Post on 24-Apr-2018
International Financial Reporting
Standards:Strategies For Adopting a Single Set of Standards
Driving Enterprise Value Presents:
D.J. Gannon, Deloitte & Touche LLP
Joel Osnoss, Deloitte & Touche LLP
February 20, 2008
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Shareholder Value
Revenue GrowthOperating Margin
(after taxes)Asset Efficiency Expectations
VolumePrice
Realization
Selling,General &
Administrative(SG&A)
Cost of GoodsSold
(COGS) Income Taxes
Property, Plant& Equipment
(PP&E)Inventory
Receivables& Payables
Company
Strengths
External
Factors
Product &Service
Innovation
Marketing &Sales
Product &Service
Innovation
Retention
AccountManagement
Cross-Sell/Up-Sell
Cash/AssetManagement
Demand &Supply
Management
PriceOptimization
IT, Telecom &Networking
Real Estate
Human Resources
Procurement(Excluding
Production Materials & Merchandise)
Business Management
Financial Management
Finished Goods
Work inProcess &
Raw Materials
OperationalExcellence
Partnership &Collaboration
RelationshipStrength
StrategicAssets
Accounts,Notes
& Interest Receivable
Accounts,Notes
& Interest Payable
Equipment &Systems
RealEstate & Infrastructure
Agility&Flexibility
BusinessPlanning
Governance
Program Delivery
BusinessPerformanceManagement
Logistics &Distribution
Merchandising
ServiceDelivery
ImproveDevelopment &
ProductionEfficiency
Product Development
Materials
Production
Income TaxManagement
ImproveCorporate/
Shared ServiceEfficiency
Marketing &Advertising
Sales
CustomerService &Support
OrderFulfillment &
Billing
Retain andGrow CurrentCustomers
Strengthen Pricing
LeverageIncome-
GeneratingAssets
ImproveInventoryEfficiency
ImproveExecution
Capabilities
Improve Income Tax
Efficiency
Improve Managerial &GovernanceEffectiveness
ImprovePP&E
Efficiency
ImproveLogistics &
Service ProvisionEfficiency
Improve Receivables &
Payables Efficiency
ImproveCustomerInteractionEfficiency
Acquire NewCustomers
Welcome to the Next Episode in “Driving Enterprise
Value”
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Agenda
• IFRS background and update
• Why are U.S. companies considering IFRS?
• A case study
• Final thoughts
Copyright © 2008 Deloitte Development LLC. All rights reserved.
IFRS Today and Tomorrow
• Today IFRS is used in over 100 countries
–Required across all EU countries, starting in 2005
–Large countries like Brazil, Canada and India have
announced mandated adoption
• By 2011, it is expected that
–All major countries will have adopted IFRS to some extent
–China and Japan will be substantially converged to IFRS
–Substantial majority of Global Fortune 500 will report
under IFRS
–U.S. public companies will likely have the option of using
either IFRS or U.S. GAAP
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Regulatory Developments
• Ongoing evolution of regulatory practices around
the globe
–Movement towards mutual recognition of financial
reporting frameworks
• Greater scrutiny of IFRS financials
–Presentation and disclosure are significant areas of focus
across industries
–Focus on understanding judgments used and
assumptions made in applying IFRS
• Greater cooperation on IFRS application issues
–SEC/CESR work plan
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Principles-based Approach
• Greater emphasis will be on interpretation and
application of principles
• Need to assess the “substance” of transactions
–Evaluate whether the accounting presentation reflects the
“economic reality”
–Companies will need to do a “reality check”
• Renewed focus on use of professional judgment
• Greater use of fair value as a measurement basis
• Comparability versus uniformity
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Poll Question #1
Principles-based judgments should play a more
important role in the application of accounting and
financial reporting standards than adherence to
bright-line rules.
–Strongly agree
–Agree
–Neither agree nor disagree
–Disagree
–Strongly disagree
–Don’t know / not applicable
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Drivers of Interest in IFRS
• Industries dominated by non-U.S. companies
–Financial services, pharmaceuticals, energy & resources,
certain technology and manufacturing sectors
• Fear of “the other guy” adopting
• Cross-border M&A transactions
–Acquisitions of foreign companies using IFRS
–Targets of foreign companies using IFRS
– Investments in joint ventures
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Poll Question #2
What do you see as the most significant
obstacle/reason for not adopting IFRS?
• Total cost of education and/or conversion
• Your competition does not use IFRS
• Lack of a consistent IFRS application globally
• IFRS is not as comprehensive as U.S. GAAP
• IFRS is not viewed as acceptable as U.S. GAAP by
investors and analysts
• Don’t know/not applicable
Copyright © 2008 Deloitte Development LLC. All rights reserved.
You May Already Be Using IFRS
• Your subsidiaries may already file IFRS financials
–More countries are considering IFRS
–Publicly available financial information
–More disclosure than before
• Are you tracking statutory reporting?
–Who is ensuring accuracy and consistency?
• IFRS is inevitable in the U.S.
–Consider building the foundation now if there is a
business case
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Poll Question #3
Your company has centralized visibility over statutory reporting requirements that govern non-U.S. subsidiaries.
• Strongly agree
• Agree
• Neither agree nor disagree
• Disagree
• Strongly disagree
• Don’t know/not applicable
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Case Study: Laying the Groundwork
• Created a Steering Committee
• Implemented a project management office (PMO)
and assembled a working group
• Full participation of company, advisors and auditors
• Internal communications set the tone
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Case Study: Initial Assessment
• Statutory reporting – questions asked
– In how many different countries and GAAPs do we report?
–What is the risk of getting statutory reporting wrong?
–Where we are adopting IFRS as our local GAAP, how
confident are we?
–How many GAAPs could we replace with IFRS?
–Where do we place significant reliance on external firms?
–How much does statutory reporting cost us and can cost
be reduced?
• Consolidated reporting – how do we prepare for the
inevitable?
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Case Study: Centralized Activities
• Formulated a long-term strategy
• Held kick-off meetings and training sessions
• Evaluated policy alternatives
• Developed solutions to GAAP differences and issues
• Created tools
• Developed policies and procedures
• Began assessing optional countries
• Began assessing potential global impacts
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Case Study: What Was Learned
Challenges Benefits
• Uncertain future enforcement
• Cultural bias and other change
management challenges
• Possible effects on tax structures and
covenants
• IFRS: more complex and restrictive than former local statutory GAAPs
– Statutory reports in many countries can be
accessed by the public
• Standardized and improved
accounting and reporting policies
• Availability and more efficient usage of resources
• Improved controls
– Statutory reports often prepared
based on manual conversion from
U.S. GAAP
• Better cash management
– Consistent standard across
countries can help improve cash
flow planning
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Poll Question #4
If given a choice between U.S. GAAP and IFRS for
U.S. reporting purposes, your company would
consider adopting IFRS.
• Strongly agree
• Agree
• Neither agree nor disagree
• Disagree
• Strongly disagree
• Don’t know/not applicable
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Final Thoughts
• IFRS has become a dominant force globally and is
coming, sooner or later, to the U.S.
• Global transition to IFRS has current implications
for statutory reporting obligations of MNCs
–Requirements to report under IFRS for statutory reporting
–Opportunities to use IFRS for statutory reporting
–Local GAAP may be substantially the same as IFRS
• IFRS can significantly improve global reporting
processes
• A significant number of U.S. companies are
planning for the adoption of IFRS
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Poll Question #5
Your company has an adequate number of personnel
who collectively have a level of IFRS knowledge
sufficient to convert to and maintain IFRS financial
statements.
• Strongly agree
• Agree
• Neither agree nor disagree
• Disagree
• Strongly disagree
• Don’t know/not applicable
Join us March 19th at 3PM ET as
our Driving Enterprise Value series
presents:
Mergers and Acquisitions: What
CFOs Should Consider Asking
Before the Deal Is Done
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Thank you for joining
today’s webcast.
To request CPE credit,
click the link below.
Copyright © 2008 Deloitte Development LLC. All rights reserved.
Contact Information
D.J. Gannon
Deloitte & Touche LLP dgannon@deloitte.com
Joel Osnoss
Deloitte & Touche LLP josnoss@deloitte.com
Copyright © 2008 Deloitte Development LLC. All rights reserved.
The information contained in this publication is for general purposes only and is not
intended, and should not be construed, as legal, accounting, or tax advice or
opinion provided by Deloitte to the reader. This material may not be applicable or
suitable for, the reader’s specific circumstances of needs. Therefore, the
information should not be used as a substitute for consultation with professional accounting, tax, or other competent advisors. Please contact a local Deloitte
professional before taking any action based upon this information.
Copyright © 2008 Deloitte Development LLC. All rights reserved.
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