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Page 1: Convergence with IFRS around the World: IASB activities Update

®International

Accounting Standards Board

Convergence with IFRS Convergence with IFRS around the World:around the World:IASB activities UpdateIASB activities Update

Tatsumi YamadaTatsumi YamadaBoard Member, Board Member, IASBIASB

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DisclaimerDisclaimer

Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the speaker.

Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.

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OutlineOutline

Objectives of IASBObjectives of IASBConvergence efforts (EU, USA, Convergence efforts (EU, USA, Canada, China, Canada, China, KoeraKoera and Japan and Japan etc)etc)Three new projectsThree new projectsStability of Stability of IFRSsIFRSs & enhanced & enhanced consultation consultation

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Objectives of IASBObjectives of IASB

Development of a Development of a single setsingle set of high quality, of high quality, understandable and enforceable global understandable and enforceable global accounting standards that require accounting standards that require high high quality, transparent and comparablequality, transparent and comparableinformation in financial statements;information in financial statements;……Bringing about Bringing about convergenceconvergence of national of national accounting standards and IFRS to high accounting standards and IFRS to high quality solutionsquality solutions

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Achieving Convergence Achieving Convergence with IFRS Worldwidewith IFRS Worldwide

Put emphasis on achieving relationship Put emphasis on achieving relationship with regionally and worldwidewith regionally and worldwideDeletion of Deletion of ““liaison countriesliaison countries”” (June (June 2005)2005)Regional Interaction:Regional Interaction:

Regular meeting with NSS in the regionRegular meeting with NSS in the regionSouth East Asia, China/Japan/Korea etcSouth East Asia, China/Japan/Korea etc

World Standards setters meeting:World Standards setters meeting:Five annual meetings since November 2002Five annual meetings since November 2002

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EU adoption of IFRSEU adoption of IFRSEuropean CommissionEuropean Commission’’s IFRS s IFRS RegulationRegulation

Passed in 2002Passed in 2002Requires all EU companies listed on EU Requires all EU companies listed on EU regulated markets to prepare first full regulated markets to prepare first full consolidated IFRS accounts for 2005consolidated IFRS accounts for 2005Member States may extend to 2007 forMember States may extend to 2007 for

companies using US GAAPcompanies with only listed debt

Option to require IFRS for other Option to require IFRS for other companiescompanies

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Convergence project with USConvergence project with US

A focus is convergence with US A focus is convergence with US FASBFASBNorwalk Agreement aims to Norwalk Agreement aims to achieve convergence in short and achieve convergence in short and long term (October 2002) long term (October 2002) MoUMoU related to SEC Roadmap is related to SEC Roadmap is second step of Norwalk Agreement second step of Norwalk Agreement (February 2006)(February 2006)

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Convergence project with US Convergence project with US AgreementAgreement

SEC SEC ‘‘road maproad map’’ –– removal of removal of reconciliation to US GAAPreconciliation to US GAAP by 2009, by 2009, provided conditions are metprovided conditions are metApril 2005 April 2005 –– SEC/EC agreed on SEC/EC agreed on ‘‘roadmaproadmap’’Progress of convergence by 2008Progress of convergence by 2008

TargetTargetNot necessary to achieve full Not necessary to achieve full convergence on all standardsconvergence on all standardsWorking jointly and making progress on Working jointly and making progress on major projects by 2008 (major projects by 2008 (MoUMoU))

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Convergence project with US Convergence project with US FASB FASB –– ‘‘MoUMoU –– Short termShort term’’

Segment reportingSegment reportingSubsequent eventsSubsequent events

Joint venturesJoint venturesResearch and Research and developmentdevelopment

Government grantsGovernment grantsInvestment propertiesInvestment properties

Income tax (with FASB)Income tax (with FASB)Income tax (with IASB)Income tax (with IASB)

Impairment (with FASB)Impairment (with FASB)Impairment (with IASB)Impairment (with IASB)

Borrowing costsBorrowing costsFair value optionFair value option

IASB examinationIASB examinationFASB examinationFASB examination

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Convergence with US Convergence with US FASB FASB –– ‘‘MoUMoU –– Other projectsOther projects’’

To have issued converged To have issued converged guidance guidance

Fair Value Fair Value MeasurementMeasurement

To implement work aimed at the To implement work aimed at the completed development of completed development of converged standards as a matter converged standards as a matter of high priority of high priority

ConsolidationsConsolidations

To have issued converged To have issued converged standards (projected for 2007) standards (projected for 2007)

Business Business CombinationsCombinations

Progress to achieve by 2008Progress to achieve by 2008ProjectProject

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Convergence with US Convergence with US FASB FASB –– ‘‘MoUMoU –– Other projectsOther projects’’

To have issued one or more due To have issued one or more due process documentsprocess documents

PostPost--retirement retirement benefits (inc. benefits (inc. pensions)pensions)

To have issued one or more due To have issued one or more due process documents on the full process documents on the full range of topicsrange of topics

PerformancePerformance

ReportingReporting

To have issued one or more due To have issued one or more due process documentsprocess documents

Liabilities / Liabilities / equityequity

Progress to achieve by 2008Progress to achieve by 2008ProjectProject

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Convergence with US Convergence with US FASB FASB –– ‘‘MoUMoU –– Other projectsOther projects’’

To have issued one or more due To have issued one or more due process documents relating to the process documents relating to the accounting for financial accounting for financial instrumentsinstruments

F Instruments F Instruments (replace (replace existing existing standards)standards)

To have issued a due process To have issued a due process document relating to the results of document relating to the results of staff research efforts staff research efforts

DerecognitionDerecognition

To have issued one or more due To have issued one or more due process documentsprocess documents

Revenue Revenue RecognitionRecognition

Progress to achieve by 2008Progress to achieve by 2008ProjectProject

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Convergence with US Convergence with US FASB FASB –– ‘‘MoUMoU –– Other projectsOther projects’’

To have considered and made a To have considered and made a decision about the scope and decision about the scope and timing of a potential agenda timing of a potential agenda project project

LeasesLeases

To have considered the results of To have considered the results of the the IASBIASB’’ss research project and research project and made a decision about the scope made a decision about the scope and timing of a potential agenda and timing of a potential agenda project project

Intangible Intangible assetsassets

Progress to achieve by 2008Progress to achieve by 2008ProjectProject

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Convergence Effort in Convergence Effort in CanadaCanada

Strategy announced in January 2006Strategy announced in January 2006Separate strategies for major Separate strategies for major categories of entitiescategories of entitiesFor public companies, converge For public companies, converge Canadian GAAP with IFRSCanadian GAAP with IFRS

US GAAP as an alternativeUS GAAP as an alternative5 year transition then “big bang”5 year transition then “big bang” (2011)(2011)

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Convergence Project with Convergence Project with ChinaChina

June 2005 June 2005 –– China agrees to make up an China agrees to make up an action plan to achieve highaction plan to achieve high--quality quality accounting standards accounting standards October 2005 October 2005 –– IASB staff was in China to IASB staff was in China to discuss Chinese discuss Chinese EDsEDs for convergencefor convergenceNovember 2005 November 2005 –– the 1the 1stst convergence convergence meeting including IASB Board membersmeeting including IASB Board membersFebruary 2006 February 2006 –– issuance of new standards issuance of new standards substantially converged with IFRS in main substantially converged with IFRS in main principles (effective from January 2007 for principles (effective from January 2007 for listed companies)listed companies)

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Convergence Effort in Convergence Effort in KoreaKorea

February 2006 February 2006 –– establishment of establishment of ‘‘IFRS IFRS convergence task forceconvergence task force’’ to discuss the three to discuss the three step strategy step strategy –– replacement of KAS by replacement of KAS by translated version of IFRS (full adoption)translated version of IFRS (full adoption)Phase IPhase I –– Optional application of KIFRS or Optional application of KIFRS or KAS for all entities (starts by 2009)KAS for all entities (starts by 2009)Phase II Phase II –– Application of KIFRS to listed Application of KIFRS to listed global entities global entities Phase III Phase III –– Application of KIFRS to all listed Application of KIFRS to all listed entitiesentitiesTiming of Phase II and III is not decidedTiming of Phase II and III is not decided

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Convergence Project with Convergence Project with JapanJapan

October 2004 October 2004 ––inauguration of the Joint inauguration of the Joint Convergence projectConvergence projectMarchMarch 2005 2005 ––items to be dealt with in the 1items to be dealt with in the 1stst

phase were announced (1phase were announced (1stst meeting ) meeting ) September 2005 September 2005 –– progress has been progress has been reported (2reported (2ndnd meeting)meeting)March 2006 March 2006 –– a new (whole picture) a new (whole picture)

approach agreed and three new items added approach agreed and three new items added (Asset removal obligation etc) (3(Asset removal obligation etc) (3rdrd meeting)meeting)September 2006 September 2006 –– 44thth meeting was held in meeting was held in LondonLondon

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New ProjectNew ProjectEmployee BenefitsEmployee Benefits

Phased approach Phased approach First phase by 2010First phase by 2010

Presentation & disclosurePresentation & disclosureDefinition of DB & DC arrangements and accounting Definition of DB & DC arrangements and accounting for cash balance plansfor cash balance plansDeletion of smoothing & deferral mechanismsDeletion of smoothing & deferral mechanismsTreatment of settlements and curtailmentsTreatment of settlements and curtailments

Second phase Second phase –– not yet decidednot yet decidedWorking closely with FASBWorking closely with FASB

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New ProjectNew ProjectLeasesLeases

Fundamental reconsideration of lease Fundamental reconsideration of lease accounting accounting –– DP will be in late 2008DP will be in late 2008For both lessee and For both lessee and lessorlessorFocus on assets and liabilities arising Focus on assets and liabilities arising from contractual rights and obligationsfrom contractual rights and obligationsTo reflect the conveyance of the right To reflect the conveyance of the right of use and control of the associated of use and control of the associated future economic benefitsfuture economic benefits

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New ProjectNew ProjectRelated party disclosuresRelated party disclosures

Proposed by CASC & ASBJProposed by CASC & ASBJReview of requirements re stateReview of requirements re state--owned owned entities (SOE) transactions with entities (SOE) transactions with SOEsSOEsReview of the disclosure scopeReview of the disclosure scopeTransactions between an associate Transactions between an associate and a subsidiary of the associateand a subsidiary of the associate’’s s significant investorsignificant investorED will be by the end of 2006ED will be by the end of 2006

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Stability of Stability of IFRSsIFRSs & & enhanced consultationenhanced consultation

12 months lead time to the 12 months lead time to the implementationimplementationDP for Conceptual frameworkDP for Conceptual frameworkDP for Fair value measurement DP for Fair value measurement RoundRound--table discussions for review of table discussions for review of IAS 37 and measurement phase of CFIAS 37 and measurement phase of CFNo requirement to apply new No requirement to apply new IFRSsIFRSsuntil 2009 (four year stability)until 2009 (four year stability)

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®International

Accounting Standards Board

Convergence with IFRS Convergence with IFRS around the World:around the World:IASB activities UpdateIASB activities Update


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