Following are excerptions taken from WILEY – IFRS 2008 Interpretation and Presentation of IFRS.
While IFRS had been gaining adherents on a slow but steady pace for many years, 2005 was a true watershed in that over 7,000 publicly traded companies in nations of the European Union were required to begin reporting group (consolidated) financial statements using IFRS, vastly increasing the total number of companies world-wide employing international standards.
Other nations have recently either embraced IFRS, announced plans to do so, or are endeavoring to “converge” their national GAAP with IFRS.
The US standard-setting body, FASB, agreed on a program to converge with IFRS in 2002, and in the past several years a number of US GAAP standards have been modified to conform to their IFRS equivalents (and several international standards have been modified to converge to US GAAP equivalents, where that was deemed appropriate).
Most recently, the US securities regulatory authority, the SEC, has agreed to accept filings by foreign private issuers (i.e., foreign registrants in the US) with financial statements prepared in conformity with IFRS, making wider acceptance of IFRS in the US a near certainty – perhaps signaling the ultimate superseding of US GAAP by IFRS.
With this developments and prospective events in mind, IASB issued a comprehensive standard on “first-time adoption,” IFRS 1, in mid-2003.
When a reporting entity prepares its financial statements in accordance with international accounting standards for the first time, a number of implementation questions need to be addressed and resolved.
IASB’s predecessor standard setter, IASC, had provided only limited guidance on this matter, which was set forth in SIC 8. This was superseded by the more comprehensive standard, IFRS 1, First-time Adoption of IFRS. IFRS 1 differed in several important respects from SIC 8.
The word wide trend toward universal adoption of IFRS has continued, extending beyond the EU action of 2005. Several nations have since announced plans to drop existing national GAAP in favor of IFRS.
Canada will converge to or adopt IFRS by 2011 (Canadian GAAP is currently very similar to US GAAP), China is converging to IFRS beginning in 2007, and even Japan appears to be accelerating its IFRS converging efforts. Indonesia standard-setting body, IAI, is in the plan to convergence the Indonesian GAAP (PSAK) with IFRS by 2012. Many more countries in Eastern Europe, South Asia, and the Far East are planning to be included in the growing list of new converts to IFRS. It is within this context that IASB decided to promulgate a standard on this subject as its maiden pronouncement, notwithstanding the existing guidance on this topic (SIC 8).
IASB endeavored to provide a “stable platform” of standards, with few revisions and no new standards having near-term effective dates, in order to facilitate the transition process by EU-based public companies.
IASB has announced that any new standards to be issued in the near-term will likely have implementation dates of 2009 or later, and indeed subsequent pronouncements (e.g., revised IAS 1, IFRS 8) have 2009 mandatory effective dates, although earlier application is permitted. This was intended to provide a respite from the challenges of dealing with constantly evolving standards.
A proposed standard would remove the discussion of specific exemptions and exceptions, currently part of the body of IFRS 1, to appendices to the standard. Furthermore, exemptions would be categorized as either permanent (e.g., waiving the need to account for the liability component of compound financial instruments when the component is no longer outstanding) or temporary (e.g., certain requirements relative to applying fair value measurements to financial instruments).
If this is done, the temporary exemptions will be removed as they become no longer relevant (that is, as the passage of time makes these moot).
Current issues regarding on implementation of IFRS for U.S. GAAP
CFO.com in its August 27, 2008 article titled “The End of GAAP Could Begin Next Year” wrote that the Securities and Exchange Commission has raised the possibility that some U.S. publicly traded companies will be able to use international financial reporting standards next year.
Further, it reported that on Wednesday, the SEC commissioners proposed a timetable for transitioning all public companies from U.S. generally accepted accounting standards to IFRS within eight years, with the allowance for some companies to begin using the global rules earlier. If this so-called roadmap is approved, the SEC estimates that 110 companies would be eligible to use IFRS at the end of fiscal years ending after December 15, 2009, depending on their size and industry.
The roadmap further calls for the SEC to make a decision in 2011 regarding whether to require all of its registrants to use IFRS. The commissioners would base their decision on the progress made on, among other things, funding the International Accounting Standards Committee Foundation (which governs the International Accounting Standards Board), IFRS data tagging, and accounting education.
Here is the SEC Proposed Timeline for Moving Companies to IFRS :
1. End of 2009 – limited group of large companies given the option to use IFRS. SEC estimates 110 U.S. companies will be able to take advantage of the offer
2. 2011 – SEC evaluates the progress of achieving proposed milestones, and makes a decision about whether to mandate adoption of IFRS. If IFRS is mandated, the commission will develop a staged roll out, starting with the largest public companies first.
3. 2014 – Year the first wave of companies will be mandated to report financial results using international accounting standards, if IFRS requirements are adopted in 2011.
4. 2016 – Year that all public companies, big and small, will be mandated to report financial results using international accounting standards, if IFRS requirements are adopted in 2011.
Sources of this article : WILEY – IFRS 2008 the interpretation and application of IFRS and CFO.com (The End of GAAP Could Begin Next Year)
