Introduction to IFRS. JOIN KHALID AZIZ ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM,

Introduction to IFRSIntroduction to IFRS

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ECONOMICS OF ICMAP ICAP MA-ECONOMICS OF ICMAP ICAP MA-ECONOMICS BCOMECONOMICS BCOMFINANCIAL ACCOUNTING OF ICMAP STAGE FINANCIAL ACCOUNTING OF ICMAP STAGE 134 ICAP MODULE B BCOM BBA MBA amp 134 ICAP MODULE B BCOM BBA MBA amp PIPFAPIPFACOST ACCOUNTING OF ICMAP STAGE 23 COST ACCOUNTING OF ICMAP STAGE 23 ICAP MODULE D BBA MBA amp PIPFAICAP MODULE D BBA MBA amp PIPFA

CONTACTCONTACT0322-33857520322-33857520312-23028700312-2302870R-1173ALNOOR SOCIETY BLOCK R-1173ALNOOR SOCIETY BLOCK 19FBAREA KARACHI PAKISTAN19FBAREA KARACHI PAKISTAN

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FRESH CLASSES FOR ICAP MODULE FRESH CLASSES FOR ICAP MODULE BhellipFINANCIAL ACCOUNTINGBhellipFINANCIAL ACCOUNTING

REGISTER YOUR SELF NOWREGISTER YOUR SELF NOW

COMPLETION OF SYLLABUS WITH COMPLETION OF SYLLABUS WITH ACCENTUATE ON BASIC CONCEPTSACCENTUATE ON BASIC CONCEPTS

The Big Picture

1048707A new perspective on financial reporting ndashFocus on ldquotransparencyrdquo of financial information versus uniformity of practices

1048707General movement toward global standardsndashGrowing consensus among regulators and standard setters on need for global standardsndashConsensus on the use of a ldquoprinciple-basedrdquo approach

1048707Shift in how standards are developed written and appliedndashWill involve a new way of thinking about accounting and financial reportingndashReducing complexity and simplifying standards

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CRASH CLASSES FOR CRASH CLASSES FOR COMPLETION OF COMPLETION OF IMPORTANT TOPICSIMPORTANT TOPICS

ICMAP STAGE 1 amp 2ICMAP STAGE 1 amp 2

FINANCIAL AND COST FINANCIAL AND COST ACCOUNTINGACCOUNTING

JOIN NOWJOIN NOW

What is IFRSWhat is IFRS

10487071048707IFRS is a set of established accounting standards that IFRS is a set of established accounting standards that is rapidly gaining worldwide acceptanceis rapidly gaining worldwide acceptance

10487071048707Standards are promulgated by the London-based Standards are promulgated by the London-based International Accounting Standards Board (IASB)ndashInternational Accounting Standards Board (IASB)ndashIASB includes representatives from major countries IASB includes representatives from major countries including the USincluding the US

10487071048707Generally more focused on objectives and principles Generally more focused on objectives and principles and less reliant on detailed rules and interpretations and less reliant on detailed rules and interpretations than US GAAPndashIFRS currently consists of a single than US GAAPndashIFRS currently consists of a single volume of approximately 40 standards and 25 volume of approximately 40 standards and 25 interpretationsinterpretations

ndashndashStandards include IASs and IFRSsStandards include IASs and IFRSsndashndashInterpretations include SICs and IFRICsInterpretations include SICs and IFRICs

The Global Move Towards IFRSThe Global Move Towards IFRS

Europe2005

Australia 2005

Canada200911

South Africa2005

United States (2011)

Current or anticipated requirement or option to use IFRS (or equivalent)

Brazil2010

China 2007

India 2011

Chile 2009

Japan()

IFRS Today and TomorrowIFRS Today and Tomorrowndash Today IFRS isToday IFRS is used used

in over 100 in over 100 countriescountries

Required across all EU countries Required across all EU countries starting in 2005starting in 2005

Argentina Brazil Canada and Argentina Brazil Canada and India have announced mandated India have announced mandated useuse

Ongoing convergence efforts Ongoing convergence efforts between FASB and IASBbetween FASB and IASB

ndash By 2014 it is By 2014 it is expected thatexpected that

All major countries will have All major countries will have adopted IFRS to some extentadopted IFRS to some extent

China and Japan will be China and Japan will be substantially converged to IFRSsubstantially converged to IFRS

US public companies will begin to US public companies will begin to be required to use IFRSbe required to use IFRS

196187

117

0

50

100

150

200

250

2006

US GAAP IFRS Other

Accounting Standards Used by Global Fortune 500

Global IFRS reporting trendsGlobal IFRS reporting trends

bull IFRS quickly picking up share of Global F500 companies

IFRSIFRSDriversDrivers

bull Enhances transparencycomparabilityEnhances transparencycomparabilitybull Eases flow of capital globally thus Eases flow of capital globally thus

possible reduction in cost of capitalpossible reduction in cost of capitalbull Facilitates accounting and reportingFacilitates accounting and reporting

203

268

29

183

113

204

0

50

100

150

200

250

300

2004 2007

US GAAP

Other

IFRS

Recent Regulatory DevelopmentsRecent Regulatory Developments10487071048707SEC Concept Release on allowing US issuers a SEC Concept Release on allowing US issuers a

choice between IFRS and US GAAP choice between IFRS and US GAAP 10487071048707Elimination of US GAAP reconciliation for Foreign Elimination of US GAAP reconciliation for Foreign

Private Issuers using IFRSPrivate Issuers using IFRS10487071048707FASB panel discussion of US moving to IFRSFASB panel discussion of US moving to IFRS

ndashndashEncouragement from stakeholders for the Encouragement from stakeholders for the SEC to set a definitive timeline for conversion to IFRSSEC to set a definitive timeline for conversion to IFRS

10487071048707SEC IFRS Roundtable ndashAugust 2008SEC IFRS Roundtable ndashAugust 2008ndashndashDiscussion on performance of IFRS and US GAAP Discussion on performance of IFRS and US GAAP

during credit crisisduring credit crisis 10487071048707Consensus that IFRS held up well if not better than Consensus that IFRS held up well if not better than

US US GAAPGAAP 10487071048707Fair value still remains a challenge under both Fair value still remains a challenge under both

standardsstandards

ndashndashDiscussion on areas where continued convergence is Discussion on areas where continued convergence is neededneeded

Recent Regulatory DevelopmentsRecent Regulatory Developments

10487071048707SEC Proposing Release sets the stage for possible SEC Proposing Release sets the stage for possible mandatory adoption of IFRS by US issuers mandatory adoption of IFRS by US issuers beginning with fiscal years ending after December 15 beginning with fiscal years ending after December 15 2014 for large accelerated filers2014 for large accelerated filers

10487071048707Roadmap contains certain milestones to be achievedndashRoadmap contains certain milestones to be achievedndashSEC Commission to review milestone progress in SEC Commission to review milestone progress in 2011 before issuing a final rule for mandatory 2011 before issuing a final rule for mandatory adoptionadoption

10487071048707Proposed rule to permit certain US issuers the option Proposed rule to permit certain US issuers the option to use IFRS for fiscal years ending after December to use IFRS for fiscal years ending after December 15 2009ndashThree years of financial statements must be 15 2009ndashThree years of financial statements must be presentedpresented

ndashndashIssuers must be in the top 20 companies in their industry based on Issuers must be in the top 20 companies in their industry based on market capitalization andtheir industry peer market capitalization andtheir industry peer groupmustpredominantly report under IFRS groupmustpredominantly report under IFRS

US GAAP ndash IFRS ConvergenceUS GAAP ndash IFRS Convergence

Convergence is to be achieved throughConvergence is to be achieved throughndash Formal liaison relationshipsFormal liaison relationshipsndash Monitoring of FASB and IASB major projectsMonitoring of FASB and IASB major projectsndash Short-term convergence projectsShort-term convergence projectsndash Joint projectsJoint projects

Ongoing Convergence EffortsOngoing Convergence Effortsndash IASB and FASB reaffirm convergence effortsIASB and FASB reaffirm convergence efforts

Updating of the ldquoNorwalk AgreementrdquoUpdating of the ldquoNorwalk Agreementrdquo

ndash Focus is on the process and converging general Focus is on the process and converging general principlesprinciples

Less focus on converging detailsLess focus on converging details

ndash Involves several projectsInvolves several projectsldquoldquoShort-termrdquo convergence projectsShort-termrdquo convergence projects

Joint conceptual framework projectsJoint conceptual framework projects

Other Joint convergence projectsOther Joint convergence projects

Other IASB projectsOther IASB projects

ndash Future prospectsFuture prospects

Recent FASBIASB StandardsRecent FASBIASB StandardsldquoHigh Levelrdquo ConvergenceldquoHigh Levelrdquo Convergence

DescriptionDescription FASB IssuancesFASB Issuances IASB IssuancesIASB Issuances

Share-based paymentsShare-based payments FAS 123RFAS 123R IFRS 2IFRS 2

Business combinationsBusiness combinations FAS 141RFAS 141R IFRS 3 (2008)IFRS 3 (2008)

Goodwill and other Goodwill and other intangible assetsintangible assets

FAS 142FAS 142 IAS 36 and IAS 38IAS 36 and IAS 38

Long-lived assets held Long-lived assets held for sale and discontinued for sale and discontinued operationsoperations

FAS 144FAS 144 IFRS 5IFRS 5

Fair value option and Fair value option and measurement guidancemeasurement guidance

FAS 155 FAS 157 and FAS 155 FAS 157 and FAS 159FAS 159

IAS 39IAS 39

Even though these were joint projects key differences still remain

US GAAP ndash IFRS Convergence ndash US GAAP ndash IFRS Convergence ndash Where are we nowWhere are we now

Boards have achieved ldquohigh-levelrdquo Boards have achieved ldquohigh-levelrdquo convergence in some areasconvergence in some areasndash Examples include income taxes business Examples include income taxes business

combinations share-based payments etccombinations share-based payments etc

Other areas models are very differentOther areas models are very differentndash Examples include debtequity classification Examples include debtequity classification

de-recognition consolidation etcde-recognition consolidation etc

US GAAP ndash IFRS Convergence ndash US GAAP ndash IFRS Convergence ndash Where are we nowWhere are we now

A study of 130 reconciliations from foreign A study of 130 reconciliations from foreign filers using IFRS in 2006 showed the filers using IFRS in 2006 showed the differences between the two accounting differences between the two accounting systems can be quite largesystems can be quite largendash Approx 23 of the companies showed higher Approx 23 of the companies showed higher

earnings under IFRSearnings under IFRSndash Only two companies in the study showed the Only two companies in the study showed the

same earnings under both IFRS and US GAAPsame earnings under both IFRS and US GAAP

US GAAP ndash IFRS Convergence ndash US GAAP ndash IFRS Convergence ndash Where are we nowWhere are we now

Impact to EquityImpact to Equityndash Slightly more than half of the cos Showed greater Slightly more than half of the cos Showed greater

equity under IFRSequity under IFRSndash 1 company had the same equity1 company had the same equity

The following areas contributed significantly to The following areas contributed significantly to the differencesthe differencesndash Deferred taxes PPampE pensions minority interest Deferred taxes PPampE pensions minority interest

capitalization of interest purchase price capitalization of interest purchase price accounting and asset impairmentaccounting and asset impairment

First Time Adoption of IFRSFirst Time Adoption of IFRS

Terminology DifferencesTerminology Differences

IFRSIFRS US GAAPUS GAAP

SharesShares Stock Stock

StockStock Inventory Inventory

ReservesReserves Equity Equity

AssociateAssociate Investee Investee

ProvisionProvision Accrual Accrual

True and fairTrue and fair Presents fairlyPresents fairly

Overview of IFRS 1Overview of IFRS 1

10487071048707Applicable when an entity makes its first explicit and Applicable when an entity makes its first explicit and unreserved reference to IFRSunreserved reference to IFRS

10487071048707Generally apply retrospectively all IFRS effective at reporting Generally apply retrospectively all IFRS effective at reporting datedatendashndashCertain exemptions can be electedCertain exemptions can be electedndashndashSome exceptions that must be followedSome exceptions that must be followed

10487071048707Requires one year of comparative financial Requires one year of comparative financial informationinformation

10487071048707Transition adjustments recognized in retained Transition adjustments recognized in retained earningsearnings

10487071048707Must explain effect of transition to IFRSMust explain effect of transition to IFRS

ScopeScope

10487071048707An entity is a ldquofirst-time adopterrdquo if the most An entity is a ldquofirst-time adopterrdquo if the most previous financial statements were preparedprevious financial statements were preparedndashndashIn conformity with IFRS in all respects except that In conformity with IFRS in all respects except that

an explicit and unreserved statement of an explicit and unreserved statement of compliance was not presentedcompliance was not presented

ndashndashStating compliance with some but not all of IFRSStating compliance with some but not all of IFRS

ndashndashWith a reconciliation of some amounts to IFRSWith a reconciliation of some amounts to IFRS

ndashndashOn an IFRS basis for internal use onlyOn an IFRS basis for internal use only

Terms to RememberTerms to Remember

10487071048707First IFRS financial statementsndashFirst annual financial First IFRS financial statementsndashFirst annual financial statements in which an ldquoexplicit and unreservedrdquo statements in which an ldquoexplicit and unreservedrdquo reference to compliance with IFRSreference to compliance with IFRS

10487071048707Date of transition to IFRSndashBeginning of the earliest Date of transition to IFRSndashBeginning of the earliest comparable period presented in an entityrsquos first IFRS comparable period presented in an entityrsquos first IFRS financial statementsfinancial statements

10487071048707Reporting datendashThe end of the latest period covered Reporting datendashThe end of the latest period covered by financial statements or by an interim financial by financial statements or by an interim financial reportreport

Compliance with IFRSCompliance with IFRS

Compliance with IFRS includesCompliance with IFRS includesndash All active standards (IASs and IFRSs)All active standards (IASs and IFRSs)ndash All active interpretations (SICs and IFRICs)All active interpretations (SICs and IFRICs)ndash IFRS requires presentation of comparative IFRS requires presentation of comparative

periodperiod

Must make explicit and unreserved Must make explicit and unreserved statement of compliancestatement of compliance

IFRS GAAP OverviewIFRS GAAP Overview

The Good the Bad and the UglyThe Good the Bad and the Ugly

10487071048707The goodndashYou know more about IFRS than The goodndashYou know more about IFRS than you thinkyou thinkndashndashMany areas are similar to US GAAP Many areas are similar to US GAAP

10487071048707The badndashThere are significant areas of The badndashThere are significant areas of differencedifferencendashndashNew way of thinking about standardsNew way of thinking about standards

10487071048707Just plain uglyndashThere has been historically lax Just plain uglyndashThere has been historically lax practices in applying IFRS (ldquoIFRS literdquo)practices in applying IFRS (ldquoIFRS literdquo)

Accounting PoliciesAccounting Policies

Overview of Key ConceptsOverview of Key ConceptsConceptConcept DiscussionDiscussionAccounting policiesAccounting policies 1048707Specific principles bases conventions 1048707Specific principles bases conventions

rules and practicesrules and practices

EstimatesEstimates 1048707Adjustments in the carrying amount of 1048707Adjustments in the carrying amount of assets or liabilities assets or liabilities

10487071048707Result from new information or Result from new information or developments developments

ErrorsErrors 1048707Material omissions or misstatements in 1048707Material omissions or misstatements in financial statements financial statements10487071048707Include clerical errors mistakes in Include clerical errors mistakes in application oversight or application oversight or misinterpretation of facts fraud misinterpretation of facts fraud

MaterialMaterial 1048707Omissions or misstatements that 1048707Omissions or misstatements that individually or collectively influence the individually or collectively influence the economic decisions of users economic decisions of users10487071048707Consider the size and nature of the Consider the size and nature of the

itemitem

IFRS Accounting Policies ndash IAS 8IFRS Accounting Policies ndash IAS 8

IAS 8 established ldquohierarchyrdquo when choosing IFRS IAS 8 established ldquohierarchyrdquo when choosing IFRS accounting policiesaccounting policies

11 Apply any specific IFRS consider any relevant Apply any specific IFRS consider any relevant implementation guidanceimplementation guidance

22 Refer to other IFRSs dealing with similar or related Refer to other IFRSs dealing with similar or related issuesissues

33 IFRS FrameworkIFRS Framework

44 Consider pronouncement of other standard-setting Consider pronouncement of other standard-setting bodies or industry practices if consistent with the above bodies or industry practices if consistent with the above stepssteps

Consistency of Accounting Policies ndash Consistency of Accounting Policies ndash IAS 8IAS 8

If one or more alternative methods are If one or more alternative methods are availableavailable

Choose and apply Choose and apply oneone method for the method for the consolidated entityconsolidated entity

For all transactionitems orFor all transactionitems or

If expressly permitted for all transactionsitems If expressly permitted for all transactionsitems etc in a category of itemsetc in a category of items

If expressly permitted on a transaction by If expressly permitted on a transaction by transaction basistransaction basis

A Principles-based ApproachA Principles-based Approach

10487071048707Less detailed guidance to consider Less detailed guidance to consider ndashndashMore of a focus on the ldquosubstancerdquo of More of a focus on the ldquosubstancerdquo of

transactionstransactionsndashndashEvaluate whether the accounting presentation Evaluate whether the accounting presentation

reflects the ldquoeconomic realityrdquoreflects the ldquoeconomic realityrdquo

10487071048707More use of professional judgment More use of professional judgment 10487071048707Impact on riskImpact on risk

ndashndashPossibility of second-guessing by regulatorsPossibility of second-guessing by regulators

ndashndashMore of a focus on the ldquoprocessrdquo around making More of a focus on the ldquoprocessrdquo around making judgmentsjudgments

ndashndashCIFR recommendationsCIFR recommendations

Other Accounting Policy Other Accounting Policy ConsiderationsConsiderations

10487071048707In considering the applicability of US GAAP In considering the applicability of US GAAP pronouncements must consider consistency pronouncements must consider consistency with the overall IFRS ldquoprinciplerdquowith the overall IFRS ldquoprinciplerdquo

10487071048707Generally no ldquobright linesrdquondashNeed to establish Generally no ldquobright linesrdquondashNeed to establish ldquobenchmarksrdquo for analysisldquobenchmarksrdquo for analysis

10487071048707Transitional provisions in US standards and Transitional provisions in US standards and interpretations may not be applicable under interpretations may not be applicable under IFRSIFRSndashndashOn first-time adoption would need to apply On first-time adoption would need to apply retrospectively unless related to exemptionretrospectively unless related to exemption

Financial Statement PresentationFinancial Statement Presentation

Overview of Key Concepts ndashIAS 1Overview of Key Concepts ndashIAS 1

ConceptConcept DiscussionDiscussionFair presentationFair presentation 1048707Faithful representation of the effects of 1048707Faithful representation of the effects of

transactions and events in accordance with the transactions and events in accordance with the Framework Framework

10487071048707Includes financial position financial Includes financial position financial performance performance and cash flows and cash flows

10487071048707Presumed if compliant with IFRSPresumed if compliant with IFRS

Going concernGoing concern 1048707Ability to continue to operate1048707Ability to continue to operate10487071048707Take into account information about the future Take into account information about the future which is at least but not limited to twelve which is at least but not limited to twelve

months months from the balance sheet date from the balance sheet date

Accrual basisAccrual basis 1048707Look to the definitions of assets liabilities 1048707Look to the definitions of assets liabilities equity equity income and expense in the Framework income and expense in the Framework

OffsettingOffsetting 1048707Generally donrsquot offset items1048707Generally donrsquot offset items

Components of Financial Components of Financial StatementsStatements

10487071048707Balance sheetBalance sheet10487071048707Income statementIncome statement10487071048707Statement of changes in equityStatement of changes in equity

ndashndashAll changes in equity (SORIE)All changes in equity (SORIE)

ndashndashChanges in equity other than from transactions with Changes in equity other than from transactions with ownersowners

10487071048707Cash flow statementCash flow statement10487071048707NotesNotes

ndashndashSignificant accounting policiesSignificant accounting policies

Overview of Key Potential Overview of Key Potential DifferencesDifferences

ItemItem AlternativesAlternatives MoreMore DifferentDifferent JudgmentJudgment

DisclosureDisclosurePeriods presentedPeriods presented XX

Performance measuresPerformance measures XX X X

Expense formatExpense format XX X X

Extraordinary itemsExtraordinary items X X

Changes in equityChanges in equity XX X X

ldquoldquoMezzanine equityrdquoMezzanine equityrdquo X X

Overview of Key Concepts ndashIAS 33Overview of Key Concepts ndashIAS 33

ConceptConcept DiscussionDiscussion

Ordinary shareOrdinary share 1048707Equity instrument subordinate to all other 1048707Equity instrument subordinate to all other classes of equity instruments classes of equity instruments

Potential ordinary sharePotential ordinary share 1048707Financial instrument or contract that may 1048707Financial instrument or contract that may entitle entitle its holder to ordinary shares its holder to ordinary shares

1048707 1048707Examples convertibles options and Examples convertibles options and warrantswarrants

Contingently issuable share Contingently issuable share 1048707Ordinary shares issuable for little or no cash or 1048707Ordinary shares issuable for little or no cash or other considerationother consideration

1048707 1048707Dependent on the satisfaction of specified Dependent on the satisfaction of specified conditionsconditions

DilutionDilution 1048707Reduction in EPS or an increase in loss per 1048707Reduction in EPS or an increase in loss per shareshare

1048707 1048707Assume conversion of convertibles and Assume conversion of convertibles and issuance of potential ordinary issuance of potential ordinary

sharesshares

Overview of Key Concepts ndashIAS 33Overview of Key Concepts ndashIAS 33

Basic EPSBasic EPS Diluted EPSDiluted EPS

EarningsEarnings(the numerator)(the numerator) 1048707Profit or loss attributable 1048707Profit or loss attributable 1048707Adjust for the effects of 1048707Adjust for the effects of

to ordinary equity holders to ordinary equity holders potential ordinary sharespotential ordinary shares10487071048707May include dividends May include dividends interest or other changes interest or other changes in income or expense in income or expense

SharesShares(the denominator) (the denominator) 1048707Weighted average 1048707Weighted average 1048707Assume conversion of 1048707Assume conversion of

number of ordinary number of ordinary all dilutive potentialall dilutive potential shares shares ordinary sharesordinary shares

10487071048707Assume conversion as Assume conversion as of the beginning of the of the beginning of the period or issue date if period or issue date if laterlater

EPS Example for 2007EPS Example for 2007

FactsFactsProfit attributable to ordinaryProfit attributable to ordinaryequity holders equity holders $1200000$1200000

Weighted average of Weighted average of ordinary shares outstanding ordinary shares outstanding 500000 shares500000 shares

Average market price of share Average market price of share $2000 $2000

Weighted average of shares Weighted average of shares under option under option 100000 shares100000 shares

Exercise price for shares under Exercise price for shares under option option $1500 $1500

JOIN KHALID AZIZJOIN KHALID AZIZ

ECONOMICS OF ICMAP ICAP MA-ECONOMICS OF ICMAP ICAP MA-ECONOMICS BCOMECONOMICS BCOMFINANCIAL ACCOUNTING OF ICMAP STAGE FINANCIAL ACCOUNTING OF ICMAP STAGE 134 ICAP MODULE B BCOM BBA MBA amp 134 ICAP MODULE B BCOM BBA MBA amp PIPFAPIPFACOST ACCOUNTING OF ICMAP STAGE 23 COST ACCOUNTING OF ICMAP STAGE 23 ICAP MODULE D BBA MBA amp PIPFAICAP MODULE D BBA MBA amp PIPFA

CONTACTCONTACT0322-33857520322-33857520312-23028700312-2302870R-1173ALNOOR SOCIETY BLOCK R-1173ALNOOR SOCIETY BLOCK 19FBAREA KARACHI PAKISTAN19FBAREA KARACHI PAKISTAN