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Slide 1: International Financial Reporting Standards The Enduring Need for Strong International Standards Jan Engstrom Sao Paulo September 2009 The views expressed in this presentation are those of the presenter, not necessarily those of the IASC Foundation or the IASB
Slide 2: The Vision single set of high 2 …one quality global standards.. ..used on the global capital markets.
Slide 3: Benefits to Capital Markets 3 • Credibility to foreign investors • More cross-border investment • Efficient capital allocation • Facilitates global education and training … and benefits to companies
Slide 4: International Monitoring Board IASB structure International Accounting Standards Committee Foundation Trustees 4 Standards Advisory Council International Accounting Standards Board Staff: technical 50 + admin 30 IFRIC Working Groups Education XBRL Publications Operations
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Slide 6: The world’s stock markets (US$ trillion) 70 6 60 50 40 30 20 10 0 2005 2006 2007 2008 2009
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Slide 8: The Financial Crises • Financial Stability Board – Reasons leading to the crises – Actions needed 8 • G20 – Basically same conclusions • Politician’s and regulator’s supervision failed – Bonus systems – Risk acceptance – Decapitalising
Slide 9: The Financial Crises – IASB actions • Guidance – Fair values in illiquid markets • Financial Crises Advisory Group • Reclassification of financial instruments • ED consolidations / ED derecognition • FASB changed impairment rules • G20 November 08 / April 09 • Replacement of financial instruments standard (#39) 9
Slide 10: Replacement financial instruments standard (#39) - timetable Project phase 1. Classification and measurement 2. Impairment methodology 3. Hedge accounting 10 Exposure Draft July 2009 Finalisation In time for 2009 year end financial statements In 2010 October 2009 December 2009 In 2010 * The above is in addition to a project on derecognition of financial instruments. ED Derecognition was published in March 2009. 2008 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org
Slide 11: Overview of model Basic loan features Managed on a contractual yield basis 11 + Amortised cost (one impairment method) FVO for accounting mismatch (option) All other instruments: • Equities • Derivatives • Some hybrid contracts Fair Value (= no impairment) Equities: OCI presentation available (option) 2009 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org
Slide 12: IASB Focus today • The Financial Crises • 2011 • SME • Translations • Constitutional review • Agenda 2012 and forward 12
Slide 13: Due process 13 Discussion Comment analysis Paper Exposure Comment analysis Draft Standard Effective Date and local approval process! Research National Standard Setters Others
Slide 14: Principle-based standards 14 Principles Rules
Slide 15: A principle based standard • No exceptions or inconsistencies • Core principles • Tied to conceptual framework • Judgement • Minimum guidance • Few interpretation 15
Slide 16: The Agenda • Conceptual framework • Revenue recognition • Financial Statement Presentation • Liabilities • Insurance • Fair value measurement • Common control • Emission rights trading • • • • • 16 Leasing Pensions Consolidations Management Commentary Small and Medium sized entities • Financial instruments • Short term converg.x 4
Slide 17: The Agenda – together with FASB • Conceptual framework • Revenue recognition • Financial Statement Presentation • Liabilities • Insurance • Fair value measurement • Common control • Emission rights trading • • • • • 17 Leasing Pensions Consolidations Management Commentary Small and Medium sized entities • Financial instruments • Short term converg.x 4
Slide 18: After approval of standard 18 • >1 year after publication before implementation • Review 2 years after implementation
Slide 19: Roadmap: “MOU 2006” 1. Short term - remove major differences 1. Medium term 19 - new joint standards where significant improvement required
Slide 20: US SEC Changes: - Regulation: removal of reconciliation 2007 - Concepts Release: IFRS available to US companies? 20
Slide 21: IFRIC Agenda Decisions • Submissions considered by staff and recommendation made to IFRIC 21 • Tentative decisions published in IFRIC Update for comment • Final decisions published and included permanently on website
Slide 22: Annual Improvements - for non-urgent, minor amendments • Purpose—practical expedient – Resolve inconsistencies between standards – Clarify unclear wording • Process – Annual ED – 90 day exposure – 12 month effective date • Benefits – Improved use of constituents’ and IASB’s time 22
Slide 23: Translations • The IFRSs are translated to 50 languages • One translation per language • Now a special focus on Spanish: – Improved availability – All IASB’s documents (=DP, ED, IFRS, IFRIC) – An enlarged translation committee 23
Slide 24: 24 • A codification used to electronically exchange financial information between businesses and users • The IASC Foundation develops the IFRS Taxonomy (also for SMEs) which is the XBRL representation of the IFRSs © 2008 IASC Foundation. First Floor | 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
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Slide 26: IFRS for SMEs 26 • < 50,000 listed companies in the world • Millions of SMEs – Suppliers, distributors, customers, ..
Slide 27: The Final IFRS for SMEs Good Financial Reporting Made Simple. 27 • 230 pages • Simplified IFRSs - built on an IFRS foundation • Suitable for entities that are not listed and not financial institutions • Standalone product that sits side-by-side with the full set of IFRSs
Slide 28: Two general problems for IASB • Principles v rules • Acceptance of Standards – EU?! – SEC! – Japan? – Others?? 28
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