An IFRS Overview with Peter Thatcher BSc FCA Whats on the agenda? - - PowerPoint PPT Presentation

An IFRS Overview

with Peter Thatcher BSc FCA

What’s on the agenda?

• What does ‘complying with IFRS’ mean?
• Who uses IFRS?
• Who is involved in the standard setting process?
• What IFRS and IAS are currently in issue?
• What are the IASB’s plans for future standards?
• Where can you find out more?

What does ‘complying with IFRS’ mean?

Complying with IFRS

• IAS 1 requires entities whose financial statements comply with

IFRS to make an explicit and unreserved statement of such compliance in the notes

• Financial statements should not be described as complying

with IFRS unless they comply with all applicable requirements

IFRS defined

• IAS 1 defines IFRS as standards and interpretations issued by

the International Accounting Standards Board which comprise:

– International Financial Reporting Standards – International Accounting Standards – IFRIC Interpretations – SIC Interpretations

Who uses IFRS?

The aim of the IASB

• To develop a single set of high quality, global accounting

standards that require transparent and comparable information in general purpose financial statements

The benefits of IFRS

• Transparency
• Accountability
• Efficiency

Who uses IFRS?

• 126 jurisdictions require IFRS to be used by all or most

domestic publicly listed companies

– Another 12 jurisdictions permit the use of IFRS by these companies

• The IFRS Foundation website (ifrs.org) contains profiles of 150

jurisdictions which highlight:

– Each jurisdiction’s commitment to global financial reporting standards and – The extent of IFRS application in that jurisdiction

European Union

• IFRS (as adopted by the EU) are required for the consolidated

financial statements of all European companies whose debt or equity securities trade in a regulated market in Europe

• Individual member states may also require or permit IFRS for:

– Small securities exchanges that are not deemed regulated markets – Separate financial statements of companies whose securities trade

• n a regulated market

– Consolidated and separate financial statements of companies whose securities do not trade on a regulated market

United States

• Since 2002, the IASB and FASB agreed to work together to

remove differences between IFRS and US GAAP

– This was addressed in a Memorandum of Understanding (Norwalk Agreement)

• US companies whose shares are traded in a public market are

not permitted to use IFRS

• Other US companies may in certain circumstances use IFRS
• Foreign companies whose shares are traded in a public market

are permitted to use IFRS

Who is involved in the standard setting process?

Key bodies

Monitoring Board IFRS Foundation 22 trustees Provide governance and oversight of the IASB Oversee trustees and approve their appointment IASB IFRS Interpretations Committee 14 members Responsible for the approval of standards, exposure drafts and interpretations 14 voting members Supports IASB Responds to questions about application of standards

Other bodies

• IFRS Advisory Council

– Provides advice and counsel to the IASB and the Foundation Trustees

• Accounting Standards Advisory Forum

– Supports the Foundation and facilitates technical discussions on standard-setting issues

• Standing consultative groups
• Transition resource groups

Including amendments to standards

An overview of the standard setting process

Agenda consultation

• Every five years, the IASB conducts a comprehensive review

and consultation to define the standard-setting priorities and develop its project work plan

– Topics may be added to the work plan between agenda consultations

Research

• Consider the issues
• Identify possible solutions
• Develop and issue for public comment a discussion document
• Consider the comments received on the discussion document

within the consultation period

• Decide whether to progress to developing a new standard

Developing a standard

• Develop and issue for public comment an exposure draft

– Include any dissenting opinions of IASB members – Include a basis for conclusions and alternative views of any IASB member who opposes publication

• Consider comments received on the exposure draft within the

consultation period

• Hold public hearings and conduct field tests as required
• Make amendments to the exposure draft as required

Issuing a standard

• Approval is required by nine members of IASB (if fourteen

members)

– The standard specifies the effective date – The standard is accompanied by:

• The basis for conclusions (including an effect analysis) and
• The details of any dissenting opinions of IASB members

What IFRS and IAS are currently in issue?

Overview

• Effective for accounting periods commencing on or after 1

January 2018

– 26 IAS – 15 IFRS

• Plus IFRS for SMEs

– 22 Interpretations

IAS effective for accounting periods commencing on or after 1 January 2018

IAS 1 Presentation of financial statements IAS 2 Inventories IAS 7 Statement of cash flows IAS 8 Accounting policies, changes in accounting estimates and errors IAS 10 Events after the reporting period IAS 12 Income taxes IAS 16 Property, plant and equipment IAS 17 Leases IAS 19 Employee benefits

IAS effective for accounting periods commencing on or after 1 January 2018

IAS 20 Accounting for government grants and disclosure of government assistance IAS 21 The effects of changes in foreign exchange rates IAS 23 Borrowing costs IAS 24 Related party disclosures IAS 26 Accounting and reporting by retirement benefit plans IAS 27 Separate financial statements IAS 28 Investments in associates and joint ventures IAS 29 Financial reporting in hyperinflationary economies

IAS effective for accounting periods commencing on or after 1 January 2018

IAS 32 Financial instruments: Presentation IAS 33 Earnings per share IAS 34 Interim financial reporting IAS 36 Impairment of assets IAS 37 Provisions, contingent liabilities and contingent assets IAS 38 Intangible assets IAS 39 Financial instruments: Recognition and measurement IAS 40 Investment property IAS 41 Agriculture

IFRS effective for accounting periods commencing on or after 1 January 2018

IFRS 1 First-time adoption of IFRSs IFRS 2 Share–based payment IFRS 3 Business combinations IFRS 4 Insurance contracts IFRS 5 Non-current assets held for sale and discontinued operations IFRS 6 Exploration for and evaluation of mineral resources IFRS 7 Financial instruments: Disclosures IFRS 8 Operating segments

IFRS effective for accounting periods commencing on or after 1 January 2018

IFRS 9 Financial instruments IFRS 10 Consolidated financial statements IFRS 11 Joint arrangements IFRS 12 Disclosure of interests in other entities IFRS 13 Fair value measurement IFRS 14 Regulatory deferral accounts IFRS 15 Revenue from contracts with customers

IFRS in issue at 1 January 2018 but not yet effective

IFRS 16 Leases Effective for periods commencing on or after 1 January 2019 IFRS 17 Insurance contracts Effective for periods commencing on or after 1 January 2021

Conceptual Framework

• It sets out the concepts that underlie the preparation and

presentation of financial statements for external users

• It deals primarily with:

– The objective of financial reporting – The qualitative characteristics of useful financial information – The definition, recognition and measurement of the elements of financial statements

The purpose of the Conceptual Framework (1)

• To assist the IASB in the development of future IFRS and in its

review of existing IFRS

• To assist the IASB in promoting harmonisation of regulations,

accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by IFRS

• To assist national standard-setting bodies in developing

national standards

The purpose of the Conceptual Framework (2)

• To assist preparers of financial statements in applying IFRS and

in dealing with topics that have yet to form the subject of an IFRS

• To assist auditors in forming an opinion on whether financial

statements comply with IFRS

• To assist users of financial statements in interpreting the

information contained in IFRS financial statements and

• To provide information about the IASB’s approach to the

formulation of IFRS

What are the IASB’s plans for future standards?

IASB’s work plan

• Based on the agenda consultation
• Regularly updated
• Key projects include:

– Conceptual framework – Primary financial statements – Principles of disclosure – Goodwill and impairment

Where can you find out more?

Useful websites

• IFRS Foundation

– www.ifrs.org

• European Financial Reporting Advisory Group

– www.efrag.org

• Large accounting firms, for example:

– www.iasplus.com

• Accounting bodies, for example:

– www.icaew.com

Thank you for listening