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IFRS Accounting Trends & Techniques provides a close look at the reporting practices of international companies that have already tackled the conversion to IFRS.
IFRS Accounting Trends & Techniques presents carefully selected excerpts from the audited annual reports of 100 survey entities to illustrate current reporting techniques and various presentation and disclosure practices. With a strategic use of common headings (overview, recognition and measurement, presentation, and disclosure) throughout all sections, under which appear subheadings for U.S. GAAP and IFRS, the narrative commentary tackles the complex requirements with a focus on the reader's clear understanding of the content.
To maximize usability, IFRS Accounting Trends & Techniques is topically organized using familiar financial statement terminology and offers:
Whether you're reporting under IFRS for the first time or simply looking to stay current with the latest IFRS reporting techniques, you'll get a rich supply of examples that will save you hours of time. Preparers and auditors alike can apply this practical guidance to develop tailored solutions for difficult reporting issues.
Find the answers and IFRS reporting examples you need in IFRS Accounting Trends & Techniques.
IFRS Accounting Trends & Techniques is also available as an online subscription on AICPA Resource. Click here for details.
About the Author
Patricia Doran Walters, PhD, CFA®, is Clinical Associate Professor of Accounting at Fordham University in New York City where she teaches International Accounting as well as U.S. GAAP Financial Reporting & Analysis in the undergraduate, MBA and Executive Programs. She is also President of Disclosure Analytics, Inc, a consulting firm specializing in the independent assessment of the quality of financial reporting and disclosure under International Financial Reporting Standards (IFRS) and U.S. GAAP.
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Preface
About this Edition of IFRS Accounting Trends & Techniques
IFRS Accounting Trends & Techniques (IFRS ATT) is the newest addition to the series of Accounting Trends & Techniques publications. These AICPA bestsellers are the tools of choice for financial reporting and have an unmatched legacy of innovation and practical application.
Similar to the other titles in the series, IFRS ATT compiles annual reporting and disclosure data and illustrative examples from an extensive analysis of the annual reports of publicly traded entities across numerous industries. Only those entities whose financial statements were prepared in conformity with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) were selected. These entities made an explicit and unreserved statement of such compliance in the financial statement note disclosures, as required by IFRSs. Other eligibility criteria applicable to the selection process include meeting one of the following criteria:
| • | Entity is a foreign private issuer registered with the U.S. Securities and Exchange Commission (SEC) and files its annual report on Form 20-F | ||||||
| • | Entity is registered on the London Stock Exchange (LSE) and included in either | ||||||
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IFRS ATT provides preparers and auditors and other financial professionals with an invaluable resource for incorporating new and existing accounting and reporting guidance into financial statements using presentation techniques adopted by some of the most recognized entities in the world. IFRS ATT can also be used by an entity's internal management, investors, analysts, and academics to build their base of understanding and awareness of financial statement presentation under IFRSs and the accounting policies most prevalent across different industries around the world reporting under IFRSs.
Organization and Content
This 2009 edition of IFRS ATT incorporates information from the annual reports of 100 carefully selected entities generally having annual fiscal periods ending between January and December 2008.
The content of IFRS ATT addresses many of the common requirements most likely to be encountered when reporting on the general purpose financial statements, including consolidated financial statements of commercial, industrial and business reporting entities, as defined in Framework for the Preparation and Presentation of Financial Statements (framework) within the IASB's International Financial Reporting Standards 2009 bound volume. The framework sets forth the concepts that underlie the preparation and presentation of financial statements for external users and contains definitions of the elements of financial statements (that is, assets, liabilities, equity, income, and expenses).
Among other purposes, the framework assists preparers of financial statements in applying IFRSs and in dealing with topics that have yet to form the subject of a specific standard or interpretation. Although the framework is not a standard, the requirements of IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, essentially establish the framework as part of the IFRSs hierarchy of accounting and reporting requirements.
To provide you with the most useful and comprehensive look at current financial reporting techniques and methods, IFRS ATT is topically organized using familiar financial statement terminology and offers the following:
| • | Descriptive narratives that include comparisons of the reporting requirements under IFRSs and U.S. generally accepted accounting principles (GAAP) |
| • | Statistical tables that track reporting trends |
| • | Illustrative excerpts from the surveyed annual reports showing reporting techniques |
| • | Detailed indexes |
Different terms for the same underlying concepts within IFRSs and U.S. GAAP are identified to enhance relevance and understanding.
Narratives
IFRS ATT offers thorough discussions of the significant IFRSs and U.S. GAAP accounting and financial statement reporting requirements in a narrative presentation that uses a standard layout in all the major sections. You'll find a strategic use of common headings (overview, recognition and measurement, presentation, and disclosure) throughout all sections; under those common headings appear subheadings for IFRSs and U.S. GAAP. Although not a substitute for the authoritative accounting and reporting standards, these narratives tackle the complex requirements with a focus on the reader's clear understanding of the content.
Within the specifically identified IFRSs components of the narratives, the related authoritative sources for each requirement are included (for example, IFRS 3, Business Combinations). Within the specifically identified U.S. GAAP components of the narratives, the content is presented in a plain English approach without specific U.S. GAAP references.
For easy reference and to avoid potential confusion, comparisons of IFRSs to U.S. GAAP are confined within the U.S. GAAP components of the narratives.
Trend Tables
Statistical tables incorporated into some of the narrative discussions are easily identified by a shaded background to distinguish them from excerpted content. These tables show trends across the available choices in recognition, measurement, and presentation in such diverse reporting matters as financial statement format and terminology and the treatment of transactions and events reflected in the financial statements. Additional trends of this nature will likely be added in a future edition.
Excerpts Showing Technique
IFRS ATT presents carefully selected excerpts from the audited annual reports of the survey entities to illustrate current reporting techniques and various presentation practices. Each new edition of IFRS ATT will include all new annual report excerpts found to be particularly relevant and useful to financial statement preparers and other users in illustrating current reporting practices.
Indexes
Indexes in this edition include the "Appendix of Survey Entities," which alphabetically lists each of the 100 survey entities included in the current edition and identifies where in the text excerpts from their annual reports can be found; the "IFRSs Pronouncement Index," which provides for easy cross-referencing of IFRSs' interpretations to the applicable descriptive narratives; and a detailed "Subject Index," which is fully cross-referenced to all significant topics included throughout the narratives.
Authoritative Sources
Unless otherwise indicated, references to IFRSs throughout this 2009 edition of IFRS ATT refer to the version of those standards and interpretations included in IFRS 2009 bound volume. As noted in the "Changes in This Edition" section of that publication, it includes the latest consolidated version of the entire authoritative body of IFRSs as at December 31, 2008. Unless otherwise indicated, references to U.S. GAAP throughout this 2009 edition of IFRS ATT refer to the FASB Accounting Standards Codification™ as of July 1, 2009.
Note that the AICPA Code of Professional Conduct has been revised to recognize the IASB in London as an accounting body for purposes of establishing IFRSs, thus granting AICPA members the option to use IFRSs as an alternative to U.S. GAAP.
Also note that the effective dates of recently released guidance affect the timing of its inclusion in the financial statements of the survey entities, thereby affecting the availability of illustrative excerpts for potential inclusion in each edition of IFRS ATT.
International Financial Reporting Standards
What Is IFRSs?
IFRSs is a set of accounting standards and interpretations developed and issued by the IASB, a London-based independent accounting standard-setting body consisting of 14 members from 9 countries, including 4 from the United States. Important elements of member selection include technical competence, recent practical experience, and diversity, including diversity in terms of work experience such as one's background as a financial statement preparer, auditor, and external user, and diversity in terms of a member's country of origin.
IASB began operations in 2001, when it succeeded the International Accounting Standards Committee (IASC). IASC was formed in 1973, soon after the formation of the Financial Accounting Standards Board (FASB). In 2001, when the IASB replaced the IASC, a new, independent oversight body, the IASC Foundation, was created to appoint the members of the IASB and oversee its due process. The IASC Foundation's oversight role is very similar to that of the Financial Accounting Foundation in its capacity as the oversight body of FASB.
The term "IFRSs" has both a narrow and a broad meaning. Narrowly, IFRSs refers to the new numbered series of pronouncements issued by the IASB, as differentiated from International Accounting Standards (IASs) issued by its predecessor, the IASC. More broadly, however, IFRSs refer to the entire body of authoritative IASB pronouncements, including those issued by the IASC and their respective interpretive bodies. Therefore, the authoritative IFRSs literature, in its broadest sense, includes the following:
| • | Standards, whether labeled IFRSs or IASs |
| • | Interpretations, whether labeled IFRIC (referring to the International Financial Reporting Interpretations Committee, the current interpretive body of the IASC Foundation) or SIC (Standing Interpretations Committee, the predecessor to IFRIC and former interpretive body of the IASC) |
The preface to the IFRS 2009 bound volume states that IFRSs are designed to apply to the general purpose financial statements and other financial reporting of all profit-oriented entities including commercial, industrial, and financial entities regardless of legal form or organization. Included within the scope of profit-oriented entities are mutual insurance companies and other mutual cooperative entities providing dividends or other economic benefits to their owners, members, or participants. IFRSs are not designed to apply to not-for-profit entities or those in the public sector; but these entities may find IFRSs appropriate in accounting for their activities. In contrast, U.S. GAAP is designed to apply to all nongovernmental entities, including not-for-profit entities, and includes specific guidance for not-for-profit entities, development stage entities, limited liability entities, and personal financial statements.
IASB's approach to establishing standards and interpretations differs to some degree than that of FASB. In developing an IFRS, the IASB strikes a different balance than FASB in developing U.S. GAAP by expecting preparers to rely on core principles and limited application guidance with fewer prescriptive rules than found in U.S. GAAP. In contrast, FASB often leans more toward providing extensive prescriptive guidance and detailed rules.
The difference in the amount of industry specific guidance is an example of the different approaches. Currently, IFRSs include only three standards (for example, IAS 41, Agriculture) that might be regarded as primarily industry-specific guidance. However, the scope of these standards includes all entities to which the scope of IFRSs applies. In contrast, U.S. GAAP has considerable guidance for entities within specific industries. For example, on liability recognition and measurement alone, U.S. GAAP contains specific guidance for entities in the following industries:
| • | Agriculture |
| • | Health care |
| • | Contractors and construction |
| • | Contractors and the federal government |
| • | Entertainment, with separate guidance for casinos, films, and music |
| • | Financial services, with separate guidance for brokers and dealers, depository and lending, insurance, and investment companies |
For nonmonetary transactions, U.S. GAAP provides specific guidance for the airline, software, and entertainment industries. U.S. GAAP also addresses some specific transactions not currently addressed in IFRSs, such as accounting for reorganizations, including quasi-reorganizations, troubled debt restructuring, spinoffs, and reverse spinoffs.
Convergence of U.S. GAAP and IFRSs
The convergence of U.S. GAAP and IFRSs gained momentum in 2002, when FASB and IASB signed what is known as the Norwalk Agreement. At that meeting, FASB and IASB pledged to use their best efforts to (a) make their existing financial reporting standards fully compatible as soon as is practicable, and (b) to coordinate their future work programs to ensure that, once achieved, compatibility is maintained. That agreement was reaffirmed in a February 2006 Memorandum of Understanding (MoU), which was based on the following three principles:
| • | Convergence of accounting standards can best be achieved through the development of high quality, common standards over time. |
| • | Trying to eliminate differences between two standards that are in need of significant improvement is not the best use of FASB's and IASB's resources—instead, a new common standard should be developed that improves the financial information reported to investors. |
| • | Serving the needs of investors means that FASB and IASB should seek convergence by replacing standards in need of improvement with jointly developed new standards. |
| • | Detailed indexes |
At their joint meeting in April 2008, FASB and IASB again affirmed their commitment to developing common, high quality standards, and agreed on a pathway to completing the MoU projects, including projected completion dates. In September 2008, the two boards jointly published an update of their 2006 MoU to report the progress they have made since, and to set the goal of completing their major joint projects by 2011. Each board believes that such standards would improve the quality, consistency, and comparability of financial information for investors and capital markets around the world.
Other AICPA Publications
For the same reasons that you'll find IFRS ATT to be the premier resource for financial reporting under IFRSs, the other publications in this series are just as robust and deserving to be your tool of choice for their respective types of financial reporting. A similar publication in this series that focuses exclusively on U.S. GAAP is Accounting Trends & Techniques (product code 0099009). Now in its 63rd edition, this AICPA bestseller is filled with all new examples of current reporting techniques and methods used by 500 of the top publicly traded U.S. companies across all major industries. See www.cpa2biz.com for ordering information.
For additional information on the likelihood, timing and practical implications of U.S. adoption of IFRS, we suggest you check out IFRS Digest: What U.S. Practitioners and Entities Need to Know Now. This AICPA publication helps you to invest the right amount of time on reading the right information for this stage in the adoption process. The book contains a discrete number of articles and white papers carefully selected by two of the most prominent U.S. experts on IFRS with a specific eye toward what busy professionals in the U.S. need to understand now.
Notice
IFRS ATT is a nonauthoritative practice aid and is not designed to provide a comprehensive understanding of all the requirements contained in U.S. GAAP and IFRSs and does not identify all possible differences between those aforementioned bases of accounting. IFRS ATT does not include reporting requirements relating to other matters such as internal control or agreed-upon procedures.
Authoritative guidance on accounting treatments in accordance with IFRSs can only be made by reference to the IFRSs themselves, which are copyright of the IASC Foundation and can be acquired directly from the IASB.
IFRS ATT has not been reviewed, approved, disapproved, or otherwise acted on by any senior technical committee of the AICPA and does not represent official positions or pronouncements of the AICPA.
The use of this publication requires the exercise of individual professional judgment. It is not a substitute for the original authoritative pronouncements. Users are urged to refer directly to applicable authoritative pronouncements when appropriate. As an additional resource, users may call the AICPA Technical Hotline at 1-877-242-7212.
1Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification™ >and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162,significantly changed the U.S. generally accepted accounting principles (GAAP) hierarchy and the entire structure of U.S. GAAP by establishing FASB Accounting Standards Codification™ as the authoritative source of U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the U.S. Securities and Exchange Commission (SEC) relevant for SEC registrants. FASB Statement No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. This new standard reduces the U.S. GAAP hierarchy to two levels: authoritative U.S. GAAP (guidance found in FASB ASC) and nonauthoritative U.S. GAAP (guidance not found in FASB ASC). Exceptions include all rules and interpretive releases of the SEC under the authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants, and certain grandfathered guidance having an effective date before March 15, 1992.
2In addition to International Accounting Standards 41, the other International Financial Reporting Standards (IFRSs) that address issues specific to certain industries are IFRS 4, Insurance Contracts,and IFRS 5, Exploration for and Evaluation of Mineral Resources.
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