international financial reporting standards (ifrs) overview
DESCRIPTION
International Financial Reporting Standards (IFRS), together with International Accounting Standards (IAS), are a “principles-based ” set of standards that establish broad rules rather than dictating specific accounting treatments. From 1973 to 2001, IAS were issued by the International Accounting Standards Committee (IASC). In April 2001 the International Accounting Standards Board (IASB) adopted all IAS and began developing new standards called IFRS.TRANSCRIPT
International Financial Reporting Standards (IFRS) Overview
Sambhasiva Rao Venkata CheedellaIFRS Certified, Senior Consultant, Oracle.
IFRS Overview 2
Purpose
This document is regarding International Financial Reporting Standards (IFRS), implication on regular business transactions as per IFRS recommendations. Few examples, case studies on IFRS. It is also one good resource wishing to make use of accounts under IFRS.Implementation pre-requisites on ERP (Oracle Applications) to map according to IFRS.
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Abbreviations
CESR Committee Of European Securities RegulatorsEC European CommissionEEA European Commission Area (EU 27 + 3 countries)EFRAG European Financial Reporting Advisory GroupEITF Emerging Issues Task Force (Of FASB)EU European Union (27 countries)FASB Financial Accounting Standards Board (US)FEE Federation Of European AccountantsGAAP Generally Accepted Accounting Principles IAS International Accounting StandardsIASB International Accounting Standards Board
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IASC International Accounting Standards committee (Predecessor to the IASB)IASCF IASC Foundation (parent body of the IASB) (From 1 March 2010 named as IFRS Foundation) IFRIC International Financial Reporting Interpretations Committee Of the IASB, and Interpretations issued by that committee (from 1 March 2010 named as IFRS Interpretations Committee) IFRS International Financial Reporting StandardsIFRSF IFRS Foundation NCI Non-Controlling interest (previously ‘minority’ interests)
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SAC Standards Advisory Council (advisory to the IASB) (from 1 March 2010 named as IFRS advisory council)
SEC Securities and Exchange Commission (US)
SIC Standing Interpretations Committee Of the IASC, and Interpretations issued by that committee
IOSCO International Organization Of Securities Commissions
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IASB and IFRS
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Members Of IASB
2 Members in IASC from India out of 22.Mr. Mohandas, Mr.Prabhakar Kalavacherla. Kalavacherla was previously a partner at KPMG LLP.
Sri David Tweedie, Chairman became the first Chairman on 1 January 2001, having served from 1999-2000 as the first full time Chairman of UK Accounting Standards Board. Term expires 30 June 2011.
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IASB and its Objectives
International Accounting Standards Board (IASB)-Independent, privately funded accounting standard setter based in London.- Responsibility to develop International Financial Reporting Standards (IFRS)
The Objectives are:-To develop a single set of accounting standards (High quality, understandable, global and enforceable)
-To promote their use and rigorous application- To work actively with national standard setters (To bring about convergence of national accounting standards and IFRSs)
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History1973 IASC formed1998 Core standards completed2000 SEC review of core standards; concept release published Feb 2000 IASC approves new constitution IOSCO review finalized EU proposes that all EU listed companies (some 6,700) should apply IAS by 20052001 IASB assumes accounting standard setting responsibilities from IASC2002 EU’s decision to adopt IFRS from 1 Jan 20052005 Nearly 7,000 listed business in 25 countries switch to IFRS2007 SEC accepts fillings from Foreign Private Issues (FPI) without reconciliation to US GAAP2010 US allows certain large filers to file IFRS accounts2014? US converged for listed companies – decision to be taken in 2011
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International Financial Reporting Interpretations Committee (IFRIC)
Interpretation of contentious accounting issues
- Expand beyond interpretations of current standards to include areas where there is no guidance
Interpretations are authoritative guidance
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Timelines of achieving convergence
Phase I – Transaction date April 1, 2011
- NIFTY 50- SENSEX 30- Companies whose shares or other securities listed on stock exchanges outside India- Companies (listed or unlisted) with net worth in excess of INR.1000 crores.
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Phase II – Transaction date April 1, 2013
- Companies (listed or unlisted) with net worth in excess of INR.500 crores but less than INR.1000 crores
Phase III – Transaction date April 1, 2014
- Listed companies with net worth in less than INR.500 crores
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IFRS time lines for banks and insurance companies
Banks
SCB* and UCB# with net worth > INR 300 crores
SCB* and UCB# with net worth > INR 200 crores
but <= INR300 crores
•Scheduled commercial banks• urban Co – Operative banks
April 1, 2013 April 1, 2014
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April 1, 2012
Insurance Companies
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NBFCs
1. Part of Nifty 50/ BSE 302. Net worth > INR. 1000Cr Net worth > INR. 500 Crores
April 1, 2013 April 1, 2014
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MCA clarifications on IFRS adoption
Presentation of comparativesOpening balance sheet prepared at 1 April 2011 and the financial statements for the year ending 31 March 2012 shall be in accordance with the converged accounting standards; but comparative period figures (I.e. for the year ending 31 March 2011) shall continue to be reported as per the non-converged accounting standards.
Option to present comparatives voluntarily (2010-2011)A company may however, voluntarily choose to report comparative period figures (I.e. for the year ending 31 March 2011) as per the converged accounting standards as an additional column in the financial statements. The opening balance sheet (and therefore transaction adjustments) for companies in such a case shall be 1 April 2010.
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Voluntary adoption for Phase 2 and 3 companies- Phase 2 and 3 companies will have an option to early adopt the converged accounting standards, commencing on or after 1 April 2011- All other companies can also early adopt IFRS
If, subsequent to the adoption, the company does not meet the IFRS adoption criteria, should it discontinue IFRS?- Once a company follows the converged accounting standards it shall continue preparing financial statements in accordance with the converged accounting standards. It shall not revert to the non-converged accounting standards.
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Applicability to group companies
- The criteria for determination of various phases shall be based on the stand-alone financial statements of various entities.- Companies having subsidiaries, joint ventures and associates or covered in any of the phases shall prepare consolidated financial statements in accordance with the converged accounting standards.- Group companies (subsidiaries, joint ventures or associates) not covered in the phases similar to the parent company shall continue to prepare financial statements according to the according to respective phases as applicable.- However, such companies may voluntarily adopt the converged accounting standards.
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ICAI Standards – Converged progress (1)
Abbreviations
S.No
Topic Standard under IGAAP
Standard under IFRS
Differences noted
Nature of difference
1 Presentation of Financial Statements AS 1 IAS 1 No -
2 Inventories AS 2 IAS 2 No -3 Statement of Cash Flows AS 3 IAS 7 Yes GAAP4 Events after the reporting
period AS 4IAS 10IFRIC 17 No -
5 Accounting policies, changes in accounting estimates and errors AS 5 IAS 8 No -
6 Construction Contracts AS 7 IAS 11IFRIC 12 & SIC 29 Yes
Transactional provisions
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ICAI Standards – Converged progress (2)
Abbreviations
S.No
Topic Standard under IGAAP
Standard under IFRS
Differences noted
Nature of difference
7 Revenue recognition AS 9 IAS 18SIC 31IFRIC 13, 15 & 18
Yes Terminology & transactional provisions
8 Property, plant & Equipment AS 10*
IAS 16IFRIC 1
Yes- same as7-
9 Effect of Change in foreign exchange rates AS 11 IAS 21 Yes
- same as7-
* Includes AS 6 depreciation a/c ing
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ICAI Standards – Converged progress (3)
Abbreviations
S.No
Topic Standard under IGAAP
Standard under IFRS
Differences noted
Nature of difference
10 Government grant AS 12 IAS 20 No -
11 Business Combinations AS 14 IFRS 3 YesTerminology, Transactional provisions
12 Employee benefits AS 15IAS 19IFRIC 14 Yes GAAP
13 Borrowing Costs AS 16 IAS 23 Yes GAAP
14 Operating Segments AS 17 IFRS 8 YesTransactional provisions
15 Related party disclosures AS 18 IAS 24 Yes GAAP
16 Leases AS 19IAS 17IFRIC 4 No -
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ICAI Standards – Converged progress (4)
Abbreviations
S.No
Topic Standard under IGAAP
Standard under IFRS
Differences noted
Nature of difference
17 Earnings per share AS 20 IAS 33 Yes GAAP18 Consolidated and separate
financial statements AS 21IAS 27SIC 12 Yes
Transactional provisions
19 Income Taxes AS 22IAS 12SIC 21, 25 Yes GAAP
20 Investments in Associates AS 23 IAS 28 Yes GAAP
21Non current assets held for sale & discontinued operations
AS 24 IFRS 5 Yes GAAP
22 Interim financial reporting AS 25IAS 34IFRIC 10 No -
23 Intangible assets AS 26 IAS 38 Yes GAAP
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ICAI Standards – Converged progress (5)
Abbreviations
S.No
Topic Standard under IGAAP
Standard under IFRS
Differences noted
Nature of difference
24 Joint ventures AS 27 IAS 31SIC 13
Yes Terminology, Transactional provisions
25 Impairment AS 28 IAS 36 Yes - Same as 24-
26Provisions, contingent liabilities & contingent assets
AS 29 IAS 37 YesTransactional provisions
27Financial instruments, recognition & measurement
AS 30IAS 39IFRIC 9, 16 & 19
YesTerminology, Transactional provisions
28Financial instruments presentation AS 31
IAS 32IFRIC 2 Yes GAAP
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ICAI Standards – Converged progress (6)
Abbreviations
S.No
Topic Standard under IGAAP
Standard under IFRS
Differences noted
Nature of difference
29Financial instruments: Disclosures AS 32 IFRS 7 Yes GAAP
30 Share based payments AS 33IFRS 2IFRIC 8IFRIC 11
Yes Transactional provisions
31Financial reporting in hyperinflationary economies AS 34
IAS 29IFRIC 7 No -
32Exploration of & evaluation of mineral resources AS 35 IFRIC 6 Yes
Transactional provisions
33Accounting and reporting by retirement benefit plans AS 36 IAS 26 Yes GAAP
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ICAI Standards – Converged progress (7)
Abbreviations
S.No
Topic Standard under IGAAP
Standard under IFRS
Differences noted
Nature of difference
34 Investment property AS 37 IAS 40 Yes Transactional provisions
35 Agriculture AS 38 IAS 41 YesTerminology, Transactional provisions
36 Insurance Contracts AS 39 IFRS 4 Yes Terminology difference
37 Financial Instruments AS 40 IFRS 9 YesTerminology difference
38 First time Adoption AS 41 IFRS 1 Yes GAAP
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IFRS Framework
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Key points
The IASB uses its conceptual framework as an aid to drafting new or revised IFRSs- Objective and elements of financial statements-Underlying assumptions and qualitative characteristics - Definitions
The framework is a key point of reference in the absence of specific guidance-Specific guidance in IAS 8 applies
IFRSs do not apply to items that are “immaterial” Transactions should be accounted for in accordance with their substance, rather than only their legal form.
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Presentation of Financial Statements
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Required Components of Financial Statements- Statement of Financial Position- Statement of Comprehensive Income- Statement of Chages in Equity- Statement of Cash flows- Notes
- Statement of financial position as at the beginning of the earliest comparative period when an entity restates comparative information, if material, following a:- Changes in accounting policy- Correction of an error, OR - Reclassification of items in the financial statements- Equal prominence for all of the financial statements
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Identification of financial statementsMust be clearly identified and distinguished from other information in annual reportRequired disclosures - Name of the entity - Separate, individual or consolidated financial statements - Date of the end of the reporting period or period covered by the financial statements - Presentation currency - Level of rounding
Reporting Period Financial statements to be presented at least annually If shorted or longer period, disclose- Reason- Fact that amounts reported may not be comparableNo prohibition on 52-week period for practicality
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Accrual basis of accounting
Financial statements, except for cash flow information, should be prepared using the accrual basis
Assets, liabilities, equity, income and expenses recognized when the definitions and recognition criteria in the framework are met
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Offsetting
Assets and liabilities should not be offset unless - Required or permitted by an IFRS
Items of income and expenses should not be offset unless- Required or permitted by an IFRS - Gains, losses and related expenses arising from the same or similar items are not material
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Comparative Information
Numerical comparative information for the previous period required unless an IFRS requires or permits otherwiseNarrative comparative information required if relevant to understanding of current period Reclassify comparative amounts unless impracticable to change presentation or classification- Disclosure requiredWhen an entity applies an accounting policy retrospectively, corrects a prior year error, or reclassifies items in its financial statements, it shall present, in addition a statement of financial position as of the beginning of the earliest period presented, if material
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Compliance with IFRSs
“Explicit and unreserved statement of compliance”Compliance with all IFRSs
Disclose application of IFRSs before effective dateInappropriate accounting treatments can not be rectified by disclosure
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Statement of financial position- Current/ non-current
Present assets and liabilities in the statement of financial position as- Current/ non-current OR - Broadly in order of liquidity (when reliable and more relevant)
Disclose amounts due for recovery or settlement after more than 12 months for each asset and liability Deferred tax assets and liabilities are never presented as current Assets current if: Liabilities current if:All other assets and liabilities are non-currentEvents might qualify for disclosure as non-adjusting events in accordance with IAS 10
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Sub-classifications of items presented, either - In the statement of financial position; or - In notes
Separate presentation of amounts payable to and receivable from the parent, subsidiaries, associates and other related partiesFurther guidelines in individual standards
Statement of financial position- Sub-classifications
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Statement of comprehensive income- Presentation
Single statement or income statement and a separate statement of comprehensive incomeAnalysis of expenses (in SCI or notes): by nature or function If classification based on function, additional information required:- Depreciation / amortization- Employee benefits expenseSeparate disclosure of nature and amounts of material items of income and expense (in SCI or notes)No extraordinary itemsOther comprehensive income for the period Other disclosures
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Statement of comprehensive income- Unusual and exceptional items
No definition of “exceptional” or “unusual” events or items of income or expense given in IFRSsItems not exceptional just because of requirement to disclose separately Exceptional items occur infrequentlyClassification in same way as non-exceptional items of same function or natureDescription of use of the term in notes, and applied consistently
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Statement of changes in equity
Include
- Total comprehensive income for the period - For each component of equity, the effect of retrospective application or restatement recognized in accordance with IAS 8
- For each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period disclosing separately Profit or loss
Each item of other comprehensive incomeTransactions with owners
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Statement of changes in equity- additional disclosure
Also present, either in the statement of changes in equity or in the notes
- the amount of dividends recognized as distribution to owners during the period, and the related amount per share
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Information about share capital
For each class of share capital (in the statement of financial position, statement of changes in equity or notes):- Number of shares authorized- Number of shares issued: fully paid and not fully paid- Par value or no par value- Reconciliation of movements in number of shares- Rights, preferences and restrictions- Treasury shares- Share held for options and sale contracts (including terms/ amounts)Nature and purpose of each equity reserve
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Example Question
Which components of financial statement is NOT prepared using the accrual basis of accounting?a) Statement of financial position
b) Statement of comprehensive income
c) Statement of changes in equity
d) Statement of cash flows
e) Notes to financial statements
Ans: d
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IFRS FrameworkStatement of Cashflows
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Introduction
IAS 7 requires the provision of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows which cash cash flows during the period into:
- operating activities- investing activities- financing activities
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Scope
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Key definitions
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Examples
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Revenue
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Types of income and related standards
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Revenue recognition criteria
Common- Inflow of future economic benefits to entity is probable- Revenue is measurable reliably- Costs (incurred and expected) are identifiable and measurable reliably
Specific criteria for sale of goods- Significant risks and rewards of ownership transferred - Retain neither. managerial involvement; nor . effective control
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Layaway sales
Recognize when goods are delivered
But:If experience indicates that most such sales are consummated, then recognize when- Significant deposit has been received- Goods are on hand, identified, ready for delivery
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IFRIC: 13 Customer Loyalty Programs
IFRIC: 15 Agreements for the Construction of Real Estate
IFRIC: 18 Transfer of Assets from Customers
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Scope
Addresses accounting for customer loyalty award credits- Granted to customers as part of a sales transaction- Can be redeemed in future for free or discounted goods or services
Include entities receiving consideration from a party other than the customer to whom it grants credits- Credit card companies are with in the scope
Excludes programs that grant the customer a financial asset or do not include a sales transaction
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Issues
Whether award credits are:
- Separately identifiable component for which revenue should be deferred until awards are delivered (apply IAS 18.19) or
If separate component
- How much revenue to be allocated?- When should revenue be recognized?
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Separate Components
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IFRIC 15 – Agreements for the Construction of Real Estate
Divergence in practice- IAS 11 vs IAS 18 accounting
Issues addressed by IFRIC 15- Applicable standards (IAS 11 or IAS 18)- Timing of revenue recognition
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Continuing managerial involvement or effective control?
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IAS 11 or IAS 18?
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Effective date and transition
Effective date - Annual periods beginning on or after 1 January 2009- Earlier application permitted, and shall be disclosed
Transition- Retrospective application- In accordance with IAS 8 Accounting Policies, changes in Accounting Estimates and Errors
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Revenue Vs principal
Revenue of the agent- Amount of commission- Plus any other amounts charged by the agent
Revenue of the principal
- Gross amount charged to the ultimate customer
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Example:1 Company A operates an Internet site from which it will sells Company T's products. Customers place their orders for the product by making a product selection directly from the internet site and providing a credit card number for the payment. Company A receives the order and authorization from the credit card company, and passes the order on to Company T. Company T ships the product directly to the customer.
Company A does not take title to the product and has no risk of loss or other responsibility for the product. Company T is responsible for all product returns, defects, and disputed credit card charges. The product is typically sold for USD 175 of which Company A receives USD 25. In the event a credit card transaction is rejected, Company A losses its margin on the sale (i.e. the USD 25)
Should Company A revenue on a gross basis as USD 175 along with costs of sales of USD 150 or on a net basis as USD 25, similar to a commission?
Ans: Here company is an Agent, is not taking any risk.
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IFRIC 18 – Transfer of Assets from Customers
Divergence in practice- Recognize contributed PPE at fair value or cost of nil?- Recognize credit as revenue immediately or over period of service / asset life?
Issues addressed by IFRIC 18 - Should asset be recognized by the entity receiving the transfer? At what amount?- How to account for the credit? Cash contributions?
Scope - Accounting by the entity receiving the transfer (contribution)
Effective date - Transfer of assets on or after 1 July 2009- Prospective application
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Revenue by Category
- Sale of goods
- Rendering of services
- Construction contracts
- Interest
- Royalties
- Dividends
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IAS 11 vs AS 7
There is major difference the Exposure draft of AS 7 (revised 20xx), Construction Contracts and International Accounting Standard (IAS) 11, Construction Contracts, IFRIC 12, Service Concession Arrangements and SIC 29, Service Concession Agreements: Disclosures, except that the transactional provisions given in IFRIC 12 have not been given in the Exposure Draft of AS 7 (Revised 20xx), keeping in view that Accounting Standard corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards, will deal with same.
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IAS 18 vs AS 9IFRS AS 9
Terminology used is 'Statement of financial position' and 'Statement of Comprehensive income'.
Different terminology is used, as used in existing laws e.g. term 'balance sheet' and 'Statement of profit & loss'
The transactional provisions given in SIC 31, IFRIC 13, IFRIC 15 regarding changes in accounting policy have not been given in the Exposure draft of AS 9 (Revised 20xx), since IFRS 1, First time Adoption of International Financial Reporting Standards, provides that transitional provisions in other IFRSs do not apply to a first time adopters transition to IFRSs, unless otherwise permitted in IFRS 1. It is noted that IFRS 1does not permit use of these transactional provisions. Accordingly, deleting or retaining the said paragraph would have the same effect. Transitional provisions given in IFRIC 18 have not been given in the Exposure draft of AS 9 (Revised 20xx), since the Accounting Standard corresponding to IFRS 1, First time Adoption of International Financial Reporting Standards, will deal with the same.
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Example 2
“Bill and hold” sales, in which delivery is delayed at the buyer's request but the buyer assumes title and accepts invoicing, should be recognized when
a) The buyer makes an order
b) The sales starts manufacturing the goods
c) The title has been transferred but the goods are kept on the seller's premises
d) It is probable that the delivery will be made, payment terms have been established, and the buyer has acknowledged the delivery instructions
Ans: d
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Example 3
X ltd, a large manufacturer of cosmetics, sells merchandise to Y ltd, a retailer, which in turn sells the goods to the public at large through its chain of retail outlets. Y ltd. Purchases merchandise from X ltd. Under a consignment contract. When should revenue from the sale of merchandise to Y ltd be recognized by X ltd ?
a) When goods are delivered to Y ltd
b)When goods are sold by Y ltd
C) It will depend on the terms of delivery of the merchandise by X ltd
d) It will depend on the terms of payment between Y ltd and X ltd (Cash or credit)
Ans: b
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Example 4
Considering the provisions of IAS 18 for Multiple Deliverable Contracts, which of the following statement is true?
a) In case of multiple deliverable contracts, transaction should be segmented into individual transactions and recognition criteria must be applied to each of them
b) In case of multiple deliverable contracts, recognition criteria needs to be applied on the combined transaction as a whole
Ans: a
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Property, Plant & Equipment
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Definition and Scope
•Definition
–Tangible items•Held for production or supply of goods or services, or •Rental to others, or•For administrative purposes–Expected to be used during more than one period
•Scope: accounting for all PPE
–Unless another standard requires or permits a different accounting treatment
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Recognition
•PPE is recognized as an asset when–Future economic benefits are probable, and –Cost can be measured reliably
•Criteria apply to all costs when incurred, including–Initial acquisition or construction costs–Subsequent costs (covered later)
•PPE is measured initially at cost
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Cost of acquired or self-constructed assets
•Purchase price (including import duties and non-refundable purchase taxes)
–Less any discounts or rebates deducted–Less implicit interest in deferred payment–Plus borrowing costs in the case of “qualifying assets” (refer IAS 23)–Plus any other directly attributable costs
•Excludes abnormal amounts of wasted material, labour and other resources
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Expenses not recognized as cost of PPE
•Feasibility assessment costs
•Costs of opening new facility
•Costs of introducing new product or service
•Costs of conducting business in new location or with new class of customer
•Costs of staff training
•Administration and other general overhead costs
•Costs incurred in using or redeploying an item
•Amounts related to certain incidental operations
•Costs incurred while construction is interrupted, unless certain criteria are met
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Asset exchange transactions
•Cost of exchanged asset is measured at fair value unless–Exchange transaction lacks commercial substance, or
–Fair value of neither asset received nor given up can be measured reliably
•Fair value of asset given up is used, unless fair value of asset received is more clearly evident
•If not measured at fair value, then carrying amount of asset given up becomes new cost basis
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Subsequent costs
•Subsequent costs are capitalized only if meet general recognition criteria–Future economic benefits are probable–Cost can be measured reliably
•Costs of day-to-day servicing are expenses as incurred
•Recognize cost of replacing part of PPE item when incurred
•Recognize major inspection cost as replacement
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Parts of an item –“Component accounting”
•on initial recognition, allocate cost to significant parts of asset, including non-physical parts
• Separate depreciation of each “component”
Ship costs 150, useful life 10 yrs. Estimated docking cost 15, planned after 3 yrs.
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Measurement after recognition
IFRS Overview 80
Depreciation
•Systematic allocation of cost to profit or loss over useful life
•Depreciable amount determined after deducting residual value
•Review at least at each balance sheet date–Residual value
–Useful life
–Depreciation method
•Changes are changes in estimate, so adjust current and future periods only
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Revaluation model (1)
•Revalue regularly
•Revalue all assets of the same class
•To adjust accumulated depreciation at the date of the revaluation either:–Restate it proportionately with the change in the gross carrying amount of the asset, or
–Eliminate it against the gross carrying amount of the asset and restate the net amount to the revalued amount of the asset
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Revaluation model (2)
•Revaluation increases credited to–Profit or loss to the extent they reverse previous revaluation decrease of that asset recognized in profit or loss–Otherwise, equity (revaluation surplus)
•Revaluation decreases debited to–Equity to the extent of any revaluation surplus in equity related to that asset
–Otherwise, profit or loss
•The revaluation surplus maybe transferred to retained earnings when the asset is derecognized or as it is used by the entiry
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Example (1) Revaluation Model
•Company A owns a building with the initial cost of 1000, accumulated depreciation of 600. The fair value of the asset on the same date is assessed at 800•Entries to recognize revaluation of the asset should be:OPTION 1: PROPORTIONATE RESTATEMENT Dr Revaluation reserve 600
Cr Accumulated depreciation 600
Dr Building, cost 1,000
Cr Revaluation reserve 1,000
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Example (2) Revaluation Model
•Company A owns a building with the initial cost of 1000, accumulated depreciation of 600. The fair value of the asset on the same date is assessed at 800•Entries to recognize revaluation of the asset should be:
OPTION 2: ELIMINATION AGAINST ASSET COST
Dr Accumulated depreciation 600Cr Building, cost 600
Dr Building, cost 400 Cr Revaluation reserve 400
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IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities(1)
•Changes due to a change in–Estimated timing and amount of payments–Estimated amount of payments–Discount rate
•Added to / deducted from cost of underlying asset and depreciated prospectively over remaining useful life•Foreign exchange gains and losses may be recognised in profit or loss or adjusted against cost of PPE•Applies regardless of accounting policy (cost or revaluation model) but implementation varies•New obligations: in our view, accounting analogous to change in estimates
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IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities(2)
•Cost model
–Changes in liability added/deducted from asset cost in current period
–No negative carrying amount possible; any excess recognised immediately in profit or loss
–Increase in carrying amount triggers consideration of impairment, including, if necessary, calculation of recoverable amount
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IFRIC 1 Changes in Existing Decommissioning,Restoration and Similar Liabilities(3)
•Revaluation model- Change in liability does not affect valuation of asset (impact on valuation reserve)
- Changes in liability: indication that asset might have to be revalued.
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Impairment assessment
IFRS Overview 89
Impairment loss recognition
•Recognize impairment loss as expense immediately
–Unless carried at revalued amount (treat as revaluation)
–Use “new” carrying amount to calculate future depreciation
•Refer to IAS 36 for impairment loss calculation
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Derecognition
•Derecognize:–On disposal, or
–When no future benefits expected from use or disposal
•Difference between carrying amount and net disposal proceeds recognized as gain/loss in profit or loss
•Gains (or proceeds) are not classified as revenue
•Exception: when an entity routinely sells assets it has held for rental, it transfers them to inventory when they cease to be rented.
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Compensation for impairment, loss or surrender
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IAS 16 –Key learning points (1)
•Analyze costs carefully to determine what can be capitalised•Use cost or revaluation model to account for assets in the same class•Adjust changes in existing decommissioning, restoration and similar liabilities to cost of underlying asset:–Cost model: to asset cost in current period–Revaluation model: to revaluation surplus
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IAS 16 –Key learning points (2)
•Allocate cost to significant components and depreciate separately•Depreciation method, useful life, residual value reviewed at each balance sheet date•Specific disclosure requirements for revalued assets •Should capitalize borrowing costs on “qualifying assets” in accordance with IAS 23 (R). The revised standard applies for accounting periods beginning on or after 1 January 2009
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IAS 16 vs AS 10
There is no major difference between the exposure draft of AS 10 (revised 20xx), property, plant and equipment and International Accounting Standards (IAS) 16, Property, plant and equipment and IFRIC 1, changes in existing decommissioning, restoration and similar liabilities except that the transitional provisions given in IAS 10 (revised 20xx), keeping in view that Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards, will deal with the same.
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Impairment of Assets
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Cash-generating unit –Definition
•Determine recoverable amount for the individual asset if possible
•Apply the CGU concept if the asset does not generate cash inflows independent from other assets
•CGU is smallest identifiable group of assets that generates cash inflows that are largely independent from other (groups of) assets.
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CGU –Factors to be considered
•Key factor: ability to generate independent cash inflows–If an active market exists for the output of an asset group, then it is a CGU even if the output is only sold to another division with the entity–The focus is on cash inflows, not net cash flows
•Consider how management makes decisions about continuing or disposing of assets / operations•Consider how management monitors operations
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Goodwill
•Future economic benefits arising from assets that are not capable of being individually identified and separately recognized
•Does not generate independent cash flows
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Indications of impairment
•External sources–Significant decline in market value
–Technological, market, economic, legal environment
–Increases in interest rates or rates of return
–Lower market capitalization than equity book value
•Internal sources–Evidence of obsolescence or physical damage
–Discontinuance, disposal, restructuring plans
–Asset performance declining or expected to decline
–Receipt from a dividend of a subsidiary, jointly controlled entity or associate when the carrying amount of the investment exceeds the share of underlying net assets (including goodwill) in the consolidated accounts or when the dividend exceeds total comprehensive income of the investee
IFRS Overview 100
Frequency and timing of testing (1)
•CGU to which goodwill has been allocated
•Intangible assets with an indefinite useful life
•Intangible assets not yet available for use
IFRS Overview 101
Frequency and timing of testing (2)
•Recent calculation can be used if the following criteria are met:–CGU did not change substantially
–Most recent recoverable amount was significantly greater than carrying amount
–Analysis of events and circumstances –no elimination of the difference
Note: A recent calculation can only be used in the case of intangible assets with an indefinite useful life and cash-generating units to which goodwill has been allocated
IFRS Overview 102
Recoverable amount
•Recoverable amount is the greater of:–Value in use (VIU): present value of estimated future cash flows to be derived from an asset/CGU (continuing use and ultimate disposal)
–Fair value less costs to sell (FVLCS): amount obtainable from the sale of asset/CGU in an arm’s length transaction less costs of disposal
•If FVLCS is determinable, then not required to measure VIU or test at CGU level when:–an asset’s FVLCS is higher than the carrying amount; or
–an asset’s FVLCS can be estimated to be close to VIU (e.g. asset held for disposal)
IFRS Overview 103
Allocating impairment loss –Step by step
IFRS Overview 104
Reversal of impairment loss
IFRS Overview 105
Key disclosures
•By category of asset–Amount of impairment losses recognized / reversed during the period in•Profit or loss or
•Other comprehensive income
–If recognized in profit or loss, disclosure of where items are included
–Segment reporting information
•By category of asset–Disclosures when impairment losses are material for an individual asset
–Information on basis used for determining recoverable amount
–Discount rate used
IFRS Overview 106
Key learning points
•IAS 36 covers impairment of PPE, goodwill, intangible assets and investments in subsidiaries, joint ventures and associates
•Detailed impairment testing generally is required only when there is an indication of impairment
•Annual impairment testing:–Intangible assets not yet available for use
–Intangible assets with indefinite useful life
–Goodwill
•Recognize impairment loss
IFRS Overview 107
IAS 36 vs AS 28
IFRS Converged StandardTerminology used is 'Statement of financial position' and 'Statement of comprehensive income'
Different terminology is used, as used in existing laws e.g. term 'Balance sheet' is used instead of 'Statement of profit and losses' is used instead of 'Statement of comprehensive income'
The transitional provisions have not been include in the exposure draft of AS28 (revised 20xx), since these are not relevant in the present Indian context as they relate to amendments made in the standard from time to time.
IFRS Overview 108
Example 1
•Which of the following assets are within the scope of IAS 36?A. Assets held for sale
B. Inventories
C. Property, plant and equipment
D. Financial assets
Ans: c
IFRS Overview 109
Example 2
•What is the most appropriate definition of the “value in use”?
A. The higher of an asset’s fair value less cost to sell and its market value
B. The market quote
C. The asset’s carrying value in the statement of financial position
D. The discounted present value of future cash flows arising from use of the asset and from its disposal
Ans: d
IFRS Overview 110
Example 3
•Under IAS 36, which is the most appropriate conclusion when fair value less costs to sell cannot be determined?
A. The asset is not impaired
B. The value-in-use is the only measure of the recoverable amount
C. The net realizable value should be used as an approximation
D. The carrying value of the asset does not changeAns: b
IFRS Overview 111
Example 4
•What is normally the maximum period for which estimates of future cash flows can be reasonably developed?A. Five yearsB. Eight yearsC. Ten yearsD. Three years
Ans: a
IFRS Overview 112
Example 5
•Which of the following cash flows should NOT be included when calculating the estimates of future cash flows? A. Cash flows from the sale of assets produced by the assetB. Cash flows from disposal C. Income tax paymentsD. Cash outflows on the maintenance of the asset
Ans: c
IFRS Overview 113
Income Taxes
IFRS Overview 114
Income Taxes
Income tax
Deferred taxCurrent tax
=
+
=
IFRS Overview 115
Recognition of current tax
● In the statement of financial position current tax for current and prior periods should be recognized as an asset or liability
● Tax Payable = liability
● Tax paid but recoverable = asset - Tax assets may arise in some jurisdictions through the ability to redeem
current period tax losses against tax paid in earlier periods
IFRS Overview 116
Recognition of current tax (continued)
Profit or Loss
If relates to item either in other comprehensive Income or in equity
Unless relates to item outside profit or loss (either in othercomprehensive income or in equity)
OCI/Equity
IFRS Overview 117
Measurement of current tax
Applicable tax rate for that type of income
• Generate rate• Specific rates (e.g. capital gains tax rate)• Assume no distribution
Enacted or substantively enacted by end of the reporting period
IFRS Overview 118
Distribution of profit - Example
- Taxable income as at 31 Dec 20x7 is 100,000●- Subsequently, on 15 Mar 20x8 proposed dividends of 10,000 are approved and recognized as a liability
Tax rate for undistributed earnings 50%
Tax rate for distributed earnings 35%
What tax rate?
Measure tax on undistributed earnings at 50% as at 31 Dec 2007 - Recognize current income tax liability and expense of 50,000 - Expectation of future distribution irrelevant
Remeasure when distribution recognized as at 15 Mar 2008 - Credit 1,500 (15%) as at 15 Mar 20x8 to profit or loss
IFRS Overview 119
Deferred tax: overview
IFRS book value Vs Tax base = Temporary differences
Deductible Taxable
Tax rate applicable
- OCI / EquityProfit or loss OR - Goodwill
Deferred tax asset recognition?
IFRS Overview 120
Tax base
● The tax base of an item is the amount attributed to that item for tax purposes
● Tax base of an asset: - Amount deductible for tax purposes when the asset is recovered - Example: Interest receivable of 100 (carrying amount) Related interest revenue are taxed on a cash basis Tax base is nil
IFRS Overview 121
Tax base (continued)
● Tax base of liability: - Carrying amount less any amount that will be deductible for tax purposes in
respect of that liability - Example: Loan payable of 100 (carrying amount) Repayment of the loan has no tax consequences Tax base is 100
IFRS Overview 122
Temporary differences
Temporary differences
Tax Base
Accounting IFRS Book value
= -
TaxableAmount on recovery/ settlement
Deferred tax LIABILITY
Taxable Temporary difference
Deductible amount on recovery/ settlement
Deductible Temporary differences
Deferred tax ASSET→
→ →
→
IFRS Overview 123
Typical Temporary Differences
Account Potential temporary differencesMarketable Securities Recorded at fair value for financial statement
purposes, generally recorded at historical cost for tax purposes
Allowance for doubtful accounts
Allowance for tax purposes, if permitted, generally different from the financial statement allowance
Inventory Valuation reserves for financial statement purposes but not for tax purposes
Property, plant and equipment
Costs capitalized for financial statement purposes but not for tax purposes
Different depreciation lives or methods for financial statement and tax purposes
Pension liability (for asset) Generally not deductible for tax until paid
IFRS Overview 124
Taxable temporary difference- Solution 1
● PPE with original cost of 150 - Accounting treatment: depreciate straight line zero residual value over 5
years - Tax treatment: original cost tax deductible straight line over three years
● At the end of year 1 - Accounting: carrying amount=120 - Tax: tax base=100
● Taxable temporary difference: 120-100=20●Deferred tax liability
IFRS Overview 125
Taxable temporary difference- Solution 2
● Transaction costs of 20 on loan received - Accounting treatment: deduct from loan proceeds and amortize over the
loan term to accounting profit - Tax treatment: tax deductible when loan was first paid
● Immediately after receiving the loan- Accounting: carrying amount = 0 - Tax: tax base = 20
● Taxable temporary difference:- (0-20)=20● Deferred tax liability
IFRS Overview 126
Deductible temporary difference – Situation 1
● Revaluation of PPE for tax purposes 100 - Accounting treatment: no revaluation recognized - Tax treatment: tax deductible in future years through tax depreciation
● At period end - Accounting: carrying amount = 0 - Tax: tax base = 100
● Deductible temporary difference: 0-100= -100● Deferred tax asset
IFRS Overview 127
Deductible temporary difference – Situation 2
● Warranty provision of 100 - Accounting treatment: expense as incurred - Tax treatment: tax deductible upon reversal (when claims are actually paid)
● Immediately after incurred - Accounting: carrying amount = 100 - Tax: tax base = 0
● Deductible temporary difference:- (100-0) = 100● Deferred tax asset
IFRS Overview 128
Temporary differences and consolidation
Tem
pora
ry
diff
eren
ceGroup level
Local tax base
Entity level
IFRS Overview 129
Recognition of deferred tax
Profit or Loss
Goodwill
OCI/ Equity
All cases, unless;
If releases to item either in other comprehensive income or in equity
If arises on a business combination
IFRS Overview 130
Recognition of deferred tax outside profit or loss - Examples
OC
IEq
uity
● Revaluation of - Property, plant and equipment (IAS 16) - intangible assets (IAS 38) - available for sale securities (IAS 39)
● Foreign exchange differences on the translation of a foreign entity (IAS 21)● Cash flow hedge (IAS 39)
● Compound financial instruments (IAS 39)●Adjustment to the opening balance of retained earnings (IAS 8/ IFRS 1)●Share based payments (IFRS 2)
IFRS Overview 131
Recognition of deferred tax asset/ liability
AssetRecognize if recoverable
Liability Recognize in full
IFRS Overview 132
Deferred tax asset - Examples
● Deductible temporary differences● Unused tax losses● Unused tax credits
IFRS Overview 133
Asset recognition: When?
● Sufficient taxable profit: - Taxable temporary differences - Taxable profits - Tax planning opportunities - Carry back income
IFRS Overview 134
Presentation
● Minimum line items to be presented separately in the statement of financial position - Current tax assets and liabilities - Deferred tax assets and liabilities
● Deferred tax assets/ liabilities to be classified as non current items in a classified statement of financial position ● Tax expense to be presented separately in the statement of comprehensive income
IFRS Overview 135
Presentation - Offsetting
● Current tax assets/ liabilities offset only if - Legally enforceable right; and - Intention to settle on a net basis or simultaneously
● Deferred tax assets/ liabilities offset only if - Legally enforceable right to offset current tax assets and liabilities; and - Income taxes relating to same taxation authority and from: The same taxable entity Different taxable entities intending to settle/ realize net or simultaneously
IFRS Overview 136
Convergence – Income taxes
● Convergence project FASB/ IASB - Tentative Board decisions - Exposure Draft of amendments expected in 2009 - A final standard expected in 2010 - www.iasb.org for latest details
IFRS Overview 137
IAS 12 Vs. Converged AS 22
IFRS Converged StandardTerminology used is 'Statement of financial position','Statement of Comprehensive income' and 'authorization of financial statements for issue'
Different terminology is used as used existing laws e.g. term 'balance sheet' is used instead of 'Statement of financial position', 'Statement of Profit or loss' is used instead of 'Statement of comprehensive income' . Words 'approval of the financial statements for issue' have been used instead of 'authorization of financial statements for issue' in the contest of financial statements considered for the purpose of events after the reporting period.
IAS 12 requires presentation of tax expense (income) in the separate income statement, where separate income statement is presented.
Such requirements have been deleted. This change is consequential to the removal of option regarding two statement approach in AS 1 (Revised 20XX). AS 1 (Revised 20XX) requires that the components of profit or loss and components of other comprehensive income shall be presented as a part of the statement of profit and loss.
The transitional provisions given in SIC 21 and SIC 25 regarding changes in accounting policy have not been given in the Exposure Draft of AS 22 (Revised 20xx), since IFRS 1, First-time Adoption of International Financial Reporting Standards, provides that transitional provisions in other IFRSs do not apply to a first-time adopter's transition to IFRSs, unless otherwise permitted in IFRS 1. It is noted that IFRS 1 does not permit use of these transitional provisions. Accordingly, deleting or relating the said paragraph would have the same effect.
IFRS Overview 138
Example 1
Company A reported pre-tax accounting income of 90,000, but due to temporary differences arising in the year, taxable income is only 50,000. Assuming a tax rate of 40%, statement of comprehensive income should report net income of:a) 70,000b) 40,000c) 30,000d) 54,000
Ans: d
IFRS Overview 139
Example 2
Assume that Company C has accrued several speeding fines for its salespeople. Fines are never deductible for tax purposes. This will result in which of the following?a) Deductible temporary difference and future income tax liabilityb) No temporary differencec) Taxable temporary difference and future income tax liabilityd) Taxable temporary difference and future income tax asset
Ans: b
IFRS Overview 140
Example 3
With respect to deferred taxes:1. Deferred tax liability and assets must be offset if the entity has a legally enforceable right to offset current tax liabilities and assets, they relate to taxes levied by the same tax authority and the entity intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously;2. Deferred tax assets and liabilities have to be discounted.
a) 1 is true, 2 is falseb) 1 is false, 2 is truec) 1 is true, 2 is trued) 1 is false, 2 is false
Ans: a
IFRS Overview 141
First-time Adoption of IFRS
IFRS Overview 142
When to apply IFRS 1
• Apply IFRS 1
- In the first set of financial statements that contain an explicit and unreserved statement of compliance with IFRSs
- In any interim financial statements for a period covered by those financial statements that are prepared under IFRS
IFRS Overview 143
Why does IFRS 1 apply to?
• Entity A stated compliance with all IFRSs except IAS 39 (Financial instruments)
• Entity B claimed compliance, but it was IFRSs “lite” (i.e. only selected standards were applied)
• Entity C followed IFRSs for group reporting only
IFRS Overview 144
Transition date
• The beginning of the earliest period for which an entity presents full comparative information under IFRSs
Date of transition Reporting date= IFRS opening statement of financial position
Comparative period First IFRS financial statements 1 Jan 2008 31 Dec 2008 31 Dec 2009
IFRS Overview 145
General Requirements
• Step 1 – Select IFRS accounting policies - Latest version of IFRSs only
• Step 2 – Recognize/ derecognize an necessary, for example - Liabilities (e.g. future losses, decommissioning obligations, leases) - Special purpose entities
• Step 3 – Remeasure, for example - Basis same, but measured differently (e.g IFRS cost not equal to previous GAAP cost) - Basis changed (e.g. from cost to fair value) - Discounting is required / prohibited (e.g. deferred tax, provisions, impairments)
• Step 4 – Reclassify, for example - Between captions (e.g. debt/ equity) - Current/ non-current
IFRS Overview 146
Opening IFRS statement of financial position
Adjustments as a result of applying IFRSs for the first-time
Retained earnings
Goodwill
Another equity category
Exempti ons
IFRS Overview 147
Mandatory exceptions
• Derecognition of non-derivative financial instruments • Hedge accounting
• Estimates
IFRS Overview 148
Derecognition of non-derivative financial instruments
Derecognized after 1 Jan 2004?
Do not apply IAS 39
Apply IAS 39
Does the entity elect to apply IAS 39 retrospectively?
Information needed to apply IAS 39 retrospectively obtained at the time of initially accounting for transactions?
Yes
No No
Yes
YesNo
IFRS Overview 149
Hedge accounting
Measure all derivatives at fair value and remove all deferred gains and losses arising on derivatives recognised under previous GAAP
Designated as a hedge under previous GAAP and is the hedge effective?
On transition apply thefollowing adjustments
Do not reflect hedging relationship in opening IFRS statement of financial position → recognise effectin retained earnings
Fair value hedge: adjust carrying amount of the hedged item in opening IFRS statement of financial position → recognize effect in retained earnings
Cash flow hedge and hedge of a net investment: recognize deffered gains and losses on the hedging instrument in equity as seperate item
YesNo
IFRS Overview 150
Estimates in the opening IFRS statement of financial position
No estimates under previous GAAP
Conditions arising after the date of transition
“Wrong”
Use information available at the date of transition to IFRSs (i.e no hindsight)
“Right”
Apply also to the end of the comparative period
IFRS Overview 151
Estimates in the opening IFRS statement of financial position (continued)
Previous GAAP estimate
Apply IFRS methodology to estimate made
No errorAdjust, but do not use hindsight
Apply also to the end of the comparative period
Error
IFRS Overview 152
Overview of optional exemptions
• Deemed Cost • Share-based payments
• Compound financial instruments • Day 1 gain or loss
• Cumulative translation differences • Arrangements containing a lease
• Business Combinations • Defined benefit obligation pension disclosures
• Employee benefits • Insurance Contracts
• Designation of previously • Service concession
recognized financial instruments arrangements
• Decommissioning liabilities • Borrowing Costs
• Transfers of assets from customers
IFRS Overview 153
IFRS 1 vs Converged AS 41 (1)
IFRS Converged StandardIFRS 1 First-time Adoption of International Financial Reporting Standards was first issued by the International Accounting Standards Board in June 2003 and thereafter has been amended many times to accommodate the changes to other relevant IASs and IFRSs and the first time Accommodation required arising from those changes. For the purposes of Ind-AS 41, the IFRS 1 as restructured and issued in 2008 has been used as the basis and updated to reflect subsequent amendments up to November 2009 excluding the amendments so far as they relate to changes arising from instruction of IFRS 9 – Financial Instruments
To that extent Ind-AS 41 reflects only the current set of provisions and exemptions and does not present all the evolution
IFRS Overview 154
IFRS 1 vs Converged AS 41 (2)
IFRS Converged StandardGenerally, there is only one transition date for a country transitioning to IFRS.IFRS 1 defines transitional date as beginning of earliest period for which an entity presents full comparative information under IFRS. It is this date which is the starting point for IFRS and it is on this date the cumulative impact of transition is recorded based on assessment of conditions at that date
In India, as the converged IFRS standards become applicable in a phased manner it is expected that Ind-AS 41 would be available to each company considering its relevant transition date.Ind-AS41, however provide an entity with a choice to either consider the beginning of the current period or the comparative period as the transition date. Thus, the transition date has been defined as the beginning date of financial year on or after 1April 2011 for which an entity presents financial information under Ind-AS in its first Ind-AS financial statements but where an entity voluntarily decides to provide a prior period comparatives in accordance with Ind-AS then the date of transition would be the beginning of the earliest period for which an entity presents for full comparative information under Ind-AS in its first Ind-AS financial statements i.e. beginning of financial year on or after 1 April 2010. Arising from this fundamental change, there are other consequential changes to Ind-AS 41. For example, disclosures required under paragraph 21 and reconciliations under paragraphs 24 to 26 Ind-AS 41 have been modified to accommodate this option available under Ind-AS 41. The relevant Implementation Guidance and illustrative examples have been appropriately modified to reflect the option provided to transitioning entities.
IFRS Overview 155
Key Learning Points
● IFRS 1 sets out all transitional requirements and exemptions available on the first-time adoption of IFRSs● An opening statement of financial position is prepared at the date of transition of IFRSs● Accounting policies are chosen from IFRSs in effect at the end of the first IFRS reporting period ● A number of exemptions are available ● At least one year of comparative information must be presented ● First-time adoption of IFRSs may be reported in annual or interim financial statements
IFRS Overview 156
Example 1
Under which one of the following circumstances can we conclude that the entity prepared IFRS financial statements in the previous year?a) Financial statements were prepared under IFRSs in the previous year;
however, these were meant for internal purposes only
b) Previous year's financial statements were prepared under the entity's national GAAP
c) Previous year's financial statements were prepared in conformity with all requirements of IFRSs; however, these statements that they compiled with IFRSs
d) Previous year's financial statements were prepared in conformity with all requirements of IFRSs, and these statements contained an explicit and unreserved statement that they compiled with IFRSs.Ans: d
IFRS Overview 157
Example 2
Which one of the following is a required adjustment in preparing an opening IFRS statement of financial position?a) Present at least two years of comparative information in the financial statements
b) Derecognize items as assets or liabilities if IFRSs do not permit such a recognition
c) Disclose as comparative information all figures for the current year presented under IFRSs
d) Measure all recognized assets and liabilities at fair value
Ans: b
IFRS Overview 158
Example 3
Which one of the following does NOT qualify for an exemption allowed by IFRS 1?a) cumulative translation differences
b) Inventories
c) Business combinations that occurred before the date of transition to IFRSs
d) Compound financial instruments
Ans: b
IFRS Overview 159
Implementation pre-requisites on ERP
IFRS Overview 160
Implementation pre-requisites on ERP
Implementation pre-requisites on ERP (OracleApplications) to map according to IFRS.
a) Detailed Segment Structure
b) Currencies
c) One more Secondary Ledger for IFRS (Adjustment)
IFRS Overview 161
Detailed Segment Structure
Need to prepare detailed segments according to the business and reporting requirements.
Need to prepare detailed segment values according to IFRS standards.
While preparing segments consider the points like business units, operating units, business operations & processes etc..
IFRS Overview 162
Currencies
Need to review and assign required currencies for reporting.
Assign reporting currencies to particular ledger.
IFRS Overview 163
One more Secondary Ledger for IFRS (Adjustment)
We need to maintain two ledgers. One ledger (Primary ledger) for GAAP and another ledger (secondary ledger) for IFRS. Define a new ledger for IFRS as a secondary ledger with type as adjustment. With this we are mainly doing adjustment entries for IFRS reporting (detailed reporting).
IFRS Overview 164
Example (from Insurance domain)
Please find below the details of the IFRS ledger:1. The IFRS ledger will contain the Chart of accounts structure and values as per IFRS requirement.
2. Transactions shall be accomplished in the specific sub ledgers like AP, AR from which they shall be transferred to the primary ledger (as per GAAP).
3. The account balances then shall be transferred to IFRS ledger from the primary ledger, where users will pass manual entries to make adjustments in accounts balances from one account to another as per IFRS requirement.
IFRS Overview 165
Continue (1)
The above points can be understood through an Insurance Industry example: Case Study - In case of Insurance, IGAAP just asks for a consolidated premium booking amount to be booked in the premium revenue account, while in IFRS it needs to be bifurcated into three heads - premium main(50%), premium mortality charges(25%) and premium bid charges(25%) Thus when we book a receivable Invoice of Rs 100 in AR the accounting entry to IGAAP ledger would be:
Receivable Dr 100To Premium Revenue Cr 100
IFRS Overview 166
Continue (2)
These balances would then be transferred to IFRS ledger, where the user shall pass the following manual adjustment:
Premium Revenue Dr 50 To Premium mortality charges Cr 25 To Premium bid charges Cr 25
Effect in IFRS Ledger :
Receivable Dr 100
To Premium Revenue Cr 50 To Premium mortality charges Cr 25 To Premium bid charges Cr 25
IFRS Overview 167
IFRS with Oracle E-BusinessSuite ERP
IFRS Overview 168
Introduction
Oracle EBS standard model is mostly similar to US GAAP, in this chapter we are discussing about US GAAP and IFRS.
In the fall of 2008, the SEC (Securities and Exchange Commission (US)) published a discussion road map for the adoption of IFRS by US public companies in which early IFRS adopters could file as soon as 2011, and regular filing under IFRS would begin in 2014. In March 2010, the SEC announced that in 2011 they would consider accepting IFRS into the US Financial Reporting system if certain readiness conditions were met and IFRS and US GAAP had reached convergence by mid 2011. This would mean that 2015 might be the earliest possible date for IFRS reporting.
Much is the Same …But There are DifferencesUS GAAP is always more specific, plus:
SimilaritiesApproach(Some Examples)
IFRS US GAAP
Revenue Recognition ü üFair Market (e.g. AR or Inventory Valuation)
ü üDetailed Disclosure ü üSegment Reporting ü üChart of Accounts Not Mandated ü üDistinction Between Tax and External Reporting
ü ü
Differences
Approach(Some Examples)
IFRS US GAAP
Fair Market Revaluation
Fixed Assets &
Investments
Only Certain Fixed
Assets
Extraordinary Items None Rare
Consolidation Control 2 Models
Joint Ventures Proportional OK
Only Equity
“Development” Capitalized Expensed
Fixed Assets Components Unitary
Leasing Financing Cap vs. Op
Inventory No LIFO LIFO OK
Impairment 1 Step, Reversible
2 Step, No Reversal
IFRS Overview
IFRS Overview 170
From a system view point the following lists are important:
• Financial Statements
• Revenue Recognition
• Lease Accounting
• Financial Instruments
IFRS Overview 171
“Comprehensive Income,” a proposed modification to IAS 1.
In the area of financial reporting, the Boards published a series of proposals that requiremore disclosure, in particular distinguishing operating and investment assets andrequiring the use of direct cash flow reporting.
Regarding Revenue Recognition, there are proposals to replace US GAAP revenuerecognition and IFRS revenue recognition (IAS 18) with a PerformanceObligation model. The proposal is not yet definitive, and the Boards have not yet agreedon a final proposal for public review.
According to this Oracle EBS follows mostly US GAAP. Once finalize the changes more changes will effect on application.
IFRS Overview 172
In the area of Lease Accounting, the proposals clarify the difference between long-term financing of assets and short-term rental of assets. While neither Board is keen on the current standards, the existing standards in US GAAP and IFRS are quite similar. It is anticipated that a proposal will be published in the summer of 2010.
Regarding financial instruments, the Boards are deep in consultation with the financial industry, regulators, and authorities around the world to determine the best way to value and report on complex financial instruments and transactions. Both Boards have published standards and proposals covering elements of this topic, but the overall position is not definitive, and the community is not in agreement on what is generally acceptable.
IFRS Overview 173
Background
Over 12,000 companies in a hundred countries have successfully adopted IFRS. They include countries in the European Union (EU), China, Australia, Russia, South Africa, Brazil and Chile. India, Canada, and Japan will adopt IFRS starting in 2011. The US joins Mexico in adopting IFRS within the next few years, thereby completing theworldwide adoption.
IFRS Overview 174
CHALLENGES OF TRANSITIONING TO IFRS
Although there will be significant challenges along the way, the transition to IFRS will bring considerable benefits to worldwide businesses. A single set of global accounting and financial reporting standards applied consistently will not only increase comparabilityfor investment purposes and reduce accounting complexity, but it will also increase the competitiveness of companies and capital markets. As with any significant change, companies will need to plan for it to address challenges and obstacles.
IFRS Overview 175
Impact of the Differences between US GAAP and IFRS
From an operational point of view, the post-Convergence differences between IFRS and US GAAP remain substantial. IFRS are statements of principles and do not include the detailed guidance that is a hallmark of US GAAP.
A company reporting under IFRS is likely to recognize a different amount of revenue, expense and income than it did under US GAAP. Certain assets and liabilities have different recognition and measurement criteria. Disclosure rules are different and thereare more disclosure data points. In some cases, a business model implicitly based on US GAAP will produce different results under IFRS and will need to be changed.
IFRS Overview 176
Implications of the Time-line
It appears that American companies will have a two-step transition to IFRS. Around 2013 or 2014, US GAAP will implement the Convergence standards (“Convergence”), and around 2015 and 2016, adoption of IFRS (“Adoption”) will occur.
In June 2010, the FASB and IASB wrote to the SEC, G20 and others suggesting the establishment and discussion of the timing implications of Convergence. Nothing has been decided at this time.
IFRS Overview 177
Geographic Variances in Accounting Compliance
IFRS are standards that define shareholder reporting for a complete enterprise, both domestic and overseas. While the standards have been adopted worldwide for public company shareholder reporting, not all countries have adopted them for private company reporting. In fact, some 30 countries actually disallow the use of IFRS for subsidiarystatutory reporting.During the migration period, many companies may have to simultaneously comply with three regulations: local statutory, US GAAP and IFRS. There will likely be three channels of transaction data:• In the US, where no statutory reporting is required, certain IFRS data will be captured in the subsystems.• In countries where IFRS is permitted for statutory filing, local general ledgers will be IFRS compliant. However, consolidation adjustments and currency conversion will still be necessary.• In countries where IFRS is not permitted for statutory filing, local compliance might be the daily operational routine and the accounts from such subsidiaries may need substantial conforming adjustments – as companies do today with their non-GAAP subsidiaries.
Customers using IFRS in ERP
• E-Business Suite– Emirates Airlines (since 2001)– Hilton Hotels PLC– Michelin– Reuters (since 2002)– Societe National De Chemin De Fer Francais– Westpac
• PeopleSoft– AXA International– Carrefour– European Bank of Investment – John Lewis PLC– Societe Generale
• JD Edwards– Chevron– Juken New Zealand Ltd– LaFarge– Pernod Ricard
Supporting IFRS since Release Xe for E1 and Release A7.3 for World
Supporting IFRS since Release 8.4
Supporting IFRS since Release 10.7
All
St
ages
: A
ppl
y Polic
y an
d C
ont
rol
Man
age
me
nt
Determine impact on accounting in subsystems
Configure accounting rules and set up ledgers
Process and report using dual accounting
Milestone 3Transactions Recorded in Multiple GAAPs
Stage 3 Record Transactions I in both GAAPS
Milestone 1Completed Preliminary Study
Stage 1Study Impact & Determine Strategy
Perform Preliminary Study
Assess Impact
Determine Strategy
Determine changes to business model
Transform operations using IFRS results
Report IFRS results, increase shareholder value
Stage 4 Transform Your Business& Win with IFRS
Milestone 4Business Model Optimized
IFRS Migration PlanAchieve “early mover” advantage
Collect GAAP financial results
Adjust and consolidate under GAAP & IFRS
Report, reconcile and audit results
Milestone 2IFRS Reports Produced
Stage 2 Enable Top End Reports
Oracle Enables Key Stages in IFRS Action Plan
Stage 2 Enable Top End Reports
Stage 3 Record Transactions in both GAAPS
Stage 1Study Impact & Determine Strategy
Stage 4 Transform Your Business & Win with IFRS
Oracle Enterprise Performance Management
Oracle ERP Financials Other ERP Financials
Oracle Industry Specific Applications
Oracle Governance, Risk, & Compliance Suite
Custom, Legacy,Competitor
All
Stag
es:
App
ly Po
licy
and
Con
tro
l M
ana
gem
ent
IFRS Overview 181
Oracle Enterprise Performance ManagementOracle Hyperion Financial Management (HFM) helps organizations align the processes for collecting financial results, operating results, and sustainability information in response to investor demands for increased disclosures of both financial and non-financial metrics. HFM streamlines the collection, consolidation, and reporting of financialand non-financial information. The result is more control and consistency over financial and non-financial reporting, improved data integrity and audit trails, as well as savings in time, effort, and costs.HFM supports standardized consolidation and reporting processes in compliance with US GAAP, IFRS, and local statutory requirements. It provides inter company eliminations,multi-currency translations, and minority interest calculations, delivering them quickly andcost-effectively out of the box. HFM is comprised of entity structures which define the group structure, i.e., the management or statutory hierarchies of reporting units and a chart of accounts hierarchy, which maintains the relationship or roll-up of account lines used in management and statutory reporting.
DOCUMENT ATTACHMENTS
CORE CONSOLIDATION FEATURES
FLEXIBLE REPORTING
CUSTOM DIMENSIONS
GAAP IFRS
Flexible Rules Engine
Journal Entries and Audit
Enables tracking of GAAP vs. IFRS adjustments
Multiple reporting standards in a single solution
Creates “Electronic Binder” of all adjustments
Easy to reconcile and trend GAAP vs. IFRS results
Oracle Enterprise Performance Management Enable Top End IFRS Reporting
Lead slide for our EPM and IFRS presentation: happy to arrange a showing
IFRS Overview 183
Customization An IFRS-compliant consolidation model must be able to analyze results from different sets of GAAP, and report those results side by side with their quantified differences.
IFRS Overview 184
Multi-GAAP reporting compares results and quantifies the differences
IFRS Overview 185
Satisfy IAS 14: Segmented reporting with Oracle Hyperion Financial Management’s sub forms
IFRS Overview 186
Key capabilities of HFM
• Core consolidation features, such as a flexible rules engine and journal adjustments to support multi-GAAP reporting• Custom dimensions to roll up data under different reporting standards to easily track IFRS vs. GAAP adjustments• Document attachments feature that allows users to document the details behind adjustments. These then become part of an electronic briefing book which includes the original data, adjustments, and supporting details with full audit trails.• Flexible reporting tools which allow easy viewing, reporting and reconciling of your financial results under IFRS vs. GAAP Oracle Hyperion Financial Management integrates directly with Oracle and non-Oracle transactional systems and can be deployed quickly to address your Stage 2 transition requirements.
IFRS Overview 187
Oracle Governance, Risk, and Compliance
Oracle Governance, Risk, and Compliance (GRC) Applications provide a central documentation repository that aligns any changes to the business processes and the corresponding control policies to IFRS. Organizations can manage IFRS compliance documentation with the same platform they would use to manage compliance with SOX or environmental compliance regulations.
Specific IFRS features will be examined, such as Componentized Assets. In addition, this chapter will discuss the dual accounting and reporting capabilities of EBS.
GRC DOCUMENTATION REPOSITORY
Oracle Governance, Risk, and Compliance SuiteManage changes to policies and controls
COMPLIANCE WORKFLOW
Single subledger transaction creates multiple accounting representations
APPLICATION CONTROLS MONITORING COMPLIANCE DASHBOARDS
Automate steps to audit IFRS compliance
Record changes to business process due to IFRS
Control changes to ERP applications
Monitor status of testing and exceptions
Lead slide for our GRC and IFRS presentation: happy to arrange a showing
IFRS Overview 189
History of E-Business Suite Support for IFRS
Oracle has participated in the IFRS adoption process along with other software companies as members of an International Accounting Standards Board (IASB) System Company Discussion Group since its founding. Oracle’s accounting domain experts monitor developments in the regulatory environment to ensure our software reflects bestpractice and compliance.
Oracle E-Business Suite had customers reporting under the IFRS standards in the United Arab Emirates and in Switzerland in the early years of the twenty-first century with many customers doing so in the European Union, Australia, and other IFRS stock markets around the world.
IAS/IFRS SUPPORT SINCE 2000Thousands of customers overseas reporting under IFRS
ERP Products Designed for IFRSE-Business Suite, PeopleSoft, JD Edwards
SPECIFIC IFRS FEATURESSpecific functionality developed for IFRS
IFRS MIGRATION PATHMultiple Ledgers or Multi-GAAP
IAS 2 Inventory Inventory, CostingIAS 16 Property, Plant FA, ALMIAS 18 Revenue Rec. OM, AR, BI, CAIAS 21 Currency Multibook, MRC,GLMore…
Segments, etc.…
Flex / ChartFields…
• Asset Componentizationü Parent & Child Assetsü Child Depreciation rates differ
• Impairment Processingü Impairment identificationü Unplanned depreciation
Ledger Set/Code:
DifferencesExpanded COACalendarUSD
US PrinciplesExpanded COACalendarUSD
DUAL GAAP ACCOUNTING
GAAP
IFRS Overview 191
Familiar Features Support IFRS RequirementsMany external reporting features are not specific to IFRS but can be used to support IFRS. For example, Oracle E-Business Suite Release 12 includes Sub-ledger Accounting (SLA), a rules based accounting engine that can be used to ensure consistency with accounting and data gathering across the world, while at the same time recording transactions in compliance with local regulations. SLA allows companies to record thesame business transaction under multiple accounting conventions. For example, a supplier invoice to record the purchase of goods can simultaneously be recorded using three conventions: US GAAP, IFRS, and local statutory.There are many other features Oracle E-Business Suite customers will be familiar with that are currently used to support US GAAP environments. Some reconfiguration may be necessary to comply with IFRS principles. For example, Oracle Inventory supports a variety of inventory valuation methods. However, to comply with IAS 2, inventory cannot be valued using the LIFO method.
IFRS Overview 192
For “development” expenses, expenses that might have been expensed immediately under US GAAP would need to be posted to the balance sheet and later released onto the P&L according to the IFRS principles. Customers can comply with this IFRS principle by deploying Oracle Projects, creating cost centers on the balance sheet and using allocations to release the expense; they could also track the development costs into bills of material using Oracle Inventory. The appropriate choice will depend on the circumstances of the customer, the products involved, the underlying business process, etc.
IFRS Overview 193
Unique IFRS Features
IFRS does have some principles that translate into requirements that are not required by other GAAP or regulatory standards. Oracle E-Business Suite includes specific features designed to meet these requirements as well.
An important example of a feature not widely used outside of IFRS compliance is “componentized assets” where an asset is tracked by its components when those components have different useful lives, (e.g., roof, elevator and frame of a building may have different lives). Under IFRS, each component would be depreciated under its own useful life. Oracle Assets within Oracle E-Business Suite facilitates the grouping of child assets (depreciated separately) into parent assets (managed as one) and further into asset groups.
IFRS Overview 194
The process of deriving and populating the componentized asset values is quite an issue for many customers. In Europe, many had to use real estate appraisers and other asset valuation experts. Oracle provides spreadsheet integration that facilitates importing and updating the revised valuations of the individual components.
"As per my observation we can do componentized asset depreciation by using many segments/ separate segment value for each component (make component is another segment)" .
Another example is the IFRS approach to asset impairment. The IFRS valuation method is different from US GAAP, and the impairment can be reversed. Asset impairment in Oracle E-Business Suite accommodates both of these options.
1: IFRS Sub-ledger Data Capture in EBS
Relevant IAS & IFRS Principles
• IAS 02 Inventories• IAS 11 Construction Projects• IAS 16 PP&E• IAS 17 Leases• IAS 18 Revenue• IAS 19 Employee Benefits• IAS 23 Borrowing Costs• IAS 41 Agriculture• IAS 32 & 39, IFRS 07 & 09
Financial Instruments
• IFRS 04 Insurance Contracts
• Product Support§ Standard Features in
EBS GL & Sub-ledgers– Specific features in sub
ledgers and IBU offerings• Inventory• Receivables• Assets• Projects, HCM
– General support through the data model and with features like sub ledger accounting
IFRS Standards that require transaction level data tracking either in generic ERP or in Industry Specific products
Reconfigure Existing Features
• Using LIFO? Need to reconfigure for IFRS– Costing & Inventory support
Standard Cost Actual Cost
– Watch that inventory cost the same way worldwide
• Expensing Development? Need to capitalize for IFRS
– In GL, assign cost centers to balance sheet accounts– Use allocations or BoM to eventually bring to P&L– Or– In Projects, set up projects as Capitalized…
Special IFRS Sub ledger FeaturesAsset Componentization & Impairment
• IFRS unlike other GAAPs in the way it handles Assets• Componentization
– Assets componentized by “useful life” Needs Parent-Child asset feature– Generates many more assetsþ Need an API to import data from assessor, realtors, etc.þ Need to be grouped for ease of management
• Impairment• Impairment is costed differently• Can be reversedþ Need an impairment tool
2: Corporate Accounting for IFRS in EBS
Relevant IAS & IFRS Principles
• IAS 10 Post balance sheet • IAS 20 Government Grants• IAS 21 Foreign Currency• IAS 29 Hyperinflation• IAS 36 Impairment• IAS 37 Provisions, Contingent• IAS 38 Intangibles• IAS 40 Investment Property• IFRS 01 First Time Adoption• IFRS 05 Discontinued For Sale• IFRS 06 Mineral resources• IFRS 08 Operating segments
• Product Support§ In EPM– Model corporate adjustments§ Standard Features in
EBS GL & Sub-ledgers– Flexfields, segments and
other chart of accounts features
– Reporting Currencies & Revaluation for translation or re-measurement
– Multiple Ledgers– The Accounting Engine, SLA
Specifies the handling of major transactions & situations:
Approaching IFRS Compliance in ERPExample: IAS 21, Foreign Currency
• IAS 21 Summary (Converged with FAS 52)– Two routes from local accounting to shareholder currency:
“re-measurement” @ historic rates, “translation” @ current rates– Depending on the company’s circumstances and IAS 21 tests
• Product Support– R12 “Reporting Currencies” and “Revaluation” together designed to do both
IAS 21 and FAS 52 Re-measurement and Translation– The company chooses, at each overseas location:
• Transaction Level, if they need to manage the detail in home currency• GL Activity Level, if they populate a “fat GL” or analytic cube• GL Balance level, for a traditional statement oriented approach
– HFM also includes IAS 21 and FAS 52 capability
That is: 8 IFRS Compliant options at each location There are many ways to comply with IFRS in all product areas
3: IFRS Financial Statement Preparation in EBS
Relevant IAS & IFRS Principles
• IAS 01 Financial statements • IAS 27 Consolidate / Separate• IAS 28 Associates• IAS 31 Joint Ventures• IAS 33 Interims• IAS 34 EPS• IAS 07 Cash Flow Statements• IFRS 01 First Time Adoption• IFRS 03 Business
Combinations• SEC IFRS Regulations under
discussion
• Product Support§ In EPM– Hyperion Financial
Management– E-Business Suite OFA
§ Standard Features EBS GL & Sub-ledgers
– E-Business Suite General Ledgers
• Consolidation features like GCS
• Reporting features like FSG with BI Publisher
• Multiple Ledgers & Ledger Sets
Defines what’s included on Financial Statements, and how they should be presented; work done by CPAs in EPM or GL
IFRS Overview 201
Dual GAAP Reporting
One of the most commonly asked questions about IFRS in regards to ERP systems is “how is dual or multiple GAAP reporting supported?”
Oracle E-Business Suite Release 12 and 12.1 have powerful multiple ledger reporting supported by alternative accounting in sub-ledgers with which an IFRS company can automate dual GAAP reporting. Release 11 also supported dual GAAP capabilities but to a lesser degree. In addition, Oracle Hyperion Financial Management provides consolidation and reporting capabilities oriented to support dual GAAP reporting.
Approaching Dual GAAP Reporting
• Depends on the customer’s circumstances vis-à-vis IFRS & US GAAP
– Top Down approach in EPM Products– Bottom Up approach in ERP Products
• EPM Solutions– Ask if the legacy supports the IFRS functionality in Hyperion– Specific IFRS Dimensionality, IFRS rules engine, etc.– See our EPM show!
• ERP Solutions– EBS: SLA, Ledgers, Multiple Ledgers, Ledger Sets– PeopleSoft: Book Code, Multiple Ledgers, Multi-Book– JDE: Multiple Ledger Types
Balancing SegmentValue example: 99
• Manual Adjustment• Adjustment from sub-
ledger data• Recurring Adjustment
All other segments Ledger Total
Other R11 Multiple Compliance Tools
• AX, the Accounting Engine
• MRC Ledgers at FX rate = 1
• GCS Ledgers
R11 Dual Reporting exampleRelease 11 : Balancing Segment
R12 Dual Reporting : What’s different to 11Release 12: Sub-ledger Accounting, Multiple Ledgers, Ledger Sets
Subledger Accounting
Dr Cr
Operating Unit
Can choose to use:• A (full) Secondary Ledger
• Complete alternative accountingor
• An Adjusting Ledger, (or Segment)• Automatic business reconciliation• Fewer adjusting entries• Easier feed to Hyperion
Account Balance Debit Credit US GAAPDevelopment Expense 500,000 1,500 501,500 Employee Payables (100,000) 1,500 (101,500)
Adjusting Ledger AdjustmentCapitalized Development 500,000 1,500 501,500 Development Expense (500,000) 1,500 (501,500)
Ledger Set IFRSDevelopment Expense - 1,500 1,500 - Employee Payables (100,000) - 1,500 (101,500) Capitalized Deveopment 500,000 1,500 - 501,500
Primary Ledger
US PrinciplesExpanded COACalendarUSD
DifferencesExpanded COACalendarUSD
Ledger Set:
GAAP
Accounting
Primary Adjusting
R12 Dual Reporting ExampleRelease 12 : Adjusting Ledger in a Ledger Set
Adjusting Ledger• Automatic Adjustment
from subledger data• Recurring Adjustment• SLA Driven
Adjustments
Base Ledger Total Ledger Set Total
Ledger SetLedger 1 = BaseLedger 2 = Adjusting
Endgame: Adopting IFRS, walking away from GAAPA function of your Dual Reporting Choices
1. Many subsidiaries will retain GL and subsystems in compliance with either
• Statutory requirements (foreign subsidiaries)• Regulatory legislation (utilities, financial services, etc.)
2. Some will find that their existing GL is quite appropriate, but that they have a few subsystem areas that will require adjustment
3. Others will require that they need to do something more substantial, for example restructuring their business, up to the point of reimplementing
Hyperion
ERP GL Multi-GAAP Features
ERP Sub-ledgers
IFRS Overview 207
Macro-Level in EPM solution, Transaction-Level in E-Business Suite
During the comparative reporting period of the IFRS transition, companies will need to report under dual or multiple GAAPs. Depending on the complexity of the change from GAAP to IFRS compliance, the differences can be managed in a variety of ways.Customers will find themselves on a spectrum from a macro level approach to a detailed transaction approach when it comes to dual GAAP reporting. If a top-down approach is best, they can look to an Enterprise Performance Management (EPM) solution, such as HFM; whereas if a transaction level approach is more appropriate, they can address dualGAAP reporting within their ERP solution. Customers should work with their accounting compliance advisors to identify their circumstances and the appropriate approach.
IFRS Overview 208
To support multiple ledgers in Oracle E-Business Suite, Subledger Accounting will be used to automatically populate the necessary dual accounting entries. Ledgers with similar characteristics can belong to a “Ledger Set” which facilitates treating distinct ledgers as if they were one for reporting and accounting purposes. Together, these features provide powerful dual reporting capabilities.
Dual Reporting System Strategies
Your IFRS Situation
Syst
em C
hoic
es1 GL Onlyminor differences
GL& Adjustingeasy reconciliation
2 Distinct GLsover 50% different
New GLMajor difference
Re-implementNew ballgame
Structured for GAAP, not IFRS
IFRS facilitates WW system stratification
Many IFRS:US GAAP differencesLimited IFRS:US GAAP differencesGL for National or Regulatory compliance
Valuation different in IFRS
Complexity
Typical Considerations
System Choices:From “Top-down” through Multi-GAAP ledgers and sub-ledger reconfiguration, to the possibility of a do-over
= Companies migrating
HFM OnlyNon sub-ledger
IFRS Change Potential for Business Transformation
IFRS OK for SEC and for 60+ countries’ statutories
• Improve dramatically your reporting process, consistency, and management vision
• Consider instance, ledger, data consolidation
• Consider shared service accounting & reporting centers
IFRS book leases as liabilities
• Consider buying that fleet of planes you use
• Evolve your leasing revenue business to an equipment sales business
Capitalize R&D • Move those 2009 Development expenses to the Balance Sheet – recognize in P&L, matched to Revenue, in 2010- 2011
Transform Your Business & Win with IFRS Going beyond compliance
IFRS Overview
IFRS Overview 211
Q&A
IFRS Overview 212
Thank you
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