Transcript IFRS Adoption and Implementation

International Financial Reporting Standards
IFRS Adoption and
Implementation in the World
and in Latin America
Seminario IFRS
Colombia
November 2011
Amaro Gomes IASB member
Jan Engstrom IASB member
IFRS Foundation
The views expressed in this presentation are those of the presenter,
not necessarily those of the IFRS Foundation or the IASB
© 2010 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Agenda
• Introduction
• Global convergence:
Progress and challenges
• Implementing IFRS and IFRS
for SMEs
IFRS South America Conference (Sao Paolo) October 2011
2
International Financial Reporting Standards
Global convergence:
Progress and challenges
Jan Engstrom
July 2011 Project update and the future work plan
The IFRS Objective
IFRS to be :
•the single set of accounting standards
•used worldwide
•providing high-quality,
•transparent
•and comparable information
For investors and other users of financial
information
© 2010 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
4
IFRS around the World today
120(+) countries permit or require use of IFRS
70 (+) countries use the IFRS for SME
5
6
© 2008 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Why IFRS?
7
?
Why IFRS?
Investors are acting on
a global market !!
8
Why IFRS?
• National standards don’t work on a global
market
• Cross boarder business is hindered by
national standards
9
Benefits to Capital Markets!
• Credibility of local market to foreign investors
• More cross-border investment
• Efficient capital allocation
• Comparability across political boundaries
• Facilitates global education and training
10
Benefit to companies!
• Lower cost of capital
• Facilitates raising capital abroad
• Integrated IT systems
• “One set of books” + easier consolidation
• Better understanding of financial statements
from business partners abroad
11
FASB/IASB Agreement - 2002
• Remove major differences
• Align Agendas (new joint standards where
significant improvement required)
• Interpretation
12
IFRS – FASB Convergence Process
13
2001 – 04
Reaction to investor desire for
improved, global standards
following Asian crisis and US
financial scandals
IASB is established; enters Norwalk
Agreement with FASB
2005 – 07
Growing IFRS adoption by major
economies; continued US support
and recognition of IFRSs as being
high-quality standards
MoU accelerating convergence
2008 - 09
Financial crisis; G20 pressure for
convergence leading to adoption;
focus on remaining major joint
projects
Updates to MoU with 2011 targets
and SEC roadmap
2010 - 2011
MoU timetable adjusted to ensure
critical issues are completed.
Further SEC update to roadmap
© 2010 IASC Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.iasb.org
SEC removes reconciliation
requirement
Modified convergence strategy
prioritizes major projects for
completion
G20 Summit – 25 September 2009
14
• Redouble efforts to:
– achieve a single set of high quality, global accounting standards
within the context of their independent standard setting process
– complete convergence project by June 2011.
• IASB’s institutional framework should further enhance the
involvement of various stakeholders.
• G20 acknowledge that there could be differences between capital
requirements and accounting rules
MoU projects completed in 2011
• Consolidations / Joint Ventures
• Pensions
• Fair Value Measurement
15
Challenges ahead
16
• Political turbulence
• Implementation issues
• Governance
• Funding
• Acceptance of an independent global standard
setter and its work program
International Financial Reporting Standards
Implementing IFRS and IFRS
for SMEs
Amaro Gomes
July 2011 Project update and the future work plan
Implementing IFRS: Few current
important debates
• 1. Transparency v Financial Stability
• 2. Ideology
– Fair value v historical cost
– IFRS v US GAAP
– Performance presentation
• 3. IFRS – international or regional?
• 4. ADOPT don’t ADAPT
• 5. Principles v rules
18
Principle-based standards
Principles
19
Rules
A principle based standard
• No exceptions
• Core principles (objectives)
• No inconsistencies
• Tied to conceptual framework
• Judgement
• Minimum guidance
20
Implementing IFRS: Challenges
 Commitment => Decision: leaders, law, regulation
 Responsibility
 Stakeholders involvement
 Strategic planning: date for adoption
 Opportunity (economic) : investors apetite,
expansion (emergent markets), demand for
investments (eg. infrastructure)
© 2010 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Implementing IFRS: Challenges
 Solid financial system
 Structure and expansion of capital markets ...
 Coordination: standards setter, regulators, and
supervisors (internal and regional)
 Training
 Educational programs
© 2010 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Implementing IFRS: Challenges
 Divergencies between local GAAP and IFRS:
identify and reduce assymmetries
 Consistent application of IFRS: principles- versus
rules-based => professional judgment
 Transition: systems, processes, professionals
 Actively participate in developing IFRS
 Tax neutrality (identified as key in many countries)
© 2010 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Implementing the IFRS for SMEs
24
Good Financial Reporting Made Simple.
• 230 pages (full IFRSs are 3,000+)
• Simplified IFRSs – built on an IFRS foundation
• Specific for SMEs
– User needs for information about short-term
cash flows, liquidity, and solvency
– Costs and SME capabilities
Copyright © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH UK | www.ifrs.org
Who is the Standard aimed at?
25
Millions of companies (over 99%)!
• 52 largest stock exchanges have about 50,000
listed companies
• Europe: 28 million SMEs
• USA: 25 million
• UK: 5 million
• Chile: 1 million
• Brazil: 6 million
Copyright © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH UK | www.ifrs.org
Jurisdiction plans for adoption
26
Today (December 2011), to the best of our
knowledge:
– 74 jurisdictions have either adopted
the IFRS for SMEs or stated a plan to
adopt it within the next three years
– This includes in Latin America…
Copyright © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH UK | www.ifrs.org
IFRS for SMES: Plans for adoption in
Latin America
27
• South America: Argentina, Brazil, Chile, Guyana,
Peru, Suriname, Venezuela
• Caribbean: Antigua & Barbuda, Aruba, Bermuda,
Bahamas, Barbados, Cayman, Dominica, Dominican
Republic, Guadeloupe, Jamaica, Montserrat, St KittsNevis, St Lucia, Trinidad
• Central America: Belize, Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua, Panama
Copyright © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH UK | www.ifrs.org
The future
28
2010
IFRS in +120 countries and US
convergence programme
201?
IFRS in +150 countries and US
broadly converged
Vision
A single set of high quality global
accounting standards
Thank you. Questions or comments?
Expressions of individual views
by members of the IASB and
its staff are encouraged.
The views expressed in this
presentation are those of the
presenter.
Official positions of the IASB on
accounting matters are determined
only after extensive due process
and deliberation.
© 2010 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
29