Adoption of IFRS in U.S. - An Introduction

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Adoption of IFRS in U.S.- An Introduction
Sunil Thukral, CPA, CFA
Technical Accounting Advisory
Sunil.CPA.CFA@gmail.com

IFRS in U.S.

• Where are we today?
• Rules vs. Principles - exercise
• What can I do today?

© 2012 Proformative. Proprietary and confidential

SEC Roadmap on IFRS


Comments on SEC Roadmap for IFRS
convergence:

• Cost
– By far the two most common criticisms of the roadmap were the
cost of adoption and the belief that a more measured
convergence process was the best option.
• Convergence over Adoption
– Continued convergence was a better option than adoption,
mostly because fuller convergence between both sets of
standards would be less complex and less costly than IFRS
adoption.
• Consistency Not Guaranteed
– Geographic bias


Comments on SEC Roadmap for IFRS
convergence (Contd.):

• Specific Concerns by Specific Industries
– IFRS does not have any industry specific guidance.

• IASB Funding
– Is IASB really independent?

• What about Private Companies?
– Since the SEC regulates only public companies, comments also
pointed to concern that the SEC was not recognizing that most
companies in the U.S. are not SEC registrants (issuers).
Source: http://www.ifrs.com/updates/aicpa/IFRS_SEC.html


IFRS is impacting U.S. companies today!

U.S. companies need to understand the impact of IFRS:
• Convergence of accounting standards (leasing, revenue
recognition, and financial instruments)
• IFRS is impacting business decisions
– Foreign subsidiaries of U.S. companies might be required to
report under IFRS for their local filings
– U.S. companies making foreign acquisitions (targets reporting
under IFRS)
– U.S. subsidiaries of foreign parent are required to report under
IFRS.


Comparability of IFRS financials:

• IFRS as issued by IASB

• IFRS with Carve-outs
(e.g. EU version of IFRS)

• IFRS are principles based
rules. Hence, the
application of these rules
can be quite different as to
“who” applies them.
(e.g. geographic bias).

7

Which traffic light crossing will you prefer?

8

Rules Vs Principles exercise:
Sort the following shapes into two groups:


Sorted by shape

•A •B

11

Sorted by color:

•A •B

12

• By Color • By Shape

What if we add a green
colored circle – where
will it go?


Most people choose sorting by shape .Why?

•A •B

14

Additional Information – assume that:

Mixing BLUE (80%)
with
YELLOW (20%)
makes
GREEN
15

Based on fact green has more blue than yellow:

•A •B

16

IFRS in Canada -
17
Sunil.Thukral@theIFRS.com

Same facts can provide you with different
conclusions!

“But under a different accounting convention…..”
Source: cartoonstock.com

18 © 2012 Proformative. Proprietary and confidential

So, what does it all mean?

Applying different interpretation to
the same facts might result in a
different answer.

Reality check: Life for the
accountants will not become easy
when applying simple rules
(principles) to complex transactions
19

Revenue Recognition Exposure Draft

Over 100 glossary terms
deleted and replaced with
only approx. 9 items in the
new revenue recognition
exposure draft.

Slides Source: www.SVACPA.com


STEPS IN IMPLEMENTING IFRS –
A HIGH LEVEL APPROACH


IFRS will impact all the areas of your
businesses:

Graphic Source: kpmg.com


STEP 1 – REVIEW YOUR
BUSINESS


STEP 2 – IDENTIFY THE IFRS
THAT WILL HAVE MATERIAL
IMPACT

Identifying which IFRS impacting your
organization

• Determine the IFRS are converged / not-converged, etc.
(e.g. – leasing, revenue, business combination, etc.)
• Apply the summarized IFRS summarized checklist to
identify which IFRS will impact your entities.
• Document your findings
– maintain back-ups / draft preliminary white papers.


STEP 3 – DETAILED ANALYSIS


Detailed Analysis:

• Determine the STRATEGIC choices
• Update accounting policies
• System changes (IT)
• Review internal control over financial
reporting


IFRS in U.S. – Other challenges

• IFRS/ U.S. GAAP currently have a joint project
for development of the accounting
standards .. RESULT . many more
changes to come over in the next few years
(e.g.: Revenue recognition, leasing , financial
instruments).

Bottom line: IFRS is constantly changing – so need to
remain up to date with the changes!!

28

Tools to track your IFRS implementation:

• Regularly monitor the IFRS project:
– Excel spreadsheets or other project management software

Graphic source: www.SVACPA.com

• Conduct benchmarking
– www.DisclosureNet.com
– Search engines


THANK YOU!

30

QUESTIONS
QUESTIONS
Sunil Thukral, CPA, CFA
Sunil.CPA.CFA@gmail.com
LinkedIN: http://www.linkedin.com/in/sunilthukral
Proformative: http://www.proformative.com/questions/expert/sunil-thukral
Twitter: @SunilThukral

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