International Financial Reporting Standards

1. International Financial Reporting Standards IntroductionWhat’s being covered in Acct 315 versus

2. Where do IFRS come from? • International Accounting Standards Board (IASB) • Standards Advisory Council (SAC) • International Financial Reporting Interpretations Committee (IFRIC) • International Accounting Standards Committee Foundation (IASC Foundation)

4. HISTORY - IASC • 1973 - IASC formed • 1974 - First Exposure Draft published • 1995 - Agreement with IOSCO to complete core standards by 1999 • 1999 • IOSCO review of IASC core standards begins • IASC Board meetings opened to public observation

5. IOSCO – created in 1983 • The International Organization of Securities Commissions (IOSCO) • IOSCO is an international association of securities regulators • Evolved from a predecessor organization of securities regulatory agencies from North & South America (formed in 1974) • Now has 181 members that regulate more than 90% of the world’s securities markets • Recognized today “as one of the world’s key international standard setting bodies”

6. HISTORY - IASC • 2000 • IOSCO recommends that its members allow multinational issuers to use 30 IASC standards in cross-border offerings and listings • 2001 • Trustees announce members of the International Accounting Standards Board • European Commission presents legislation to require use of IASC Standards for all listed companies no later than 2005

9. Jurisdictions Using IFRS

10. Who uses IFRS? • In 2007, used by 15,000+ foreign companies • By 2011, used by 27,000+ foreign companies • Used by foreign subsidiaries of US-based multi-national corporations • Used by US firms that are subsidiaries of foreign corporation • Foreign registrants with SEC can file using IFRS (without reconciliation to US GAAP)

14. U.S. GAAP and IFRS Convergence: WhereAre We Now? • Boards have achieved “high-level” convergence in some areas • Examples include income taxes, business combinations, share-based payments, fair value option, EPS, statement of cash flows, pensions • Other areas, models are very different • Examples include debt/equity classification, impairment of long-lived assets

15. SEC “Roadmap” • Roadmap released in April 2005 • Intended to eliminate need for reconciliation between IFRS and U.S. GAAP by 2009 -- accomplished • SEC will continue to review IFRS primary financial statements of FPIs – not mutual recognition • Reaffirmed by SEC Chairman Cox and EC Commissioner McGreevy in February 2006 Elimination of reconciliation requirement for FPIs • Use of IFRS by Domestic Issuers – Concept Release

17. Why learning IFRS matters • SEC dropped Form 20-F reconciliation for adopters of ‘IFRSs as issued by the IASB’ • SEC taking steps to allow US companies to adopt IFRSs • AICPA moving to including IFRSs on CPA exam • AICPA has amended Ethics Rules 202-203 to refer to IFRSs • Big-4 firms have launched programs to help educators adapt to IFRSs

18. A few “big” differences you should know: • IFRS is less rule based and requires more judgment as compared to US GAAP (at least that’s the myth) • No LIFO permitted under IFRS • Revaluation above historical cost is permitted under IFRS • Biological assets (cows, trees, etc.) must be carried at fair value and reported separately • R&D – a portion can be capitalized rather than expensed

19. Financial Statements Arranged Differently Balance Sheet (assets)

20. Financial Statements Arranged Differently Balance Sheet (L&OE)

21. Income statement – similar to multi-step US GAAP statement • Differences: • No extraordinary items • Discontinued operations shown but some differences in the rules • Similarities • Earnings per share data is shown at bottom • Salaries, depreciation, etc. instead of broad functional area like “selling and administrative”