IFRS

1. IFRS!

2. What is IFRS International Financial Reporting Standards

3. Who Establishes IFRS? International Accounting Standards Board (IASB)

4. Why Do We Care? Use of IFRS is widespread More than 15,000 companies listed overseas use IFRS In 2011, India and Canada, among others, will convert their financial reporting systems to IFRS This will add at least 12,000 additional companies to the list of companies reporting under IFRS

5. In the past, companies who wished to list securities in the US had to reconcile their financial statements to show the nature and cause of differences in earnings based on their reporting standards and US GAAP on a Form 20-F As of 2007, the SEC removed this restriction for companies using IFRS and now allows foreign registrations to use IFRS without reconciliation

6. The SEC is in the process of publishing a proposed roadmap (more on this later) that is moving toward allowing or requiring U.S. companies to use IFRS. This could mean that U.S. GAAP is no longer used�and we are talking about a timeframe from 2009 � 2016..

7. The FASB, SEC, AICPA, and the Big-4 Accounting firms (KPMG, PWC, Deloitte Touche, and E&Y) all favor the adoption of a set of high quality international reporting standards, and the consensus is growing that IFRS will be that standard. �The AICPA supports one set of high-quality global accounting standards for public companies,� said Barry Melancon, AICPA president and CEO.� �We believe the capital markets ultimately will insist on IFRS for public companies. Today�s action by the SEC continues a robust and thoughtful debate that is critical as the transition occurs.�

8. Why Global Accounting Standards? Enhanced worldwide comparability for investors Enhanced quality of reporting Some national GAAPs are week Possibly a lower cost of capital More company-friendly US securities market for foreign listings

9. Reduced reporting costs No need to develop and maintain national standards For audit firms and companies: Easier movement of auditors and accountants across borders

10. IASB The International Accounting Standards Committee was founded in 1973. At that time, it was composed of volunteers who met three times a year. They issued statements called International Accounting Standards (IASs); they issued 41 such standards.

11. As the demand grew for international reporting standards, IOSCO (The International Organization of Securities Commissions, of which the U.S. SEC is a member) issued a mandate that the IASC develop a core set of standards, and determined that if they were successful, the SECs of member countries would consider pursing international standards for their jurisdictions.

12. To meet this mandate, it was necessary to restructure the IASC In 2001, the first restructuring occurred Full time IASB based in London 14 members Issue IFRS (old IASs remain in force unless superseded or revised)

13. USE OF IFRS WORLDWIDE For domestic LISTEC companies IFRS required for all: 85 IFRS required for some: 4 IFRS permitted 24 IFRS are used by UNLISTED companies in over 80 jurisdictions

14. Europe EU, EAA, and Switzerland IFRS is used by all listed entitites (about 8,000) in consolidated statements. In the EU, IFRS must be �endorsed� by the Union One modification with respect to reporting on derivatives (IAS 39) so the audit report reads �IFRSs a adopted by the EU� The modification affects just a few companies (less than 100)

15. The endorsement mechanism in the EU results in time lags. (NOTE: The SEC only accepts IFRS as published in English by the IASB for U.S. filings without reconciliation)

16. Asia-Pacific Nearly word-for word convergence: Australia, New Zealand, Hong Kong Modifications, time lags, some not adopted: Singapore, Thailand, Malaysia, Philippines, China Own standards: Japan (convergence program in place), Taiwain 2011 adoption of IFRS planned: India, Korea

17. North American Canada, planned conversion to IFRS in 2011 USA Permitted for foreign SEC registrants since March 2009 Proposed roadmap for US adoption

18. Latin America/Caribbean IFRS required in Brazil by 2010 for all listed companies, banks IFRS phased in from 2009-2011 in Chili and over a dozen smaller jurisdictions

19. Middle East and Africa Many countries require IFRS, although there are often country-specific idiosyncracies

20. Financial Reporting Environments US � strong enforcement by SEC Long traditionof strict, detailed accounting standards Publication of audited financial statements by publicly traded companies

21. Many other countries Strong company laws with moderate to weak enforcement by regulators Less litigation Diverse auditing cultures Private as well as public companies must often publish financial statements, often audited

22. CANADA, UK, US Public sector has long accepted private sector accounting standards

23. EU Public sector is suspicious of private-sector accounting standards, questioning if they are in the public interest Its ever-lengthening endorsement process detracts from worldwide comparability

24. IFRS as adopted by the EU may foreshadow further deviations from IFRS

25. Most countries converge national GAAP with IFRS. Some adopt IFRS as published by the IASB IFRS is becoming more rules-based (1,200 pages in 2000; 2,700 pages in 2008)

26. IFRS vs US GAAP IFRS: Principles-based standards with limited application guidance US: Rules-based standards with specific application guidance

27. Some Differences Measuring Goodwill Disclosure of segment liabilities Basis for consolidation LIFO Deferred tax assets Revaluation of PP&E and quoted intangibles through equity Development costs

28. Gains on sale and leaseback Investments in real estate Agricultural assets Actuarial gains and losses Vested past service cost Joint ventures Measuring impairment Reversals of write-downs

29. SEC to Propose Roadmap for Potential Mandatory IFRS Filings On August 27, 2008, the SEC decided to issue a proposed IFRS Roadmap. The SEC proposed specific rule changes that would permit the use of IRFS for certain U.S. issuers. The Roadmap proposal will be published in the Federal Register within 60 days.

30. The proposal acknowledges that IFRSs have the potential to become the global set of accounting standards A timetable for adoption in the U.S. is proposed. Assuming certain milestones are achieved, the SEC is considering a mandatory transition to IFRSs starting in 2014.

31. The proposed roadmap would commit the SEC staff to monitor the progress toward achieving milestones. IF, in 2011, the SEC deems there has been adequate progress toward achieving the milestones, they would consider adopting final rules requiring U.S. public companies to use IFRS.

32. The proposed roadmap includes a potential phased transition over three years beginning with large accelerated filers in 2014, followed by accelerated filers in 2015, and concluding with non-accelerated filers in 2016.

33. Milestones IFRS continued improvement. IFRS would be improved largely through continued efforts b the IASB and the FASB to converge IFRS and U.S. GAAP. Funding and accountability of the International Accounting Standards Committee Foundation. Accountability would be strengthened by establishing a �monitoring group� and its funding process would be stabilized by basing int on shared obligations undertaken by jurisdictions using IFRS.

34. Improvement in the ability to use interactive date (e.g., XBRL) for IFRS reporting. That is, the technical capability to communicate financial information in the XBRL computer language based on the coding terms specified in a �taxonomy� would have to be available. Education and training in IFRS in the United States.

35. Limited early use by eligible entities. This milestone would give certain U.S. issuers the option of using IFRS for fiscal years ending on or after December 15, 2009. A majority of peer-group companies report using IFRS as issued by the IASB The U.S. company is one of the top 20 peer group companies (potentially more than 110 companies representing approximately 14% of total U.S. market capitalization.)

36. On the basis of the progress toward meeting milestones 1-4, and the experience gained from milestone 5, the SEC will determine in 2011 whether to require mandatory adoptoin of IFRS for all U.S. issuers. If so, the SEC will determine the date and approach for a mandatory transition to IFRS.

37. Resources http://www.iasplus.com/index.htm http://www.iasplus.com/resource/0808aaaifrsresources.pdf