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IFRS Solutions CenterIFRS InsightsAchieving a global standardIFRS Conversion:Some Important Lessons LearnedInsights from those companies transitioning to IFRS nowLessons around IFRS conversion began to accumulate when Europe and Australiarequired IFRS for public companies in 2005. Now, as some global companies based inthe U.S. embark on their own IFRS efforts, the inventory of insights is growing—andbecoming more essential for executives to know.In this issue:IFRS Conversion: Top LessonsLearnedMaking It Happen: Teamingwith the Audit CommitteeTechnical Corner: IAS 38Featured StatsIFRS ContactsVolume 9, March 2009www.deloitte.com/us/ifrsIFRS Newsletter forU.S. CompaniesU.S. companies are presented with a unique opportunity to reconsider their existingfinancial reporting in addressing IFRS. And they have the advantage of learning fromcompanies that have already adopted IFRS. While some U.S. companies are makingenhancements and adjustments to their accounting policies and operations, othersmay just be learning about the importance of IFRS. But no matter what the stage,executives can benefit from knowing what works and what doesn’t.Here are some insights and practical considerations from companies implementingIFRS today that can be factored into IFRS planning going forward.Begin with accounting changes, but don’t stop there. While understandingthe accounting changes associated with a transition from U.S. GAAP to IFRS is anobvious starting point, companies should also consider focusing on operationaladjustments, including systems, tax, people, and process implications. Consider howan accounting change such as revenue recognition might impact the configuration ofyour ERP system. Once identified and understood, it may take several months of leadtime to make those system modifications. You’ll also want to consider developingIFRS budgets and forecasts in advance of the year the company officially converts inan attempt to avoid rework or “apples to oranges” comparisons. The sooner youknow what aspects may need changing, the better, in terms of planning, for how toeffectively make those changes.Be aware of financial statement presentation and disclosure differences— and what they mean for the enterprise. The differences between U.S. GAAPand IFRS for financial presentation and disclosure requirements can drive changesin systems, processes, and controls. For example, new or more detailed data maybe required, which may drive system and process changes — as in collecting moredetailed fixed asset information or developing additional ERP query capabilities.continued on next page1
IFRS Conversion: Some Important Lessons Learned (continued)Select the right project sponsor. It’simportant to identify a leader — perhapsthe Chief Accounting Officer or otherc-suite executive — who is wellpositioned within the organizationto help usher through IFRS changesthat require the help of the largerorganization. A project sponsor withwidespread influence and organizationalclout can help connect to other businessfunctions when there are IFRS-relatedchanges required. This becomesespecially important for a company thatmay have a dozen different IFRS workstreams that span across accounting, tax,systems, and controls.Involve your external auditor.Because IFRS is principles-basedaccounting — and not rules-based likeU.S. GAAP — there is a need for moreprofessional judgment. It’s important,therefore, that the conclusions bythe company and external auditorare aligned — especially before anyimplementation changes are made in theorganization. Make sure you’re on thesame page with your external auditor inaccounting conclusions — to help avoidpotential misunderstandings or rework.Decide on the “go-live” date. Muchof a company’s IFRS planning will likelybe determined around the date toofficially “go live” with IFRS. Once thisdate is set (or generally agreed upon),preparation efforts can be defined andpaced. Given the timing outlined in theSEC’s proposed IFRS roadmap, most largeU.S. companies would adopt IFRS by2014. In order to be ready, two years ofhistorical data will need to be provided.Companies that know when they’llswitch to IFRS then have the opportunityto begin collecting necessary data andincorporating operational changesin current systems and processes inadvance. For companies undergoing ERPsystems changes in the near term, they’llhave the opportunity to factor in IFRSchanges now – and consider whethersetting up a dual reporting capability forU.S. GAAP and IFRS would be beneficialor necessary. Clarity around timing canserve as a guiding force for the planningeffort.Establish a project managementoffice. As a central point ofcoordination, a project management2office can help facilitate the consistentapplication of accounting policy andchanges across a global enterprise.Providing streamlined support,one office can assist with issuingconsistent instructions, deployingstandard templates, and adhering toone company roadmap. For issues— such as leasing — that require asignificant amount of judgment, it’simportant that the established policyis broadly communicated throughoutthe organization so it can be appliedconsistently. Having one office may helpdrive consistent messaging about keyinformation and policies to the largerorganization.Learn from those companies thathave already converted to IFRS.U.S. companies have the advantage oflearning from companies in countries,such as those in Europe, that havealready converted to IFRS. Considerthese cautionary tales in an attempt toavoid common pitfalls and overcomechallenges. An example: In Europe, somecompanies opted to record top-sidedconversion adjustments – often relyingon manual changes and spreadsheets–which, in turn, led to errors, costlyrework, and other unintendedconsequences.Communication is king. Companiesshould not underestimate the needfor communicating with internal andexternal constituents regarding thechanges around IFRS. Developinginternal and external communicationstrategies, such as websites, blogs,and road shows, can help educateemployees, avoid confusion, and engagethe larger organization in the effort.Proactively and responsibly informinginvestors and analysts may help preventmisinterpretation and could contributeto the perception that the company isforward thinking.Notice opportunities forimprovements. While IFRS conversioncan involve a significant amount of work,there may be a unique opportunity tomake needed improvements in yourfinancial reporting and accountingoperations, systems, tax accountingand processes. As an organizationundertakes this type of change, it may beworthwhile to make overdue upgradesor enhancements that could significantlyimprove overall finance operations.Top 5-10 differences generate 90%of the work. Among the many issuesconsidered in planning an IFRS transition,there are often five to ten accountingand process issues that drive much ofthe effort. Development cost, fixedasset componentization, share-basedpayments, and dual reporting are someexamples of these key items. Determinewhich issues will be big for yourcompany to address. Once you identifythe issues that may require the mostattention, plan for the necessary leadtime so the organization can adequatelyprepare.Among the lessons learned from theEuropean experience were the following: The effort was often underestimated— The original misconception thatconversion was solely an accountingissue was replaced with a growingrealization that the initiative was largerand more complex. Projects often lacked a holistic approach— Because of the limited view citedabove, companies frequently didnot take the collateral effects intoconsideration, such as the impacts on IT,HR, and Tax. A late start often resulted in escalationof costs — Those few companies thatanticipated conversion and took stepsto prepare for it were often in muchbetter shape than those that did not.Companies that delayed their responseoften paid a price for it, in terms ofhigher costs and greater diversion ofresources. Many companies did not achieve“business as usual” state for IFRSreporting — The highest quality financialdata is obtained when companies fullyintegrate IFRS into their systems andprocesses. The compressed time framesoften precluded this possibility; instead,first-year financials were often producedusing extraordinary, labor intensive, andunsustainable measures. Several companies are only nowstarting to explore benefits from IFRSimplementation — Due to multipleconstraints, the first-year effort in the EUwas focused more on “getting it done.”Potential benefits in terms of reducingcomplexity, increasing efficiency,decreasing costs, and improvingtransparency had to be deferred.Source: Deloitte’s IFRS Industry series,providing resources that examine industryspecific issues related to IFRS.
Making It Happen:Teaming with the Audit CommitteeIFRS considerations for audit committeesChief Financial Officers have a centralrole to play in helping audit committeemembers prepare for and oversee an IFRStransition. This role includes explainingthe potential enterprise-wide costs andbenefits associated with a transition toIFRS, discussing the financial statementimpact associated with a transitionto IFRS, and working with the auditcommittee in determining accountingpolicies under IFRS. It also involvescollaborating with independent auditorsand working with management teams(e.g., tax, IT, human resource leaders) toaddress any issues that could possiblyundermine — or boost — the success ofthe IFRS effort.Active involvement from CFOs alsoincludes establishing appropriate buy-infrom audit committee members andhelping set the right tone at the top— as well as setting a timeline andbudget for transition. CFOs can startnow by discussing key questions with theaudit committee, which may ultimatelydetermine the organization’s adoptionapproach. For example, some keyquestions about processes, informationsystems and income tax considerationsinclude:Process and control implications:What processes or controls willneed to be changed or enhanced tocomply with IFRS requirements?Consider certain issues regarding theaccounting for Asset Impairments.Under U.S. GAAP, subsequent reversalsof impairment losses for all assets areprohibited. Under IFRS, impairment ofall assets (other than goodwill) must besubsequently reversed if certain criteriaare met. Companies will need to developprocesses and controls to monitorwhether or not subsequent changes haveoccurred in the underlying value of apreviously impaired asset which meet theimpairment reversal criteria. Furthermore,data capture for an asset’s recoverableamount may be detailed, which couldlead to potential information systemschanges.Other examples of accounting issuesthat potentially surface process andcontrol changes include Consolidation,Investments in Associates, andInvestments in Joint Ventures. Theunderlying basis for consolidationdiffers between U.S. GAAP and IFRS.U.S. GAAP provides two consolidationmodels depending on the type of entityinvolved (variable interest entity or votinginterest entity) whereas IFRS has a singleconsolidation model based on control.In addition, under U.S. GAAP, entitieswould generally not consider potentialvoting rights when determining whethercontrol, significant influence or jointcontrol is present. Under IFRS, companiesmust consider potential voting rights,such as put or call options, whenassessing whether control, significantinfluence or joint control exists if suchvoting rights are currently exercisable orconvertible and do not lack economicsubstance. Companies will need todevelop processes and controls to assesswhether or not an entity is consolidatedand to monitor potential voting rightsand whether or not they are currentlyexercisable or convertible.Systems issues: Are the currentinformation systems capable ofcapturing the information needed tocomply with IFRS requirements?Take Property Plant & Equipment as anexample that raises system questions.Under IFRS, depreciation is based on the“components approach,” meaning thateach part of an asset that is significantin relation to the total value and thathas a differing pattern of benefits oruseful life is depreciated separately.This may require enhancements to thecurrent fixed asset system in place tocapture additional levels of detail — ifthe components approach was not usedunder U.S. GAAP.are met. This may require enhancementsto the current information systems tocapture the information needed fortracking development costs for potentialcapitalization.Tax considerations: What are thepotential tax implications of aconversion to IFRS?An obvious accounting example thatraises tax questions is Income taxes. Theseveral accounting differences betweenIFRS and U.S. GAAP will likely impactthe starting point for the accountingof deferred income taxes as well aspotentially the current tax structure asa whole. Companies may also needto reconsider their global tax planningstrategies to best capture the benefits ofa conversion to IFRS.These are just a few of the key issuesCFOs and audit committees will needto think through carefully in conductingtheir IFRS assessments and planning.Collaboration and preparation will beessential. For more detailed informationin preparing for meetings on IFRS, accessthe Deloitte & Touche LLP publication,“IFRS Considerations for AuditCommittees.”2009 FAS 109 TrainingExpand your knowledgeAnother example: Intangible Assets.Under IFRS, expenditures related to thedevelopment phase of an internallygenerated intangible asset are capitalizedas an intangible asset if specified criteria3
Featured Stats:Preview of IFRS Pulse SurveyResultsThe IFRS Solution Center recently conducteda survey of financial executives to helpkeep companies current on the latestIFRS trends. Over 150 financial executivesresponded. The sample of survey respondentsincludes companies from various industriesincluding financial services; health servicesand government; consumer and industrialproducts; energy and resources; andtechnology, media, and telecommunications.Here we highlight some of the results.1 Seventy-five percent (75%) of respondentssupported or strongly supported amovement toward a single set of highquality accounting standards, such as IFRS.This show of support is noteworthy—ascurrent views toward IFRS evolve andfinancial executives consider the SEC’sproposed IFRS roadmap and timeline. Sixty-two percent (62%) of respondentsagreed or strongly agreed that the SECshould establish a date (the so-called “datecertain”) for requiring U.S. companiesto use IFRS. The data may suggest anemerging desire to diminish uncertaintysurrounding the timing for the acceptanceof IFRS in the U.S. Over half (56%) of financial executivessurveyed indicated that the SEC shouldextend the option for early use of IFRS toa broader group of U.S. companies thanoutlined in the current SEC roadmap. Sixty-one percent (61%) responded thatthat the SEC’s proposed requirement thatwould entail having companies maintainU.S. GAAP books on an ongoing basisuntil 2011, would decrease the likelihoodof companies electing the option of earlyconversion.Technical Corner: IAS 38Accounting for Intangible AssetsCompeting in an increasingly globalizedmarket necessitates that companiescontinuously innovate their products,services, and/or operations. Accountingfor research and development activitiesthat support innovation can havea significant impact on an entity’sfinancial statements. Although thegeneral requirements of amortizing anintangible asset with a finite life overits useful life and annually reviewing anintangible asset with an infinite life forimpairment are similar, there are severalkey differences between U.S. GAAP (SFAS142, “Goodwill and Other IntangibleAssets”) and IFRS (IAS 38, “IntangibleAssets”), including: Development Costs — U.S. GAAP inSFAS 2 “Accounting for Research andDevelopment Costs” requires researchand development activities to beexpensed with the exception of certaincosts associated with developinginternal use software. IAS 38 is similarto U.S. GAAP in that it requiresresearch activities to be expensed.However, an intangible asset shouldbe recognized if both of the followingcriteria are met:o It is probable that the expectedfuture economic benefits that areattributable to the asset will flow tothe entity.o The cost of the asset can bemeasured reliably.In other words, the entity shouldcapitalize development costs if it candemonstrate all of the following: Forty-three percent (43%) of financialexecutives described the proposed SECtimeline to be “about right”; while 13%indicated it wasn’t sufficiently aggressive.o Technical feasibility Sixty-four percent (64%) of respondentsstated that no budget has yet beenallocated for IFRS conversion, in contrast tothe quarter (25%) who have budgeted forassessment, readiness and other aspects ofconversion.o Ability to use or sell the intangibleassetComing soon: The report with survey resultswill be issued soon on www.deloitte.com/us/ifrs/library.14o Intent to complete the intangibleasseto Future economic benefitso Availability of adequate technical,financial, and other resources tocomplete development Revaluation of Intangible Assets– U.S. GAAP prohibits the revaluingof intangible assets thereby requiringthe cost model. Under IFRS, if thereis an active market for an intangibleasset, the revaluation model maybe used. While specific revaluationdates or periods are not required, arevaluation must be kept sufficientlyup to date so that the carrying amountof the asset does not differ materiallyfrom the fair value. Intangible assetscontinue to be amortized and testedfor impairment. Increases in an asset’svalue are credited directly to equity(“revaluation surplus”); however, tothe extent that the upward revaluationreverses a revaluation decrease for thesame asset previously recognized as anexpense, the increase is recognized inthe income statement. A revaluationdecrease is charged directly against anyrelated revaluation surplus for the sameasset. Any excess is recognized as anexpense.It is important for entities to be aware ofIAS 38 requirements when contemplatingan IFRS conversion. Implementationguidance within IFRS 1, “First-timeAdoption of International FinancialReporting Standards” prohibits usinghindsight to conclude recognition criteriahave been met. Therefore, in order tocapitalize development costs at the “asof date” the company needs to conclude1) that future economic benefits from theasset will flow to the entity and 2) it hasa reliable system for accumulating costsof internally generated intangible assets.As a result, diligent planning is necessaryduring first time adoption to recognizedevelopment costs at the openingbalance sheet date. Generally, the entitywill need to document its conclusionsas to the future economic benefit andits ability to strictly and reliably measuredevelopment costs well in advance ofthe transition date. A lack of planningcould lead to exclusion of developmentcosts from the opening balance sheet,which could have a significant impacton earnings in the year of adoption andsubsequent years.o Ability to reliably measure the costs.The Deloitte survey had over 150 respondents, which included financial professionals, CFOs and finance managers. Survey participants were selfselected, and responded through a web-based survey. The survey results are solely the thoughts and opinions of the survey participants and are notnecessary representative of the full population of companies.
To subscribe to IFRS Insights, please visit Deloitte’s subscription page and sign up or update your profile. You may also sign upby going to www.deloitte.com/us/ifrsinsights and clicking on the “Subscribe to IFRS Insights newsletters” link.IFRS ContactsJoel Osnoss — New YorkDeloitte & Touche LLP 1 212 436 3352josnoss@deloitte.comAlfred Popken — New YorkDeloitte & Touche LLP 1 212 436 3693apopken@deloitte.comSam Doolittle — San FranciscoD
Here are some insights and practical considerations from companies implementing IFRS today that can be factored into IFRS planning going forward. Begin with accounting changes, but don’t stop there. While understanding the accounting changes associated with a transition from U.S. GAAP to IFRS is an
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New IFRS Standards—IFRS 16 Leases Page 1 of 26 . Agenda ref 30E STAFF PAPER June 2019 IASB Meeting Project Comprehensive review of the IFRS for SMEs Standard Paper topic New IFRS Standards—IFRS 16 Leases CONTACT(S) Yousouf Hansye ykhansye@ifrs.org 44 (0) 20 7246 6470
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Analytic Geometry and Calculus I Exam 1 Practice Problems Solutions 2/19/7 Question 1 Write the following as an integer: 2log4(9) log2(5) We have: 2log4(9) log2(5) 2log4(9) 2log2(5) 5 2log4(9) 5 41 2 log 4(9) 5 4log4(9) 1 2 5(9)12 5(3) 15: Here we used the properties: a b c a ac; aloga(b) b; (ab) c abc (a )b: Question 2 Eliminate the parameter t to nd a Cartesian equation .
