System capabilities for financial
reporting purposesreporting purposes• U.S. GAAPU.S. GAAP• Parallel reportingParallel reporting• Future statutory reporting Future statutory reporting • TaxTax
Communication with Tax and Communication with Tax and Treasury teamsTreasury teams
Q & AQ & A