ifrs: what should boards and audit committees be considering now?
TRANSCRIPT
IFRS: What should boards and audit committees be considering now?
Contents
3 Foreword by Jim Quigley
4 Where are we now?
5 What are U.S. companies doing today?
6 What should boards and audit committees be considering?Set the toneFocus on the processUnderstand the risks
9 Conclusion
10 Appendix - Issues Guide
This publication contains general information only, and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte and its affiliates and related entities shall not be responsible for any loss sustained by any person who relies on this publication.
IFRS: What should boards and audit committees be considering now? 3
Audit committee members play a critical role in the effective functioning of the capital markets. Their oversight and experience assists company management teams to navigate rough waters, capitalize on opportunities, operate efficiently, and, of course, provide timely, reliable financial information to investors.
In an effort to support these important audit committee activities, and to help directors stay current, this publication provides guidance on an important emerging topic for audit committees: IFRS — International Financial Reporting Standards. This publication has two sections: (1) an overview of IFRS with considerations for the board and audit committee; and (2) an “issues guide” in the appendix, a tool that outlines a number of the technical accounting differences between U.S. Generally Accepted Accounting Principles (GAAP) and IFRS and provides some key questions to use in meetings with management.
Since 2005, when the European Union required European companies to use IFRS for financial reporting, the global trend has been towards adoption of IFRS and away from U.S. GAAP. Today, more than 40 percent of Global Fortune 500 companies use IFRS and by 2011 a clear majority will likely do so. The goal of a single set of high quality accounting standards has been envisioned for many years. The growing acceptance of IFRS brings that vision closer to reality. The Securities and Exchange Commission (SEC) has solicited comments on a proposed road map to adopt IFRS in the U.S. for all filers, but the SEC has not yet committed to a date certain for adoption. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) recently announced their continued commitment to convergence of U.S. GAAP and IFRS.
The benefits of global adoption of IFRS are significant for investors. Global adoption will create a common denominator from which regulators and supervisors can assess the operations of the entities and markets they oversee. It will permit investors to compare the financial position of companies across borders, potentially allowing investors to more efficiently allocate capital on a global basis. And for many global companies, global adoption will likely eliminate the need to keep multiple sets of books in order to comply with divergent accounting regimes and thus improve the quality of financial statements by reducing the risk of translation errors between different accounting standards.
Although converting to IFRS will present challenges, we believe it will be worth the effort. Capital markets do not function effectively without a solid foundation of trust and confidence. Comparable, transparent, and reliable financial reporting provides a fundamental pillar of trust that enables global markets to function more effectively, facilitating international investment, and stimulating the investments necessary for economic recovery.
We hope you find this compilation useful. Feel free to distribute it to your colleagues; if you need additional copies, contact your Deloitte professional, who would be happy to provide them.
As always, we value and welcome your comments and feedback.
Jim QuigleyChief Executive Officer, Deloitte Touche Tohmatsu
Foreword by Jim Quigley
4
Where are we now?In 2002, the twenty-five member states of the European Union (EU) met and decided to require EU companies listed on EU exchanges to report under International Financial Reporting Standards (IFRS) beginning in 2005. Today, IFRS is used for public reporting in over 100 countries throughout the world. Other countries, namely Argentina, Brazil, Canada, Chile, India, Korea, and Mexico, will be following over the next couple of years. Japan also is weighing mandatory use in 2015. In addition, now or in the near future, many of these countries will permit or require the use of IFRS for local statutory purposes.
The movement toward IFRS has challenged regulators to revisit current public reporting requirements and the information needs of investors. In 2007, the U.S. Securities and Exchange Commission (SEC) began allowing foreign companies the ability to file IFRS financial statements in order to fulfill U.S. public reporting requirements. As a result, those foreign companies that file IFRS financial statements are no longer required to include a reconciliation to U.S. GAAP.
The discussion has now turned to the U.S. domestic environment. Last year the SEC issued for comment its “IFRS Roadmap,” proposing an eventual adoption of IFRS beginning in 2014 for U.S. public companies. The IFRS Roadmap also included a proposal to permit certain U.S. issuers the option of using IFRS early.
The issuance of the SEC’s IFRS Roadmap comes at a time when national governments are addressing issues relating to the global financial crisis. The leaders of the “Group of Twenty” countries (G-20) recently reiterated their desire for a single set of global standards in response to the current financial crisis.
In determining how to move forward with the proposed IFRS Roadmap, the SEC will likely consider recent developments related to the financial crisis, including the loss of confidence in the U.S. capital markets, the development of capital market alternatives outside the United States, and the impact on global competitiveness.
IFRS: What should boards and audit committees be considering now?
Over the last several years, the world’s capital markets have undergone tremendous expansion, diversification, and integration. Accompanying these changes has been a movement away from local financial reporting standards toward global standards.
As proposed, select U.S. filers will be eligible to file IFRS financials
2011: SEC to decide whether to mandate IFRS
January 1, 2012: Beginning of the first comparative IFRS year
December 31, 2014: Large accelerated filers could be mandated to report financial results using IFRS
2009 2010 2011 2012 2013 2014
Transition date Reporting date
Representative U.S. Timeline, as proposed*
* Representative timeline of proposed SEC Roadmap for large accelerated filers (as proposed, IFRS required for accelerated filers in 2015 and non-accelerated filers in 2016)
IFRS: What should boards and audit committees be considering now? 5
The increasing use of IFRS around the world—and the likelihood that IFRS will eventually be required in the U.S.—is driving a growing number of U.S. companies to develop an IFRS transition strategy.
As U.S. executives await the SEC’s next steps to follow up on the proposed IFRS Roadmap, many are preparing their organizations for change and mobilizing around IFRS planning and transition activities. Boards and audit committees have the important roles of overseeing the development of a comprehensive transition plan; helping to ensure that the potential risks surrounding conversion are being addressed; and helping to set the tone for an effective IFRS conversion.
What are U.S. companies doing today?Many companies have undertaken assessment activities to identify areas of significant impact. According to a recent Deloitte survey,1 80% of financial executive respondents indicated that their companies are involved with an IFRS assessment: 40% are performing or have performed a high-level IFRS assessment, while another 40% plan to perform one. Survey results also indicate that 60% of companies that are performing or have performed a high-level IFRS assessment sought or are seeking external assistance. Approximately 40% are taking on the task themselves.
1 “IFRS Survey Results 2009: Update on views and activities,” Deloitte Development LLC, September 2009. Survey participants were self-selected, and responded through a web-based survey. Survey results are solely the thoughts and opinions of survey participants and are not necessarily representative of the total population of finance professionals.
Given the broader implications that IFRS may have, company executives are finding the need to take a more holistic approach to those assessments. For example: tax structures may be affected as a result of IFRS being used by subsidiaries for statutory reporting purposes; changes in information technology infrastructure may be needed to address such areas as parallel reporting during the transition period; and agreements such as loans and leases may require revisions.
A high-level IFRS assessment generally includes the following activities:
Identifying the key impacts of IFRS throughout •the organization – This involves comprehensively analyzing the potential impacts of IFRS throughout the organization, focusing not only on accounting and systems impacts, but also on impacts in such areas as income taxes, sales contracts, loan agreements and employee compensation arrangements. Companies with global operations are already getting a taste of IFRS in countries in which their subsidiaries file IFRS financial statements for statutory purposes. For such companies, the assessment process should include determining which countries require IFRS for statutory reporting purposes, and assessing that the application of IFRS by subsidiaries in those countries is appropriate.
Determining project interdependencies and •lead-times – This involves mapping the necessary implementation actions and evaluating the time needed to complete such actions, considering the interrelationship among activities, both related and unrelated to IFRS. This also includes factoring IFRS into current or upcoming systems implementation projects.
Estimating resource needs • — Based on the outcome of the previous steps, an estimate of the time and resources needed to complete the implementation is developed.
The product of a well-executed IFRS assessment is typically a company-specific roadmap designed to enable an orderly migration to IFRS, while anticipating and mitigating risk, and facilitating greater value for the organization.
6
What should boards and audit committees be considering?Early and comprehensive oversight by the board and audit committee in the development of an IFRS implementation program can help ensure the program has the appropriate level of management’s attention. It is essential that the board and its committees, along with management, begin to form the company’s perspective on IFRS and begin discussions on the potential risks and benefits of IFRS. Through insightful discussion, members of the board and its committees (e.g., the audit committee and the compensation committee) can begin to coordinate themselves – become aligned with management – and determine the company’s IFRS direction and strategy.
To begin to set expectations for the organization, the board and audit committee should consider the following:
Set the tone.• The board and audit committee may play leading roles in the prioritization of IFRS for the organization. Raising the following key questions with management now can help establish the proper “tone at the top”:
Has management aligned key stakeholders? – Establishing a steering committee of high-level executives representing the functional groups most affected by IFRS, who are empowered to allocate resources as needed, is an important element of achieving buy-in throughout the organization. What is management doing about –communications? Open and regular communication with internal and external constituents regarding the changes around IFRS may contribute positively to the perception of a company. Investors and analysts appreciate being kept informed.
IFRS: What should boards and audit committees be considering now? 7
What steps are being taken to educate the –organization? Generally, training that is timely and specific to individual needs yields the greatest benefit. If training is too general and too early, information learned may not be retained. Timely education for the board and its committees is also important. Building IFRS proficiency will enhance board members’ ability to lead productive dialog and provide useful insights in IFRS planning discussions.
Focus on the process. • Both the board and audit committee members should focus early on in overseeing the company’s approach, timeline, and budget for transition. The amount of time companies have to prepare may be less than many would expect, and a thoughtful approach to conversion can help to control costs. Encourage management to consider short- and long-term planning issues in determining what the company needs to do now versus later. Be mindful of opportunities in the IFRS conversion process that could translate into longer-term benefits. Key questions to consider raising with management include:
Has a PMO been established? – A dedicated project management office provides a single point of coordination that can help companies adhere to a unified plan by: establishing milestones and monitoring performance against them; facilitating a globally consistent application of IFRS; fostering the creation of and deploying standard templates; and coordinating training activities. Is management taking a fresh look at policies? –IFRS provides an opportunity to refresh accounting policy implementation, with a focus on achieving greater transparency and more timely financial reporting. (See Appendix, “Issues Guide,” for a more detailed view of key IFRS/U.S. GAAP differences.) Is the company monitoring evolving standards? –The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are working toward convergence of their standards.
There are currently several active projects, some of which may result in significant impacts. While a goal of the projects is to achieve full convergence, some differences may remain upon their completion. When a company adopts a new U.S. GAAP standard, it should also be considering the related IFRS standard, and addressing the impact of the differences that remain between the two standards. Management should also consider anticipated changes related to the convergence agenda—and incorporate those into any long-term plan. Will the company be ready by the transition –date? Under the SEC’s proposed Roadmap, large accelerated filers would be required to file their 2014 financial statements using IFRS, along with comparative financial statements for 2013 and 2012. For such companies, this would mean an adoption date of December 31, 2014, with a transition date of January 1, 2012. To efficiently and properly transition to IFRS, it is advisable to run parallel IFRS and U.S. GAAP reporting, and this would mean finalizing the beginning balance sheet by the transition date. Is the independent auditor involved? – The early and continued involvement of the independent auditor can prevent future surprises and can provide management with a well-informed source of assistance that has a deep knowledge of the company.
8
Lessons from the European experienceU.S. companies have the advantage of learning from companies in countries, such as those in the European Union, that have already transitioned to IFRS. Consider these cautionary lessons (based on the observations and experiences of Deloitte professionals in the field) in an attempt to avoid common pitfalls and overcome challenges.
•The effort was often underestimated – The original misconception that conversion was solely an accounting issue was replaced with a growing realization that the initiative was larger and more complex.
•Projects often lacked a holistic approach – Because of the limited view cited above, companies frequently did not take the collateral effects into consideration, such as the impacts on information technology, human resources, and tax.
•A late start often resulted in escalation of costs – Those few companies that anticipated conversion and took steps to prepare for it were often in much better shape than those that did not. Companies that delayed their response often paid a price, in terms of higher costs and greater diversion of resources.
•Many companies did not achieve “business as usual” state for IFRS reporting – The highest quality financial data is obtained when companies fully integrate IFRS into their systems and processes. The compressed timeframes often precluded this possibility; instead, first-year financials were in many cases produced using extraordinary, labor intensive, and unsustainable measures.
•Several companies are only now starting to explore benefits from IFRS implementation – Due to multiple constraints, the first-year effort in the EU was focused more on “getting it done.” Potential benefits in terms of reducing complexity, increasing efficiency, decreasing costs, and improving transparency had to be deferred.
Understand the risks – • Work with management to be aware of potential risks up front, including understanding the risk of waiting too long to develop a plan. Also, IFRS contains less detailed guidance than U.S. GAAP and therefore requires the use of more professional judgment. How will the board and audit committee address the risk that IFRS is applied consistently throughout the organization?
Key questions to consider raising with management include:
Is management preparing for an increased use –of judgment? In contrast with U.S. GAAP, IFRS has fewer bright-line rules, resulting in the need for the increased application of judgment. Depending on such factors as complexity and level of decentralization, a company may need to develop a framework for how judgments will be made, focusing on transaction analysis, accounting research, and decision making. With the increased use of judgment, it is also expected that the level of disclosure will increase. As IFRS policies are considered for adoption, it is important to understand whether management's policy selections may be overly aggressive or conservative, and how such selections stack up against peers in the industry. What is the company doing about statutory –conversions? Centrally managed IFRS implementations by subsidiaries should be considered to potentially avoid inefficiencies and inconsistencies when IFRS is adopted for consolidated reporting in the U.S.; to identify shared service opportunities; and to develop individuals whose IFRS experience can be leveraged in future conversion activities. What are the Sarbanes-Oxley (SOX) –implications? To guard against falling out of Sarbanes-Oxley compliance during the IFRS conversion process, as process changes are designed, it makes sense to consider the effects of such changes on existing internal controls.
IFRS What should boards and audit committees be considering now? 9
ConclusionWith IFRS so clearly on the horizon, boards and audit committees should consider asking the key questions and engaging management now. Establishing processes for frequent updates and communications can help drive a sustainable plan going forward. Underestimating the planning involved—and the time required—for a change from U.S. GAAP to IFRS could prove risky. The board and audit committee can serve as a guiding force in positioning a company to achieve strategic, operational, and economic benefits from a transition to IFRS.
In the appendix, an “Issues Guide” is provided, outlining some of the key potential accounting differences between IFRS and U.S. GAAP, along with the related broader impacts of those differences, and presenting questions that board and audit committee members should consider asking as they help to guide their companies down the path of IFRS implementation.
10
Appendix – Issues Guide
11 Inventory
11 Consolidation Policy
12 Financial Statement Presentation
12 Revenue
13 Business Combinations
13 Investments in Associates & Joint Ventures
14 Long-lived Assets
14 Asset Impairment
15 Intangible Assets
15 Leasing
16 Provisions and Contingencies
16 Income Taxes
17 Employee Benefits
17 Share-based Payments
18 Financial Instruments Presentation and Disclosure
18 Financial Instruments Recognition
IFRS: What should boards and audit committees be considering now? 11
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in t
he c
onso
lidat
ed g
roup
diff
er?
•A
re t
he c
urre
nt in
form
atio
n sy
stem
s ca
pabl
e of
cap
turin
g th
e in
form
atio
n ne
eded
to
refle
ct c
hang
es in
the
repo
rtin
g •
entit
y?
12
Finan
cial
Sta
tem
ent
Pre
senta
tio
n
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
s –
IAS
1, IA
S 7,
IAS
8, IA
S 10
, IA
S •
24, I
AS
33, I
AS
34, I
FRS
5, IF
RS 8
Gui
danc
e ad
dres
ses
the
basi
c fo
rm a
nd c
onte
nt
•of
fina
ncia
l sta
tem
ents
and
incl
udes
gen
eral
co
nsid
erat
ions
suc
h as
fair
pres
enta
tion,
goi
ng
conc
ern,
acc
rual
acc
ount
ing,
con
sist
ency
of
pres
enta
tion,
mat
eria
lity
and
offs
ettin
g Fi
nanc
ial s
tate
men
t co
mpo
nent
s in
clud
e a
stat
emen
t •
of fi
nanc
ial p
ositi
on, s
tate
men
t of
com
preh
ensi
ve
inco
me,
sta
tem
ent
of c
hang
es in
equ
ity, s
tate
men
t of
ca
sh fl
ows,
and
not
es t
o th
e fin
anci
al s
tate
men
tsM
ay h
ave
a “c
onde
nsed
” pr
esen
tatio
n fo
r in
terim
•
repo
rtin
gC
erta
in d
iscl
osur
es a
re re
quire
d fo
r pu
blic
com
pani
es
•(e
.g.,
EPS,
seg
men
ts)
No
spec
ific
indu
stry
gui
danc
e•
Form
at a
nd s
truc
ture
of t
he fi
nanc
ial s
tate
men
ts;
•m
ay p
rese
nt a
ltern
ativ
e pe
rfor
man
ce m
easu
res;
no
“ex
trao
rdin
ary
item
s” in
the
sta
tem
ent
of
com
preh
ensi
ve in
com
e; c
lass
ifica
tion
of e
xpen
ses
may
be
bas
ed o
n fu
nctio
n or
nat
ure
Cas
h-flo
w c
lass
ifica
tion
of in
tere
st, d
ivid
ends
, inc
ome
•ta
xes
and
bank
ove
rdra
fts;
dis
clos
ure
of d
isco
ntin
ued
oper
atio
ns b
y ca
tego
ryLe
vel a
nd n
atur
e of
dis
clos
ure
in t
he n
otes
to
the
•fin
anci
al s
tate
men
ts; m
ore
of a
focu
s on
judg
men
ts
mad
e an
d as
sum
ptio
ns u
sed
Even
ts o
ccur
ring
afte
r th
e re
port
ing
perio
d do
not
•
affe
ct c
lass
ifica
tions
as
of t
he e
nd o
f the
repo
rtin
g pe
riod
(i.e.
, refi
nanc
ing
of b
ank
loan
s or
deb
t co
vena
nt
wai
vers
)N
arro
wer
defi
nitio
n of
a d
isco
ntin
ued
oper
atio
n•
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Dat
a ca
ptur
e m
ay b
e m
ore
or le
ss d
etai
led,
whi
ch c
ould
lead
to
chan
ges
in t
he c
hart
of a
ccou
nts
•Th
e pr
oces
s ar
ound
mon
itorin
g de
bt c
oven
ants
or
calc
ulat
ing
EPS
may
nee
d to
be
revi
site
d•
Dis
posa
ls m
ay re
sult
in m
ore
or le
ss d
isco
ntin
ued
oper
atio
ns•
Man
agem
ent
repo
rtin
g m
ay c
hang
e as
a re
sult
of d
iffer
ent
finan
cial
sta
tem
ent
form
ats
and
the
use
of a
ltern
ativ
e •
perf
orm
ance
mea
sure
sC
omm
unic
atio
n w
ith in
vest
ors
may
be
affe
cted
as
finan
cial
sta
tem
ent
form
ats;
que
stio
ns m
ay b
e as
ked
abou
t •
acco
untin
g di
ffer
ence
s an
d ho
w g
ener
al p
rinci
ples
wer
e ap
plie
dC
han
ges
pen
din
g:
•
The
re is
an
IASB
/FA
SB jo
int
proj
ect
to d
evel
op a
com
preh
ensi
ve s
tand
ard
for
the
orga
niza
tion
and
pres
enta
tion
of in
form
atio
n in
the
fina
ncia
l sta
tem
ents
with
an
emph
asis
on
pres
enta
tion
of a
coh
esiv
e pi
ctur
e of
an
entit
y’s
oper
atio
ns a
nd e
nhan
ced
cash
flow
info
rmat
ion
to a
sses
s liq
uidi
ty a
nd fi
nanc
ial fl
exib
ility
. An
expo
sure
dr
aft
is e
xpec
ted
in e
arly
201
0 w
ith a
fina
l sta
ndar
d in
201
1. T
he b
oard
s al
so h
ave
a jo
int
proj
ect
to d
evel
op a
co
mm
ent
defin
ition
of a
dis
cont
inue
d op
erat
ion,
whi
ch is
exp
ecte
d to
be
final
ized
by
early
201
0.
Key
Ques
tio
ns
to A
sk
How
wou
ld t
he p
rese
ntat
ion
form
at c
hang
e?•
Wha
t is
the
pot
entia
l im
pact
on
EPS?
•W
hat
are
the
key
perf
orm
ance
mea
sure
s an
d ho
w w
ill t
hey
chan
ge?
•H
ow d
o th
e pr
esen
tatio
n fo
rmat
s co
mpa
re w
ith t
hose
of o
ther
s in
the
indu
stry
?•
Is a
com
mun
icat
ion
stra
tegy
in p
lace
to
addr
ess
repo
rtin
g un
der
IFRS
?•
Rev
enue
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
s –
IAS
11, I
AS
18•
Gui
danc
e ad
dres
ses
gene
ral p
rinci
ples
rela
ted
to
•re
venu
e fr
om t
he s
ale
of g
oods
and
ser
vice
s; li
ttle
de
taile
d gu
idan
ce; a
lso
addr
esse
s re
venu
e fr
om
inte
rest
, roy
altie
s an
d di
vide
nds
A k
ey is
sue
is u
nder
stan
ding
the
“un
it of
acc
ount
” •
(i.e.
, com
bini
ng a
nd s
egm
entin
g co
ntra
cts,
mul
tiple
el
emen
t ar
rang
emen
ts)
Prin
cipl
es re
latin
g to
the
sal
e of
goo
ds fo
cus
on t
he
•tr
ansf
er o
f “ris
ks a
nd re
war
ds”
and
“con
trol
” ov
er
the
good
sRe
venu
e fr
om t
he s
ale
of s
ervi
ces
is re
cogn
ized
bas
ed
•on
the
“pe
rcen
tage
of c
ompl
etio
n”
Emph
asis
on
fair-
valu
e m
easu
rem
ent
of t
he
•co
nsid
erat
ion
rece
ived
Ove
rall
leve
l of g
uida
nce
is m
uch
less
; lim
ited
deta
iled
•gu
idan
ce re
sulti
ng in
mor
e ju
dgm
ent
in d
eter
min
ing
reve
nue
reco
gniti
on p
olic
ies
Varia
nces
in a
pply
ing
judg
men
t m
ay re
sult
in
•di
ffer
ence
s in
the
reve
nue
reco
gniti
on re
late
d to
ar
rang
emen
ts w
ith m
ultip
le e
lem
ents
and
tho
se
invo
lvin
g up
fron
t fe
es; a
s w
ell a
s in
real
est
ate
sale
s an
d ot
her
indu
stry
issu
es
Con
trac
t ac
coun
ting
– w
hen
the
stag
e of
com
plet
ion
•ca
nnot
be
estim
ated
relia
bly,
reve
nue
is re
cogn
ized
to
the
ext
ent
that
reco
vera
ble
expe
nses
hav
e be
en
incu
rred
Imp
lem
enta
tio
n C
onsi
der
atio
ns
The
sele
ctio
n of
reve
nue
reco
gniti
on p
olic
ies
will
requ
ire in
crea
sed
judg
men
t; a
n ov
eral
l app
roac
h to
reve
nue
•re
cogn
ition
will
nee
d to
be
deve
lope
d th
at fo
cuse
s on
a ju
dgm
ent
fram
ewor
kD
ata
capt
ure
may
be
mor
e or
less
det
aile
d, w
hich
cou
ld le
ad t
o in
form
atio
n sy
stem
s ch
ange
s•
Con
trac
t de
sign
s m
ay b
e af
fect
ed•
Cha
nges
in t
he t
imin
g of
reve
nue
reco
gniti
on m
ay a
ffec
t in
com
e ta
xes
•C
han
ges
pen
din
g:
•
The
re is
an
IASB
/FA
SB jo
int
proj
ect
to d
evel
op a
sin
gle
cont
ract
-bas
ed m
odel
for
reve
nue
reco
gniti
on u
pon
com
plet
ion
of p
erfo
rman
ce o
blig
atio
ns t
hat
can
be a
pplie
d co
nsis
tent
ly a
cros
s in
dust
ries
and
geog
raph
ies.
An
expo
sure
dra
ft is
exp
ecte
d in
201
0 w
ith a
fina
l sta
ndar
d in
201
1.
Key
Ques
tio
ns
to A
sk
Wha
t is
the
ove
rall
appr
oach
to
reve
nue
reco
gniti
on a
nd h
ow d
oes
it co
mpa
re t
o ot
hers
in t
he in
dust
ry?
•W
hat
proc
esse
s ar
e in
pla
ce fo
r de
cisi
on-m
akin
g re
gard
ing
reve
nue
reco
gniti
on, a
nd a
re t
he a
ppro
pria
te re
sour
ces
•in
volv
ed?
Are
reve
nue
polic
y di
sclo
sure
s su
ffici
ent?
•
IFRS: What should boards and audit committees be considering now? 13
Busi
nes
s C
om
bin
atio
ns
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
– IF
RS 3
•
Base
d on
the
“co
ntro
l” n
otio
n•
Gui
danc
e ad
dres
ses
the
acco
untin
g by
the
acq
uire
r;
•re
quire
s us
e of
the
acq
uisi
tion
met
hod
for
the
reco
gniti
on a
nd m
easu
rem
ent
of a
sset
s ac
quire
d,
liabi
litie
s as
sum
ed a
nd a
ny n
onco
ntro
lling
inte
rest
s in
th
e ac
quire
d en
tity
Rest
ruct
urin
g pr
ovis
ions
are
gen
eral
ly p
rohi
bite
d fr
om
•re
cogn
ition
as
acqu
ired
liabi
litie
sTr
ansa
ctio
n co
sts
are
expe
nsed
•G
uida
nce
addr
esse
s th
e ac
coun
ting
for
good
will
; •
annu
al im
pairm
ent
test
is re
quire
d; n
o am
ortiz
atio
n,
and
the
defe
rral
of “
nega
tive
good
will
” is
pro
hibi
ted
Scop
e in
clud
es t
rans
actio
ns in
volv
ing
mut
ual e
ntiti
es
•an
d co
ntro
l by
cont
ract
; doe
s no
t ad
dres
s co
mm
on
cont
rol t
rans
actio
ns
May
acc
ount
for
nonc
ontr
ollin
g in
tere
sts
at e
ither
full
•fa
ir va
lue
or t
he fa
ir va
lue
of t
he p
ropo
rtio
nate
sha
re o
f th
e ne
t as
sets
acq
uire
d; a
ccou
ntin
g po
licy
choi
ce o
n a
tran
sact
ion-
by-t
rans
actio
n ba
sis
Acq
uisi
tion
of n
onco
ntra
ctua
l lia
bilit
ies
are
initi
ally
•
reco
gniz
ed a
t fa
ir va
lue;
sub
sequ
ent
mea
sure
men
t m
ay
be d
iffer
ent
Acc
ount
ing
for
com
mon
con
trol
tra
nsac
tions
are
not
•
addr
esse
dRe
late
d pr
o fo
rma
finan
cial
info
rmat
ion
is re
quire
d fo
r •
all e
ntiti
es (p
ublic
and
non
publ
ic)
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Proc
esse
s fo
r th
e ca
ptur
e of
fina
ncia
l inf
orm
atio
n re
late
d to
bus
ines
s co
mbi
natio
ns w
ill n
eed
to b
e de
velo
ped,
•
part
icul
arly
for
fair-
valu
e in
form
atio
n re
late
d to
con
tinge
nt li
abili
ties
Cha
nges
in t
he a
mou
nt o
f cer
tain
item
s ac
quire
d or
ass
umed
in a
bus
ines
s co
mbi
natio
n an
d th
e re
late
d go
odw
ill m
ay
•af
fect
inco
me
taxe
s C
han
ges
pen
din
g:
•
Non
e
Key
Ques
tio
ns
to A
sk
How
will
the
ter
ms
and
stru
ctur
ing
of fu
ture
bus
ines
s co
mbi
natio
n tr
ansa
ctio
ns b
e af
fect
ed?
•W
hat
will
be
the
effe
ct o
f any
cha
nges
in t
he v
alua
tion
of a
sset
s ac
quire
d an
d lia
bilit
ies
assu
med
? •
How
will
any
futu
re e
xit
stra
tegi
es o
r ot
her
rest
ruct
urin
g pl
ans
rela
ted
to a
cqui
red
busi
ness
es b
e af
fect
ed?
•
Inve
stm
ents
in A
sso
ciat
es &
Jo
int
Ven
ture
s
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
s –
IAS
28 a
nd 3
1•
Key
issu
e is
det
erm
inin
g w
heth
er “
sign
ifica
nt
•in
fluen
ce”/
“joi
nt c
ontr
ol”
exis
tsSi
gnifi
cant
influ
ence
is t
he p
ower
to
part
icip
ate
•in
fina
ncia
l and
ope
ratin
g po
licy
deci
sion
s of
the
en
tity
Entit
ies
whe
re s
igni
fican
t in
fluen
ce e
xist
s ar
e co
nsid
ered
to
be “
asso
ciat
es”
and
are
acco
unte
d fo
r us
ing
the
“equ
ity m
etho
d”In
vest
men
t in
an
asso
ciat
e is
initi
ally
reco
gniz
ed a
t •
cost
; sub
sequ
ent
carr
ying
am
ount
is in
crea
sed
or
decr
ease
d ba
sed
on in
vest
or’s
sha
re o
f pro
fit/lo
ss o
f as
soci
ate;
dis
trib
utio
ns re
duce
the
car
ryin
g am
ount
Ther
e ar
e sc
ope
exce
ptio
ns fo
r “i
nves
tmen
t”
•co
mpa
nies
and
inve
stm
ents
“he
ld fo
r sa
le”
Join
t co
ntro
l exi
sts
whe
n th
e fin
anci
al a
nd o
pera
ting
•po
licy
deci
sion
s re
quire
the
con
sent
of a
ll ve
ntur
ers
thro
ugh
the
cont
ract
ual s
harin
g of
con
trol
Inve
stm
ents
in jo
intly
con
trol
led
entit
ies
may
be
•ac
coun
ted
for
unde
r ei
ther
the
equ
ity m
etho
d of
ac
coun
ting
or t
he “
prop
ortio
nate
con
solid
atio
n”
met
hod.
The
pro
port
iona
te c
onso
lidat
ion
met
hod
is
expe
cted
to
be e
limin
ated
Exce
ptio
n fr
om e
quity
acc
ount
ing
for
asso
ciat
es /
join
t •
vent
ures
hel
d fo
r sa
le
Pote
ntia
l vot
ing
right
s m
ust
be c
onsi
dere
d w
hen
•as
sess
ing
whe
ther
sig
nific
ant
influ
ence
/ jo
int
cont
rol
exis
tsTh
e ac
coun
ting
polic
ies
of a
ll as
soci
ates
/ jo
int
vent
ures
•
mus
t be
con
form
edTh
e re
port
ing
date
s of
all
asso
ciat
es /
join
t ve
ntur
es
•m
ust
be c
onfo
rmed
If lo
sses
exc
eed
the
inte
rest
in a
ssoc
iate
, dis
cont
inue
•
reco
gniti
on u
nles
s a
lega
l obl
igat
ion
exis
tsIm
pairm
ent
test
ing
not
base
d on
an
“oth
er t
han
•te
mpo
rary
” no
tion
Prop
ortio
nate
con
solid
atio
n, u
sed
in s
ome
indu
strie
s •
(e.g
., oi
l and
gas
, rea
l est
ate)
und
er U
.S. G
AA
P, t
o be
di
scon
tinue
d as
a p
olic
y op
tion
unde
r IF
RS
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Det
erm
inin
g w
heth
er e
ntiti
es s
houl
d be
con
side
red
asso
ciat
es o
r jo
intly
con
trol
led
entit
ies
will
requ
ire in
crea
sed
•ju
dgm
ent
Proc
esse
s an
d co
ntro
ls w
ill n
eed
to b
e de
velo
ped
for
mon
itorin
g po
tent
ial v
otin
g rig
hts
and
whe
ther
the
y ar
e •
curr
ently
exe
rcis
able
or
conv
ertib
lePr
oces
ses
for
the
capt
ure
of fi
nanc
ial d
ata
for
all e
ntiti
es b
eing
acc
ount
ed fo
r as
ass
ocia
tes
or jo
intly
con
trol
led
•en
titie
s w
ill n
eed
to b
e de
velo
ped,
and
acc
ount
ing
polic
ies
and
repo
rtin
g da
tes
will
nee
d to
be
conf
orm
edC
hang
es in
the
repo
rtin
g en
tity
as a
resu
lt of
mor
e or
few
er e
ntiti
es b
eing
acc
ount
ed fo
r as
ass
ocia
tes
or jo
intly
•
cont
rolle
d en
titie
s m
ay a
ffec
t in
com
e ta
xes
Chan
ges
pen
din
g:
•
The
IASB
’s E
D fo
r th
e Jo
int
Vent
ures
pro
ject
(ED
9, J
oint
Arr
ange
men
ts) p
ropo
sed
the
elim
inat
ion
of t
he p
ropo
rtio
nate
con
solid
atio
n ac
coun
ting
polic
y op
tion.
The
IASB
is c
urre
ntly
in t
he p
roce
ss o
f fin
aliz
ing
the
new
Join
t A
rran
gem
ents
sta
ndar
d.
Key
Ques
tio
ns
to A
sk
Will
mor
e or
few
er e
ntiti
es b
e ac
coun
ted
for
unde
r th
e eq
uity
met
hod
of a
ccou
ntin
g?•
Will
mor
e or
few
er e
ntiti
es b
e co
nsid
ered
join
t ve
ntur
es?
•W
hat
chan
ges
will
nee
d to
be
mad
e to
the
join
t ve
ntur
e ar
rang
emen
ts?
•W
hat
proc
esse
s ar
e in
pla
ce re
latin
g to
mak
ing
judg
men
ts re
late
d to
the
acc
ount
ing
for
asso
ciat
es o
r jo
int
vent
ures
?•
Do
the
repo
rtin
g da
tes
or a
ccou
ntin
g po
licie
s of
any
inve
stm
ents
in a
ssoc
iate
s o
r jo
intly
con
trol
led
entit
ies
diff
er?
•A
re t
he c
urre
nt in
form
atio
n sy
stem
s ca
pabl
e of
cap
turin
g th
e in
form
atio
n ne
eded
to
acco
unt
for
inve
stm
ents
in
•as
soci
ates
and
join
t ve
ntur
es?
14
Long
-liv
ed A
sset
s
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
s –
IAS
16, 2
3, 4
0, 4
1•
Long
-live
d as
sets
are
initi
ally
reco
gniz
ed a
t co
st,
•in
clud
es a
ll co
sts
dire
ctly
att
ribut
able
to
prep
arin
g th
e as
set
for
use;
bor
row
ing
cost
s ar
e ca
pita
lized
Dep
reci
atio
n is
bas
ed o
n th
e “c
ompo
nent
s” a
ppro
ach
•Su
bseq
uent
mea
sure
men
t of
pro
pert
y, p
lant
and
•
equi
pmen
t or
inve
stm
ent
prop
erty
may
be
at fa
ir va
lue
Inve
stm
ent
prop
erty
is la
nd o
r a
build
ing
(or
part
•
of a
bui
ldin
g) h
eld
to e
arn
rent
als
or fo
r ca
pita
l ap
prec
iatio
n or
bot
h Bi
olog
ical
ass
ets
and
agric
ultu
ral p
rodu
cts
at t
he
•po
int
of h
arve
st m
ust
be m
easu
red
at fa
ir va
lue;
fair
valu
e ch
ange
s of
bio
logi
cal a
sset
s in
pro
fit o
r lo
ss;
agric
ultu
ral p
rodu
cts
at t
he p
oint
of h
arve
st u
nder
IA
S 2
Ass
et e
xcha
nges
are
reco
gniz
ed a
t fa
ir va
lue,
if t
hey
•ha
ve “
com
mer
cial
sub
stan
ce”
Com
pone
nts
appr
oach
to
depr
ecia
tion
is re
quire
d;
•m
ajor
ove
rhau
l cos
ts a
re g
ener
ally
incl
uded
as
a se
para
te c
ompo
nent
Resi
dual
val
ues
are
requ
ired
to b
e ad
just
ed t
o fa
ir va
lue
•(u
pwar
ds o
r do
wnw
ards
)Su
bseq
uent
mea
sure
men
t of
ass
et re
tirem
ent
•ob
ligat
ions
may
be
diff
eren
t Pr
oper
ty, p
lant
and
equ
ipm
ent
may
be
mea
sure
d at
cos
t •
or fa
ir va
lue
usin
g th
e “r
eval
uatio
n m
odel
”In
vest
men
t pr
oper
ty m
ay b
e ac
coun
ted
for
usin
g th
e •
cost
or
fair
valu
e m
odel
; pro
pert
y he
ld a
s an
ope
ratin
g le
ase
may
be
cons
ider
ed a
n in
vest
men
t pr
oper
tyBi
olog
ical
ass
ets
mus
t be
fair
valu
ed•
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Ass
et v
alua
tion
and
depr
ecia
tion
will
requ
ire in
crea
sed
judg
men
t •
Proc
ess
and
cont
rols
may
nee
d to
be
deve
lope
d fo
r de
term
inin
g th
e fa
ir va
lue
of c
erta
in a
sset
s if
the
fair
valu
e op
tion
•is
sel
ecte
dD
ata
capt
ure
for
asse
t co
mpo
nent
izat
ion
may
be
deta
iled;
whi
ch c
ould
lead
to
info
rmat
ion
syst
em c
halle
nges
•Re
sidu
al v
alue
cha
nges
will
nee
d to
be
trac
ked
•C
hang
es in
the
mea
sure
men
t ba
sis
of lo
ng-li
ved
asse
ts a
nd d
epre
ciat
ion
may
aff
ect
inco
me
taxe
s•
Chan
ges
pen
din
g:
•
The
IASB
issu
ed a
n ED
of a
n IF
RS o
n fa
ir va
lue
mea
sure
men
t w
hich
is g
ener
ally
con
sist
ent
to
the
fair
valu
e gu
idan
ce u
nder
U.S
. GA
AP.
A fi
nal s
tand
ard
is e
xpec
ted
in t
he s
econ
d ha
lf of
201
0.
Key
Ques
tio
ns
to A
sk
Wha
t w
ill b
e th
e m
easu
rem
ent
basi
s of
long
-live
d as
sets
?•
Wou
ld t
he re
valu
atio
n m
odel
be
cons
ider
ed a
nd is
it p
ossi
ble
to d
eter
min
e fa
ir va
lues
of c
erta
in a
sset
s?•
Will
dep
reci
atio
n am
ount
s ch
ange
as
a re
sult
of t
he c
ompo
nent
s ap
proa
ch?
•A
re t
he c
urre
nt in
form
atio
n sy
stem
s ab
le t
o ca
ptur
e th
e in
form
atio
n ne
cess
ary
for
asse
t co
mpo
nent
izat
ion?
•D
o an
y pr
oper
ties
unde
r op
erat
ing
leas
es q
ualif
y as
inve
stm
ent
prop
ertie
s?•
Ass
et Im
pai
rmen
t
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
– IA
S 36
•A
sin
gle
appr
oach
to
impa
irmen
t•
Focu
s on
the
ass
et’s
“re
cove
rabl
e am
ount
,” w
hich
•
is t
he h
ighe
r of
fair
valu
e le
ss c
osts
to
sell
and
valu
e in
use
Va
lue
in u
se is
the
pre
sent
val
ue o
f est
imat
ed fu
ture
•
cash
flow
s ex
pect
ed t
o ar
ise
from
use
of t
he a
sset
and
its
dis
posa
lLe
vel o
f tes
ting
is b
ased
on
the
“cas
h-ge
nera
ting
unit”
•
(CG
U) (
i.e.,
smal
lest
iden
tifiab
le g
roup
of a
sset
s th
at
gene
rate
s ca
sh in
flow
s in
depe
nden
tly o
f oth
er a
sset
s)Fo
r go
odw
ill, t
estin
g m
ay a
ggre
gate
CG
Us;
mus
t at
•
leas
t al
loca
te t
o an
ope
ratin
g se
gmen
tIm
pairm
ent
loss
es, e
xcep
t on
goo
dwill
, are
requ
ired
•to
be
reve
rsed
, if c
erta
in c
riter
ia a
re m
et
Impa
irmen
t lo
sses
may
be
reco
gniz
ed in
an
earli
er
•pe
riod
give
n di
ffer
ence
s in
the
impa
irmen
t “t
rigge
r”Th
e le
vel o
f im
pairm
ent
test
ing
may
be
diff
eren
t •
depe
ndin
g on
the
CG
UA
mou
nt o
f im
pairm
ent
may
be
diff
eren
t ba
sed
on t
he
•re
cove
rabl
e am
ount
of t
he a
sset
Any
impa
irmen
t ch
arge
s on
pro
pert
y, p
lant
and
•
equi
pmen
t, in
vest
men
t pr
oper
ty (w
here
the
cos
t m
odel
is
use
d), a
nd in
tang
ible
s (e
xcep
t go
odw
ill) a
re re
quire
d to
be
reve
rsed
, if c
erta
in c
riter
ia a
re m
et
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Det
erm
inin
g th
e le
vel a
t w
hich
ass
ets
are
test
ed fo
r im
pairm
ent
will
requ
ire in
crea
sed
judg
men
t Pr
oces
ses
and
•co
ntro
ls fo
r th
e re
vers
al o
f im
pairm
ent
char
ges
will
nee
d to
be
deve
lope
dD
ata
capt
ure
for
an a
sset
’s re
cove
rabl
e am
ount
may
be
deta
iled,
whi
ch c
ould
lead
to
info
rmat
ion
syst
em c
hang
es•
Cha
nges
in t
he t
imin
g an
d am
ount
of i
mpa
irmen
t ch
arge
s m
ay a
ffec
t in
com
e ta
xes
•C
han
ges
pen
din
g:
•
Non
e
Key
Ques
tio
ns
to A
sk
How
will
pot
entia
l cha
nges
to
asse
t im
pairm
ent
reco
gniti
on a
ffec
t th
e tim
ing
of im
pairm
ents
?•
Wha
t ar
e th
e ta
x co
nseq
uenc
es o
f pot
entia
l cha
nges
in im
pairm
ent?
•A
re t
he c
urre
nt in
form
atio
n sy
stem
s ab
le t
o ca
ptur
e th
e in
form
atio
n ne
eded
for
impa
irmen
t te
stin
g an
d an
y •
subs
eque
nt re
vers
als?
Are
the
cur
rent
info
rmat
ion
syst
ems
capa
ble
of c
aptu
ring
the
info
rmat
ion
nece
ssar
y fo
r im
pairm
ent
test
ing?
•
IFRS: What should boards and audit committees be considering now? 15
Inta
ng
ible
Ass
ets
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
– IA
S 38
•G
uida
nce
addr
esse
s th
e ac
coun
ting
for
inta
ngib
le
•as
sets
acq
uire
d se
para
tely
or
in a
bus
ines
s co
mbi
natio
n an
d th
ose
gene
rate
d in
tern
ally
Re
quire
s ac
quire
d in
tang
ible
ass
ets,
incl
udin
g •
deve
lopm
ent
cost
s, t
o be
reco
gniz
ed, i
f cer
tain
crit
eria
ar
e m
etM
ust
clas
sify
cos
ts o
f int
erna
lly g
ener
ated
inta
ngib
le
•as
sets
into
a re
sear
ch p
hase
and
a d
evel
opm
ent
phas
eRe
quire
s al
l res
earc
h ex
pend
iture
s to
be
expe
nsed
•D
evel
opm
ent
expe
nditu
res
are
requ
ired
to b
e •
capi
taliz
ed, i
f cer
tain
crit
eria
are
met
Inta
ngib
le a
sset
s m
ay b
e re
valu
ed, i
f cer
tain
crit
eria
•
are
met
Cap
italiz
atio
n of
dev
elop
men
t co
sts
is re
quire
d; c
riter
ia
•to
be
met
incl
ude:
A
bilit
y to
dem
onst
rate
tec
hnic
al fe
asib
ility
, –In
tent
ion
to c
ompl
ete
the
asse
t an
d us
e or
sel
l –A
bilit
y to
use
or
sell
the
asse
t – H
ow t
he in
tang
ible
ass
et w
ill g
ener
ate
prob
able
–fu
ture
eco
nom
ic b
enefi
ts A
vaila
bilit
y of
ade
quat
e te
chni
cal,
finan
cial
and
oth
er
–re
sour
ces
to c
ompl
ete
the
deve
lopm
ent
and
to u
se o
r se
ll th
e in
tang
ible
ass
et A
bilit
y to
relia
bly
mea
sure
the
exp
endi
ture
dur
ing
–de
velo
pmen
tIn
tang
ible
ass
ets
may
be
mea
sure
d at
cos
t or
fair
valu
e •
usin
g th
e “r
eval
uatio
n m
odel
”A
dver
tisin
g an
d pr
omot
iona
l cos
ts a
re g
ener
ally
•
expe
nsed
as
incu
rred
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Det
erm
inin
g w
hen
inta
ngib
le a
sset
s sh
ould
be
capi
taliz
ed w
ill re
quire
incr
ease
d ju
dgm
ent
•Pr
oces
ses
and
cont
rols
for
dete
rmin
ing
fair
val
ue o
f cer
tain
inta
ngib
le a
sset
s m
ay n
eed
to b
e de
velo
ped
if th
e •
reva
luat
ion
mod
el is
use
dPr
oces
ses
and
cont
rols
for
the
capi
taliz
atio
n of
dev
elop
men
t co
sts
will
nee
d to
be
deve
lope
d•
Dat
a ca
ptur
e fo
r th
e ca
pita
lized
dev
elop
men
t co
sts
may
be
mor
e de
taile
d, w
hich
cou
ld le
ad t
o in
form
atio
n sy
stem
•
chan
ges
Cap
italiz
atio
n of
dev
elop
men
t co
sts
may
aff
ect
inco
me
taxe
s•
Chan
ges
pen
din
g:
•
Non
e
Key
Ques
tio
ns
to A
sk
Shou
ld t
he re
valu
atio
n m
odel
be
cons
ider
ed, a
nd a
re t
he fa
ir va
lues
of c
erta
in in
tang
ible
ass
ets
able
to
be
•de
term
ined
?W
hat
amou
nt o
f dev
elop
men
t co
sts
will
nee
d to
be
capi
taliz
ed?
•W
hat
are
the
tax
cons
eque
nces
of c
apita
lizin
g de
velo
pmen
t co
sts?
•A
re t
he c
urre
nt in
form
atio
n sy
stem
s ab
le t
o ca
ptur
e th
e in
form
atio
n ne
eded
for
capi
taliz
ing
deve
lopm
ent
cost
s?•
Will
cap
italiz
ed a
dver
tisin
g an
d pr
omot
iona
l cos
ts n
eed
to b
e ex
pens
ed?
•
Leas
ing
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
– IA
S 17
•G
uida
nce
addr
esse
s th
e ac
coun
ting
for
both
less
ees
•an
d le
ssor
s Sc
ope
incl
udes
leas
es o
f pro
pert
y, p
lant
and
•
equi
pmen
t, a
s w
ell a
s of
inta
ngib
le a
sset
s;
conc
essi
onar
y ar
rang
emen
ts a
ccou
nted
for
unde
r IF
RIC
12
Acc
ount
ing
for
a le
ase
depe
nds
on it
s cl
assi
ficat
ion
•as
eith
er a
n op
erat
ing
or fi
nanc
e (i.
e., c
apita
l) le
ase;
op
erat
ing
leas
es a
re “
off b
alan
ce s
heet
” w
hile
fina
nce
leas
es a
re “
on b
alan
ce s
heet
”If
a le
ase
tran
sfer
s “s
ubst
antia
lly a
ll” t
he r
isks
and
•
rew
ards
of o
wne
rshi
p, it
is c
lass
ified
as
a fin
ance
leas
eO
pera
ting
leas
e pa
ymen
ts a
re u
sual
ly re
cogn
ized
on
a •
stra
ight
-line
bas
is
Util
izes
a p
rinci
ple-
base
d fr
amew
ork
for
leas
e •
clas
sific
atio
n th
at fo
cuse
s on
the
sub
stan
ce o
f the
ar
rang
emen
t G
ener
ally
the
impl
icit
rate
in t
he le
ase
is u
sed
to
•di
scou
nt t
he m
inim
um le
ase
paym
ents
, whi
ch m
ay
affe
ct c
lass
ifica
tion
Leas
es in
volv
ing
land
and
bui
ldin
gs a
re re
quire
d to
•
be a
ccou
nted
for
sepa
rate
ly, if
mat
eria
l. N
o sp
ecia
l ac
coun
ting
for
“lev
erag
ed le
ases
” Sa
le a
nd le
aseb
ack
tran
sact
ions
are
acc
ount
ed fo
r •
base
d on
the
ir su
bsta
nce
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Det
erm
inin
g th
e cl
assi
ficat
ion
of le
ases
will
requ
ire in
crea
sed
judg
men
t be
caus
e th
ere
are
no s
tric
t cl
assi
ficat
ion
•cr
iteria
Proc
esse
s an
d co
ntro
ls fo
r cl
assi
fyin
g le
ases
may
nee
d to
be
enha
nced
•D
ata
capt
ure
for
leas
es m
ay b
e m
ore
deta
iled,
whi
ch c
ould
lead
to
info
rmat
ion
syst
em c
hang
es
•C
hang
es in
leas
e cl
assi
ficat
ion
may
aff
ect
inco
me
taxe
s or
fina
ncin
g ra
tios
(i.e.
, deb
t to
equ
ity)
•C
han
ges
pen
din
g:
•
The
re is
an
IASB
/FA
SB jo
int
proj
ect
to d
evel
op a
com
mon
leas
ing
stan
dard
whi
ch w
ill re
quire
re
cogn
ition
of l
ease
rela
ted
asse
ts (i
.e.,
right
to
use)
and
liab
ilitie
s on
the
sta
tem
ent
of fi
nanc
ial p
ositi
on. A
join
t di
scus
sion
pap
er w
as is
sued
in M
arch
200
9. A
n ex
posu
re d
raft
is e
xpec
ted
in t
he s
econ
d qu
arte
r of
201
0 w
ith a
fina
l st
anda
rd in
201
1.
Key
Ques
tio
ns
to A
sk
Will
the
re b
e ch
ange
s to
leas
e cl
assi
ficat
ion
and,
if s
o, w
hat
is t
he p
oten
tial fi
nanc
ial s
tate
men
t im
pact
?•
Will
deb
t co
vena
nts
be a
ffec
ted?
•W
hat
is t
he e
ffec
t on
how
leas
e ar
rang
emen
ts a
re s
truc
ture
d?•
Wha
t ar
e th
e po
tent
ial t
ax c
onse
quen
ces?
•A
re t
he c
urre
nt in
form
atio
n sy
stem
s ab
le t
o ca
ptur
e an
y ad
ditio
nal i
nfor
mat
ion
need
ed t
o ac
coun
t fo
r le
ases
? •
16
Pro
visi
ons
and
Co
nti
ng
enci
es
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
– IA
S 37
•G
uida
nce
addr
esse
s t
he a
ccou
ntin
g fo
r “p
rovi
sion
s”
•an
d “c
ontin
gent
” as
sets
and
liab
ilitie
sPr
ovis
ions
are
liab
ilitie
s of
unc
erta
in t
imin
g or
am
ount
; •
are
“pro
babl
e“ (i
.e.,
mor
e lik
ely
than
not
) of o
ccur
ring
and
resu
lting
in a
n ou
tflow
of r
esou
rces
to
sett
le t
he
oblig
atio
n (m
ay b
e ei
ther
lega
l or
cons
truc
tive)
“Con
tinge
nt”
asse
ts o
r lia
bilit
ies
are
not
reco
gniz
ed a
s •
thei
r lik
elih
ood
of o
ccur
ring
is n
ot “
prob
able
”Pr
ovis
ions
are
mea
sure
d us
ing
a se
ttle
men
t no
tion;
•
use
of t
he “
best
est
imat
e” o
r m
id-p
oint
of r
ange
if a
ll po
ssib
le o
utco
mes
equ
ally
like
lyD
isco
untin
g of
pro
visi
ons
is re
quire
d, if
mat
eria
l•
Seve
ral d
iscl
osur
es a
re re
quire
d, a
lthou
gh “
prej
udic
ial”
•
item
s ar
e no
t re
quire
d to
be
disc
lose
d
Reco
gniti
on t
hres
hold
for
prov
isio
ns b
ased
on
•“m
ore
likel
y th
an n
ot;”
resu
lt is
tha
t lia
bilit
ies
may
be
reco
gniz
ed e
arlie
rPr
ovis
ions
are
mea
sure
d ba
sed
on t
he “
expe
cted
-val
ue”
•m
etho
d or
at
the
mid
-poi
nt o
f a ra
nge
of e
qual
ly li
kely
po
ssib
le o
utco
mes
Pr
ovis
ions
mus
t be
dis
coun
ted,
if m
ater
ial
•Pr
ovis
ions
rela
ting
to “
oner
ous”
ope
ratin
g le
ase
•co
ntra
cts
are
reco
rded
whe
n th
ere
is a
com
mitm
ent
(i.e.
, com
mun
icat
ion
to a
land
lord
)A
reas
whe
re t
here
may
be
diff
eren
ces
in t
he t
imin
g an
d •
mea
sure
men
t in
clud
e lit
igat
ion
prov
isio
ns, r
estr
uctu
ring
char
ges,
dec
omm
issi
onin
g lia
bilit
ies,
and
unc
erta
in t
ax
prov
isio
ns“P
reju
dici
al”
item
s ar
e no
t re
quire
d to
be
disc
lose
d
•
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Det
erm
inin
g lia
bilit
y re
cogn
ition
and
cor
resp
ondi
ng d
iscl
osur
es w
ill re
quire
incr
ease
d ju
dgm
ent
•Th
e le
gal d
epar
tmen
t an
d ou
tsid
e co
unse
l will
nee
d to
be
educ
ated
on
the
thre
shol
d fo
r re
cogn
ition
of p
rovi
sion
s•
Proc
esse
s an
d da
ta c
aptu
re fo
r pr
ovis
ions
may
be
mor
e de
taile
d, w
hich
cou
ld le
ad t
o in
form
atio
n sy
stem
cha
nges
•C
hang
es in
the
tim
ing
and
mea
sure
men
t of
pro
visi
ons
may
aff
ect
inco
me
taxe
s•
Chan
ges
pen
din
g:
•
The
IASB
is c
urre
ntly
in t
he p
roce
ss o
f fina
lizin
g am
endm
ents
to
IAS
37 a
s pa
rt o
f the
Lia
bilit
ies
proj
ect
to c
onve
rge
guid
ance
for
rest
ruct
urin
g pr
ovis
ions
and
ter
min
atio
n be
nefit
s un
der
IAS
19 w
ith U
.S. G
AA
P an
d im
prov
e th
e ov
eral
l rec
ogni
tion
and
mea
sure
men
t of
pro
visi
ons.
Key
Ques
tio
ns
to A
sk
Hav
e al
l obl
igat
ions
bee
n as
sess
ed fo
r po
tent
ial r
ecog
nitio
n as
pro
visi
ons?
•W
hat
is t
he e
ffec
t on
the
tim
ing
of re
stru
ctur
ing
prov
isio
ns a
nd p
rovi
sion
s re
latin
g to
one
rous
con
trac
ts?
•H
ave
the
impl
icat
ions
of c
hang
es in
reco
gniti
on o
f pro
visi
ons
been
dis
cuss
ed w
ith t
he c
ompa
ny’s
lega
l adv
iser
s?
•D
o an
y di
sclo
sure
s co
nsis
t of
pre
judi
cial
info
rmat
ion?
•
Inco
me
Taxe
s
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
– IA
S 12
•G
uida
nce
is b
ased
on
the
“tem
pora
ry d
iffer
ence
” •
appr
oach
; def
erre
d ta
x ite
ms
are
reco
gniz
ed fo
r di
ffer
ence
s be
twee
n th
e ca
rryi
ng a
mou
nt o
f an
asse
t or
liab
ility
in t
he s
tate
men
t of
fina
ncia
l pos
ition
and
its
tax
bas
e, a
nd fo
r op
erat
ing
loss
and
tax
cre
dit
carr
yfor
war
dsD
efer
red
taxe
s no
t re
cogn
ized
on
the
initi
al
•re
cogn
ition
of a
n as
set
or li
abili
ty t
hat
is n
ot re
late
d to
a
busi
ness
com
bina
tion
or t
hat
does
not
aff
ect
book
or
tax
pro
fitD
efer
red
tax
asse
ts a
re re
cogn
ized
whe
n th
ey a
re
•“p
roba
ble”
of r
ealiz
atio
n (i.
e., m
ore-
likel
y-th
an-n
ot)
Def
erre
d ta
x ite
ms
are
mea
sure
d ba
sed
on
•th
e ap
plic
able
tax
rate
s th
at a
re e
nact
ed o
r “s
ubst
antiv
ely”
ena
cted
Def
erre
d ta
x ite
ms
are
cons
ider
ed t
o be
non
curr
ent
•
Initi
al re
cogn
ition
exe
mpt
ion;
oth
er it
ems
may
hav
e a
•ta
x ef
fect
tha
t ar
e sc
oped
out
und
er U
.S. G
AA
P Ta
x ra
tes
used
to
mea
sure
def
erre
d ta
x ite
ms
•M
ust
use
rate
app
licab
le t
o un
dist
ribut
ed p
rofit
s to
•
mea
sure
def
erre
d ta
x on
und
istr
ibut
ed e
arni
ngs
of a
su
bsid
iary
D
efer
red
tax
item
s ar
e co
nsid
ered
non
curr
ent
for
•cl
assi
ficat
ion
on t
he s
tate
men
t of
fina
ncia
l pos
ition
Allo
catio
n of
tax
to
equi
ty c
ompo
nent
s –
“bac
kwar
d •
trac
ing”
Part
icul
ar a
reas
with
a d
iffer
ent
tax
trea
tmen
t in
clud
e •
shar
e-ba
sed
paym
ents
, lev
erag
ed le
ases
, and
unc
erta
in
tax
prov
isio
ns
Imp
lem
enta
tio
n C
onsi
der
atio
ns
The
tax
depa
rtm
ent
shou
ld b
e ed
ucat
ed o
n th
e di
ffer
ent
tax
acco
untin
g re
quire
men
ts a
nd t
heir
effe
ct o
n ta
x •
plan
ning
Pr
oces
ses
and
data
cap
ture
for
defe
rred
tax
item
s m
ay b
e m
ore
deta
iled,
whi
ch c
ould
lead
to
info
rmat
ion
syst
em
•ch
ange
s C
han
ges
pen
din
g:
•
The
IASB
issu
ed a
n ED
to
clar
ify a
nd im
prov
e th
e ac
coun
ting
for
inco
me
taxe
s as
wel
l as
redu
ce
diff
eren
ces
with
U.S
. GA
AP.
The
IASB
is c
urre
ntly
in t
he p
roce
ss o
f ana
lyzi
ng t
he c
omm
ents
rece
ived
on
the
ED a
nd is
ex
pect
ed t
o de
term
ine
the
dire
ctio
n of
the
pro
ject
aft
er t
his
cons
ider
atio
n pr
oces
s.
Key
Ques
tio
ns
to A
sk
Hav
e th
e de
ferr
ed t
ax e
ffec
ts o
f oth
er c
hang
es in
acc
ount
ing
unde
r IF
RS b
een
asse
ssed
?•
Wha
t is
the
ove
rall
effe
ct o
n cu
rren
t ta
x st
ruct
ures
and
repo
rtin
g?•
Wha
t is
the
eff
ect
on fu
ture
tax
pla
nnin
g?
•
IFRS: What should boards and audit committees be considering now? 17
Emp
loye
e B
enefi
ts
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
– IA
S 19
•G
uida
nce
addr
esse
s al
l for
ms
of e
mpl
oyee
ben
efits
, •
incl
udin
g sh
ort-
term
ben
efits
; pos
t-em
ploy
men
t be
nefit
s, (i
.e.,
pens
ions
); ot
her
long
-ter
m b
enefi
ts (i
.e.,
bonu
ses)
; and
ter
min
atio
n be
nefit
sA
ccou
ntin
g fo
r po
st-e
mpl
oym
ent
bene
fits
depe
nds
•on
the
typ
e of
pla
n (d
efine
d c
ontr
ibut
ion,
defi
ned
bene
fit o
r a
mul
ti-em
ploy
er p
lan)
Defi
ned
cont
ribut
ion
plan
s in
volv
e pa
ymen
t of
fixe
d •
amou
nts
that
are
exp
ense
d as
the
em
ploy
ee p
rovi
des
serv
ices
For
defin
ed b
enefi
t pl
ans,
a b
enefi
t ob
ligat
ion
is
•re
cogn
ized
usi
ng a
n ac
tuar
ial v
alua
tion
met
hod,
net
of
pla
n as
sets
hel
dTe
rmin
atio
n be
nefit
s ar
e re
cogn
ized
whe
n •
“dem
onst
rabl
y co
mm
itted
”
Mul
tiem
ploy
er p
lans
are
acc
ount
ed fo
r ba
sed
on t
heir
•ec
onom
ic s
ubst
ance
as
eith
er a
defi
ned
bene
fit o
r de
fined
con
trib
utio
n pl
anPo
licy
choi
ce re
gard
ing
reco
gniti
on o
f act
uaria
l •
gain
s an
d lo
sses
; rec
ogni
zed
in in
com
e ei
ther
usi
ng
the
“cor
ridor
” m
etho
d or
acc
eler
ated
met
hod,
or
perm
anen
tly in
equ
ity
Prio
r se
rvic
e co
sts
are
reco
gniz
ed im
med
iate
ly, if
ves
ted
•M
easu
rem
ent
of e
xpec
ted
rate
of r
etur
n on
pla
n as
sets
•
is b
ased
sol
ely
on fa
ir va
lue
Reco
gniti
on o
f a d
efine
d be
nefit
ass
et is
sub
ject
to
a •
“cei
ling”
Liab
ility
mus
t be
reco
gniz
ed fo
r m
inim
um fu
ndin
g •
requ
irem
ents
whe
n ob
ligat
ion
aris
esTe
rmin
atio
n be
nefit
s an
d cu
rtai
lmen
ts a
re re
cogn
ized
•
whe
n “d
emon
stra
bly
com
mitt
ed”
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Cur
rent
pla
ns w
ill n
eed
to b
e ev
alua
ted
to e
nsur
e th
ey a
re a
ccou
nted
for
unde
r th
e ap
prop
riate
typ
e of
pla
n•
Det
erm
inin
g ac
tuar
ial g
ains
and
loss
es re
quire
s ju
dgm
ent
•Pr
oces
ses
and
cont
rols
for
the
asse
t ce
iling
tes
t w
ill n
eed
to b
e de
velo
ped
•D
ata
capt
ure
may
be
mor
e de
taile
d, w
hich
cou
ld le
ad t
o in
form
atio
n sy
stem
cha
nges
•C
hang
es in
the
tim
ing
and
amou
nt o
f pen
sion
cos
t m
ay a
ffec
t on
inco
me
taxe
s•
Chan
ges
pen
din
g:
•
The
IASB
has
a p
roje
ct t
o si
gnifi
cant
ly im
prov
e IA
S 19
ove
r th
e ne
xt c
oupl
e of
yea
rs a
nd h
as
divi
ded
the
proj
ect
into
thr
ee p
hase
s in
add
ition
to
a la
ter
mor
e fu
ndam
enta
l rev
iew
in c
onju
nctio
n w
ith t
he F
ASB
of
acco
untin
g fo
r em
ploy
ee b
enefi
ts:
(1) d
isco
unt
rate
; (2)
reco
gniti
on a
nd p
rese
ntat
ion
of c
hang
es in
defi
ned
bene
fit
oblig
atio
n an
d pl
an a
sset
s an
d di
sclo
sure
s; a
nd (3
) con
trib
utio
n-ba
sed
com
mitm
ents
. An
ED w
as is
sued
rega
rdin
g th
e di
scou
nt ra
te fo
r em
ploy
ee b
enefi
ts a
nd t
he IA
SB w
ill d
eter
min
e th
e tim
ing
of t
he o
ther
pha
ses
in c
onju
nctio
n w
ith
the
finan
cial
sta
tem
ent
pres
enta
tion
proj
ect.
Key
Ques
tio
ns
to A
sk
How
will
the
cur
rent
acc
ount
ing
for
empl
oyee
ben
efits
be
affe
cted
?•
Will
the
em
ploy
ee b
enefi
t pl
an fu
ndin
g re
quire
men
ts b
e af
fect
ed?
•W
ill fu
ture
ben
efit
plan
str
uctu
res
be a
ffec
ted?
•
Shar
e-b
ased
Pay
men
ts
Gen
eral
Req
uir
emen
tsPo
tenti
al D
iffe
rence
s fr
om
U.S
. G
AA
P
Prim
ary
stan
dard
– IF
RS 2
•A
pplie
s to
tra
nsac
tions
whe
re g
oods
and
ser
vice
s •
have
bee
n ex
chan
ged
for
shar
e-ba
sed
paym
ents
Tr
ansa
ctio
ns g
ener
ally
mea
sure
d ba
sed
on a
“gr
ant
•da
te”
appr
oach
Acc
ount
ing
for
gran
t de
pend
s on
how
tra
nsac
tion
will
•
be s
ettle
d; c
ash
sett
lem
ent
is a
liab
ility
; equ
ity s
ettle
d is
equ
ity; m
ay h
ave
elem
ents
of b
oth
Com
pens
atio
n ex
pens
e re
cogn
ized
on
the
basi
s of
•
gran
t-da
te fa
ir va
lue
over
the
per
iod
in w
hich
the
sh
ares
ves
t A
war
ds w
ith “
grad
ed v
estin
g” fe
atur
es a
re
mea
sure
d as
mul
tiple
aw
ards
No
spec
ific
valu
atio
n m
odel
is re
quire
d to
det
erm
ine
•sh
are
valu
e; g
uida
nce
requ
ires
incl
usio
n of
sev
eral
in
puts
Scop
e is
bro
ader
; inc
lude
s em
ploy
ee s
tock
ow
ners
hip
•pl
ans
Com
pens
atio
n ex
pens
e is
reco
gniz
ed o
n an
acc
eler
ated
•
basi
s fo
r gr
ants
with
“gr
aded
ves
ting”
pro
visi
ons
Com
pens
atio
n ex
pens
e re
late
d to
cer
tain
typ
es o
f •
awar
d m
odifi
catio
ns is
bas
ed o
n th
e hi
gher
of t
he
mod
ified
aw
ard
fair
valu
e or
the
orig
inal
gra
nt d
ate
fair
valu
eM
easu
rem
ent
of c
ompe
nsat
ion
expe
nse
for
gran
ts t
o •
non-
empl
oyee
s is
bas
ed o
n th
e fa
ir va
lue
of t
he g
oods
or
ser
vice
s w
hen
prov
ided
Cla
ssifi
catio
n of
gra
nt is
bas
ed o
n ho
w t
he t
rans
actio
n •
will
be
sett
led
Inco
me
tax
trea
tmen
t •
Requ
irem
ents
are
the
sam
e fo
r pu
blic
and
non
publ
ic
•en
titie
s
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Proc
esse
s an
d co
ntro
ls n
eed
to b
e de
velo
ped
for
iden
tifyi
ng a
ll tr
ansa
ctio
ns t
hat
shou
ld b
e ac
coun
ted
for
as s
hare
-•
base
d pa
ymen
tsA
war
ds n
eed
to b
e ev
alua
ted
for
appr
opria
te c
lass
ifica
tion
as a
liab
ility
or
equi
ty•
Judg
men
t w
ill b
e re
quire
d in
the
mea
sure
men
t of
sha
re-b
ased
pay
men
ts a
t fa
ir va
lue
•D
ata
capt
ure
may
be
mor
e de
taile
d, p
artic
ular
ly re
gard
ing
grad
ed v
estin
g, w
hich
cou
ld le
ad t
o in
form
atio
n sy
stem
•
chan
ges
Inco
me
tax
impl
icat
ions
of s
hare
-bas
ed p
aym
ents
nee
d to
be
unde
rsto
od•
Chan
ges
pen
din
g:
•
Non
e
Key
Ques
tio
ns
to A
sk
Shou
ld c
ompe
nsat
ion
stru
ctur
es b
e ch
ange
d?•
How
doe
s ac
coun
ting
for
exis
ting
shar
e-ba
sed
paym
ent
arra
ngem
ents
pot
entia
lly c
hang
e un
der
IFRS
?•
Wha
t fa
ir-va
lue
tech
niqu
es a
re b
eing
use
d an
d ho
w w
ill t
hey
chan
ge?
•A
re t
he c
urre
nt in
form
atio
n sy
stem
s ab
le t
o ca
ptur
e th
e in
form
atio
n ne
eded
to
acco
unt
for
shar
e-ba
sed
paym
ents
?•
18
Finan
cial
Inst
rum
ents
Pre
senta
tio
n a
nd
Dis
clo
sure
Gen
eral
Req
uir
emen
tsPo
tenti
al U
.S. G
AA
P D
iffe
rence
s
Prim
ary
stan
dard
s –
IAS
32, I
FRS
7•
Fina
ncia
l ins
trum
ents
are
cla
ssifi
ed a
s ei
ther
fina
ncia
l •
asse
ts, fi
nanc
ial l
iabi
litie
s, o
r eq
uity
dep
endi
ng o
n th
e su
bsta
nce
of t
he u
nder
lyin
g co
ntra
ctua
l arr
ange
men
t In
stru
men
ts w
ith li
abili
ty a
nd e
quity
ele
men
ts
•ar
e ge
nera
lly a
ccou
nted
for
sepa
rate
ly –
“sp
lit
acco
untin
g”Is
sued
equ
ity s
ecur
ities
rede
emab
le a
t th
e op
tion
of
•th
e ho
lder
or
upon
a c
ontin
gent
eve
nt a
re u
sual
ly
clas
sifie
d as
liab
ilitie
sFi
nanc
ial a
sset
s an
d lia
bilit
ies
may
be
offs
et, i
f cer
tain
•
crite
ria a
re m
etSe
vera
l dis
clos
ures
requ
ired
rela
ted
to r
isks
rela
ted
to
•fin
anci
al in
stru
men
ts h
eld
Ther
e is
no
mez
zani
ne e
quity
cla
ssifi
catio
n un
der
IFRS
; •
mus
t cl
assi
fy a
s ei
ther
liab
ilitie
s or
equ
ity“S
plit
acco
untin
g” is
requ
ired
for
inst
rum
ents
with
•
liabi
lity
and
equi
ty c
ompo
nent
s; a
lloca
te t
he in
divi
dual
co
mpo
nent
s ba
sed
on fa
ir va
lue
usin
g th
e “w
ith-a
nd-
with
out”
met
hod
Off
sett
ing
of fi
nanc
ial a
sset
s an
d lia
bilit
ies
is m
ore
inte
nt
•ba
sed
rath
er t
han
just
lega
l rig
ht o
f off
set
Add
ition
al d
iscl
osur
es a
re re
quire
d•
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Proc
esse
s w
ill n
eed
to b
e de
velo
ped
for
the
capt
ure
of d
ata
for
addi
tiona
l dis
clos
ures
, diff
erin
g of
fset
ting,
and
“sp
lit
•ac
coun
ting.
” D
iffer
ent
clas
sific
atio
n of
fina
ncia
l ins
trum
ents
may
aff
ect
inco
me
taxe
s•
Chan
ges
pen
din
g:
•
The
IASB
and
FA
SB h
ave
a jo
int
proj
ect
to b
ette
r di
stin
guis
h be
twee
n de
bt a
nd e
quity
cl
assi
ficat
ion
of fi
nanc
ial i
nstr
umen
ts a
nd c
onve
rge
the
two
sets
of s
tand
ards
. An
ED is
exp
ecte
d in
201
0 re
late
d to
thi
s pr
ojec
t. T
he IA
SB a
lso
has
a pr
ojec
t on
der
ecog
nitio
n w
ith a
goa
l of c
larif
ying
the
gui
danc
e, e
limin
atin
g di
ffer
ence
s w
ith U
.S. G
AA
P an
d re
quiri
ng fu
rthe
r di
sclo
sure
on
expo
sure
to
risks
. The
IASB
is e
xpec
ted
to fi
naliz
e th
e de
cons
olid
atio
n gu
idan
ce in
the
sec
ond
half
of 2
010
– th
e FA
SB is
mon
itorin
g th
is p
roje
ct t
o de
term
ine
wha
t st
anda
rd-s
ettin
g m
ight
be
requ
ired.
Key
Ques
tio
ns
to A
sk
Are
the
app
ropr
iate
pro
cess
es a
vaila
ble
for
the
use
of “
split
acc
ount
ing”
?•
Shou
ld d
ebt
cove
nant
s th
at a
re li
nked
to
the
amou
nt o
f lia
bilit
ies
and
equi
ty re
port
ed in
the
fina
ncia
l sta
tem
ents
be
•re
nego
tiate
d?W
hat
addi
tiona
l dis
clos
ures
will
be
requ
ired
rela
ted
to fi
nanc
ial i
nstr
umen
ts h
eld?
•
Finan
cial
Inst
rum
ents
Rec
og
nit
ion
Gen
eral
Req
uir
emen
tsPo
tenti
al U
.S.
GA
AP
Dif
fere
nce
s
Prim
ary
stan
dard
– IA
S 39
•Fi
nanc
ial i
nstr
umen
ts a
re re
cogn
ized
and
mea
sure
d •
base
d on
the
ir cl
assi
ficat
ion
as e
ither
fina
ncia
l ass
ets,
fin
anci
al li
abili
ties,
or
equi
tyD
erec
ogni
tion
of fi
nanc
ial a
sset
s is
bas
ed p
rimar
ily o
n •
whe
ther
“ris
ks a
nd re
war
ds”
have
bee
n tr
ansf
erre
dFi
nanc
ial l
iabi
litie
s ar
e de
reco
gniz
ed w
hen
•ex
tingu
ishe
dFo
cus
on t
he u
se o
f “fa
ir va
lue”
as
a m
easu
rem
ent
•ba
sis
– su
bseq
uent
mea
sure
men
t de
pend
s on
cl
assi
ficat
ion
of fi
nanc
ial i
nstr
umen
t; u
se o
f the
fair-
valu
e op
tion
is a
llow
ed in
cer
tain
inst
ance
s“H
edge
acc
ount
ing”
is a
llow
ed if
cer
tain
crit
eria
are
•
met
and
are
suf
ficie
ntly
doc
umen
ted
Fair
valu
e no
t lim
ited
to a
n “e
xit-
valu
e” n
otio
n•
Impa
irmen
t te
stin
g no
t ba
sed
on a
n “o
ther
-tha
n-•
tem
pora
ry”
notio
n; re
vers
al o
f im
pairm
ents
for
som
e ite
ms,
if c
erta
in c
riter
ia a
re m
etD
erec
ogni
tion
of fi
nanc
ial a
sset
s•
Defi
nitio
n of
a d
eriv
ativ
e is
bro
ader
- a
not
iona
l, •
paym
ent
prov
isio
n an
d ne
t se
ttle
men
t ar
e no
t re
quire
dFe
wer
rest
rictio
ns o
n th
e ty
pes
of r
isks
tha
t ca
n be
•
hedg
ed; t
he “
shor
tcut
met
hod”
is n
ot p
erm
itted
for
hedg
e ac
coun
ting;
all
hedg
es m
ust
be a
sses
sed
for
effe
ctiv
enes
s an
d do
cum
ente
dM
ay a
djus
t th
e ba
sis
of c
erta
in a
sset
s or
liab
ilitie
s fo
r •
the
effe
cts
of “
cash
-flow
hed
ges”
Imp
lem
enta
tio
n C
onsi
der
atio
ns
Valu
atio
n te
chni
ques
use
d to
det
erm
ine
fair
valu
e m
ay n
eed
adju
stm
ent
•Pr
oces
ses
will
nee
d to
be
deve
lope
d fo
r th
e ca
ptur
e of
dat
a fo
r im
pairm
ents
(inc
ludi
ng re
vers
als)
, int
eres
t re
cogn
ition
, •
and
dere
cogn
ition
requ
irem
ents
will
nee
d to
be
deve
lope
dH
edge
doc
umen
tatio
n m
ay n
eed
adju
stm
ent,
and
hed
ge e
ffec
tiven
ess
test
ing
may
requ
ire a
dditi
onal
doc
umen
tatio
n•
Diff
eren
t re
cogn
ition
and
am
ount
s of
fina
ncia
l ins
trum
ents
may
aff
ect
inco
me
taxe
s•
Chan
ges
pen
din
g:
•
As
part
of a
join
t pr
ojec
t, t
he IA
SB a
nd F
ASB
are
am
endi
ng t
he a
ccou
ntin
g fo
r fin
anci
al
inst
rum
ents
with
a g
oal o
f sim
plify
ing
the
clas
sific
atio
n an
d m
easu
rem
ent
requ
irem
ents
. The
pro
ject
will
repl
ace
IAS
39 a
nd is
bei
ng c
ondu
cted
in t
hree
pha
ses
and
expe
cted
to
be fi
naliz
ed in
201
0 by
the
IASB
(1) c
lass
ifica
tion
and
mea
sure
men
t, (2
) im
pairm
ent,
and
(3) h
edge
acc
ount
ing.
The
IASB
issu
ed IF
RS 9
on
Nov
embe
r 12
, 200
9 ad
dres
sing
ph
ase
one.
Whi
le t
his
is a
join
t pr
ojec
t, t
he b
oard
s cu
rren
tly a
re d
iscu
ssin
g pr
opos
als
that
cou
ld re
sult
in s
igni
fican
t di
ffer
ence
s.
Key
Ques
tio
ns
to A
sk
Wha
t “o
ff-b
alan
ce-s
heet
” tr
ansa
ctio
ns e
xist
, and
will
the
y no
w b
e “o
n ba
lanc
e sh
eet”
?•
Wha
t fa
ir va
lue
mea
sure
men
t te
chni
ques
are
bei
ng u
sed
and
will
the
y ch
ange
?•
Will
the
hed
ging
str
ateg
y be
aff
ecte
d?•
Wha
t fa
ir-va
lue
tech
niqu
es a
re b
eing
use
d an
d w
ill t
hey
chan
ge?
•W
ill o
ur h
edgi
ng s
trat
egy
be im
pact
ed?
•
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