Nick Difazio
Partner – National IFRS PMO
Deloitte & Touche LLP
Ben Resch
Partner – Regional IFRS PMO
Deloitte & Touche LLP
Americas' SAP Users' Group – Chicago
April 16, 2010
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Canada
2009*/2011
United States
2009‒14
Europe
2005
India
2011
China
2007
Japan
2010*/2015
Mexico
2012
Brazil
2010
Adopted or will adopt
Developing plans to adopt
Chile
2009-11 Argentina
2012
South Africa
2005
Australia
2005
No plans or unknown
* Early adopters
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Global use
— Used in over 100 countries by more than 40% of the Global Fortune 500
• Current: European Union (EU) countries, Hong Kong, Australia, New Zealand and many Middle East and South American countries
• Future: Chile (2009); Brazil (2010); Argentina, Canada, India and South Korea (2011); Mexico (2012), Japan early adopters
(2010)
• Proposed: U.S. mandatory (2015) may provide early adoption, Japan mandatory (2015) — Based on Regulatory Roadmaps
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On February 24, 2010, the SEC issued a statement expressing its continued support for the development of a single set of high-quality globally accepted accounting standards and recognized IFRS as being best positioned to serve that role.
Summary SEC statement on convergence and global standards
 Overview of the SEC (“the Commission”) statement
− Reviews Commission’s IFRS activities to date
− Summarizes public feedback on the IFRS roadmap
− Outlines an approach going forward
 Includes a “Work Plan” setting forth specific areas and factors for consideration before potentially transitioning to IFRS
 Withdraws the initial proposal on early use; although does not rule out an ability to early adopt in the future
 Execution of the Work Plan, combined with the completion of the convergence efforts, could position the Commission to make an informed decision on an IFRS mandate in
2011
 Future SEC rulemaking would be required to implement – likely effective in 2015
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Proposed SEC timeline (as revised)
2010: Expected release of revised
“IFRS roadmap” and SEC workplan
2011: SEC to decide whether to mandate IFRS
January 1, 2013
Beginning of the first comparative
IFRS year under current proposal
2010 2011 2012 2013
Transition date
U.S. GAAP Financial Statements (through third-quarter 2015)
2014
IFRS Financial Statements
Dual reporting period: IFRS & U.S. GAAP
December 31,
2015: Companies could be mandated to report financial results using IFRS
2015
IFRS Reporting date
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 SEC statement reinforces support for the ongoing convergence activities of the FASB and IASB
 SEC statement emphasizes completion of current initiatives by June
30, 2011
Convergence considerations
 Convergence does not necessarily result in identical standards; focus is on converging general principles, not every detail
 Ongoing convergence is limited to a defined group of projects
 Several of the most time consuming areas of
IFRS conversion deal with areas not subject to convergence
 “Convergence” will not result in a transition to
IFRS by U.S. issuers in and of itself
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Based on our experience and knowledge, many companies are doing the following:
 Planning to help ensure a cost effective implementation
− Answering key stakeholder questions regarding impact (e.g., earnings)
− Determining high-effort and long lead-time items
− Developing resource estimates and a plan of attack by area
− Preparing for and accomplishing statutory conversions, as required
 Monitoring the statutory reporting environment
 Evaluating the impact on in-process ERP implementations and upgrades
 Considering long-term benefit opportunities
− Simplification and streamlining of statutory reporting
− Simplified internal controllership processes—platform for finance transformation in selected areas
− Identification of impact on in-flight system modifications
− Tax planning opportunities
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Many companies are performing or planning an IFRS impact analysis in light of
IFRS developments and ongoing convergence efforts
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The following high-level IFRS conversion roadmap illustrates a potential IFRS adoption timeline and would need to be tailored to a company's unique facts and circumstances.
Note that the expected date of IFRS adoption is based on the February 24, 2010 SEC
Statement in Support of Convergence and Global Accounting Standards.
Transition phases
2010
Plan and design
2011
Solution development
2012 2013
Begin U.S. GAAP and
IFRS Dual Rptg.
2014 2015 2016
Cutover to IFRS
Implementation and dual reporting
Program management
Technical accounting
Statutory reporting
Develop
Structure
Identify other initiatives
Evaluate dependencies on other
Company Initiatives
Ongoing program management, change management, and communication
Assist business units in adopting IFRS
Obtain IFRS
Tech Acctg assessment
Set Conv.
Sequence
Model IFRS chart of accounts
Create global IFRS policies
IFRS conversion by Country
Develop reporting package Assist Company to run U.S. GAAP and IFRS in parallel
Prepare IFRS compliant financial statements
Identify and address reporting gaps
Tax
Process and controls
Obtain IFRS tax assessment
Assess process and control impacts
Evaluate tax alternatives
Determine hand-offs
Identify tax implications of global
IFRS policies
Redesign processes and controls Identify/address process and control gaps
Systems
Gather system requirements
Design, build, and test changes to
ERP and other systems
Deploy systems
Identify and address system gaps
Organization and change
Assess organization impacts
Align with operating model
Develop communication plan/infrastructure
Identify Impacts on other internal and external stakeholders
Develop user training Conduct user training
Implement organizational changes
Identify and address org and people gaps
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 Consider areas of overlap with an IFRS conversion throughout the implementation process
 Evaluate the interdependencies in the assessment phase.
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Common areas of focus Suggested activities as part of assessment
Chart of accounts (COA) structure • Understand what additional COA may be required under IFRS
• Understand if there is certain COA detail that might ultimately facilitate or simplify disclosures requirements under IFRS
• Map the IFRS sub ledger impacts to system functionality
• Facilitate COA rationalization effort is consistent with dual reporting approach
New entities potentially requiring consolidation
• Assess existing legal entity structure and COA under IFRS
• Consider legal entity structure changes for entities that could potentially be consolidated under IFRS
Dual reporting strategy
Ledger interfaces
Timeline/roadmap for implementation
• Develop a dual reporting strategy which comprehends the system
• Create journal entry methods/templates to accommodate new requirements
• Understand that the differences in the accounting treatment between current accounting standards and IFRS will likely drive changes to general ledger design
• Facilitate that the system legal entity structure and account structure can accommodate IFRS reporting
• Mapping/integration of systems and IFRS Roadmaps
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• Financial statement impact
• Current system release level
Decision drivers
• Current sub-ledger and G/L structure
• Current chart of accounts structure
• Long-term business/IT strategy
• IFRS conversion strategy
• Time to conversion
• Additional benefits derived from proposed solution
Solutions
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Pros
Cons
Best fit
Sub-Ledger
• Provides detailed data for financial analysis and reporting
• Accounts for changes in the subsidiary’s financial statements
• May integrate with existing general ledger system and structure
• May require additional effort to capture necessary detail
• May require additional system modules, off-line or 3 rd party solutions
• High financial statement impact
• Information is available at required level of detail
• Sub-ledger detail is integral for managing the business
General Ledger
• Balances between level of detail and effort of implementation
• Accounts for changes in the subsidiary’s financial statements
• May integrate with off-line and
3 rd party solutions
• Limits detail available for management reporting
• Requires reconciliation efforts between off-line solutions and general ledger
• Limited financial statement impact
• Decreased need for detail for internal/external reporting
Consolidation Level
• Requires less implementation effort
• Enables parallel / dual reporting with no impact on transactional ledgers or general ledger chart of accounts
• Limits detail available for management reporting
• Limits ability to reconcile between ledgers at subsidiary level
• Requires manual intervention — prone to error
• Is less sustainable as a long-term solution
• Low financial statement impact
• Calculations for adjustments are centralized
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 Issue Prioritization is Critical Frequently a handful of issues will drive the vast majority of the work
 Clearly Defined and Communicated System Requirements Gaps typically exist between accounting conclusions and information finance technology needs
 Effective Communication, Training and Change Management Typically underscoped, leading to ad-hoc questions and concerns
 Granular Implementation Planning Implementation roadmaps often are not sufficiently detailed to be actionable to identify key resource requirements and interdependencies
 Disciplined Project Management Coordinated with Other Functional Initiatives -
Downstream process and system analyses are frequently dependent on accounting policy selection
 Consider U.S. GAAP Convergence as Well as IFRS IFRS is driving significant changes to U.S. GAAP, in some cases on a more accelerated timeline
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+1 313-396-3208
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Information on IFRS can be found on the following sites:
/us/ifrs
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This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.
Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this presentation.
Copyright © 2010 Deloitte Development LLC. All rights reserved.