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Introduction to IFRS 20 July 2011
Outline
1
Overview of IFRS
2
Nigeria’s Transition to IFRS
© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are d with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
2
Overview of IFRS
What is IFRS What is IFRS? • IFRS is a globally-accepted set of ing standards and interpretations established by the International ing Standards Board (IASB) and its interpretative bodies the International Financial Reporting Interpretations Committee (IFRIC) and Standing Interpretations Committee (SIC). • IFRS are a set of investor-oriented standards and are more principles based rather than prescriptive (rule based) • IFRS is mainly designed for, and used by, listed, 'for-profit‘ companies • IFRS does not provide as much detailed and prescriptive implementation guidance as other GAAP e.g., U.S GAAP. As a result, there are more instances when judgment must be exercised.
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
4
Composition of IFRSs • IFRS comprise the following: − International Financial Reporting Standards (IFRS) – (13 in issue)
IFRS 10, 11, 12 & 13 are new
− International ing Standards (IAS) – (29 in issue) − Interpretations originated from the International Financial Reporting Standards Interpretations Committee (IFRIC) – (15 in issue) − Standing Interpretations Committee (SIC) – (11 in issue)
• Current individual IASs will remain – they will not be renamed IFRSs ∴ IAS 18 ≠ IFRS 18!!
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
5
The appeal of IFRS • Comprehensiveness • Comparability • Competitiveness • Dynamic & Responsive
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
6
The appeal of IFRS • Comprehensiveness
IFRS is robust, comprising of standards and interpretations where divergent practices have been noticed
IFRS covers many areas where local GAAPs do not provide specific guidance e.g., Revenue, Share-based Payments
IFRS literature includes Basis for Conclusions (BC), Application Guidance (AG), Illustrative Examples (IE), Implementation Guidance (IG), Dissenting Opinion (DO). The additional literature provide insights and transparency about the standards
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
7
The appeal of IFRS • Comparability
no industry/ country specific standards e.g., SAS 10, SAS 15, SAS 16, SAS 25
same ing principles across industries/ sectors
increased transparency in financial reporting providing investors with comparable and sufficient information to enable them understand the risk profiles of entities and make informed judgements and decisions
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
8
The appeal of IFRS • Competitiveness improved comparability of financial statements with peers and competitors improved access to global capital market and investment
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
9
The appeal of IFRS • Dynamic & Responsive
continuous review and evaluation of the relevance of each standard
amendments issued in response to global financial crises
consideration of expected loss model for impairment of financial instruments
continuous annual improvement project
issue of IFRS for SMEs
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
10
The appeal of IFRS
Conversion to IFRS is however not without its `birth’ pains: •
Significant one-time costs of converting to IFRS
•
Complexity of the new requirements
• Increased use of judgments which, coupled with the prevalence of options permitted by the standards have led to concerns about consistency of application
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
11
Current state of IFRS adoption IFRS is used around the world IFRS is used in many countries around the world, including China, Hong Kong and Russia, most European countries under the jurisdiction of the EU.
Countries in Africa include Kenya, Zimbabwe, South Africa, Zambia, Malawi, Tanzania, Ghana and Sierra Leone.
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
12
IFRS is fast becoming the globally accepted ing framework Widespread IFRS adoptions began in 2005, and the standards are now in use in more than 100 countries. IFRS Adoption Map
Countries that require or permit IFRS or have fixed dates to implement
Countries seeking convergence with the IASB or pursuing adoption of IFRS
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
13
IFRS vs. SAS: Key principles compared IFRS
SAS
Strictly Principles based
A mixture of principles and rules
Measurement based on concepts like
Measurement largely based on historical cost
Impairment largely based on rules
Fair valuation
Amortised cost
Net present value calculations
Effective Interest rate calculations
Current exit value (for insurance contracts)
Impairment based on principles and methodologies that are consistently applied
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
14
IFRS vs. SAS: a high level comparison of major statements IFRS
SAS
Statement of ing policies
Statement of ing policies
Notes to the s
Notes to the s
Balance sheet
Balance sheet
Profit and loss or income statement Statement of other comprehensive income
Profit and loss or Income statement
Statement of cash flows
Statement of cash flows
N/A
Value added statements
N/A
Five-year Financial Summary
Statement of changes in equity
N/A
Statement of financial position as at the beginning of the earliest comparative period when an entity applies an ing policy retrospectively or makes a retrospective restatement of its financial statements
N/A
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
15
Nigeria’s Transition to IFRS
Transition timetable Reporting Date:
IFRS Competence
Transition Date: Listed & Significant Public Entities (SPE’s)
Transition Date: Other public Interest entities (PIE’s)
• Awareness • Assessment • Legislative changes • Training • Planning/Impact analysis • Transition adjustments/Openin g Statement of Fin Pos
Reporting Date:
2014
• IFRS/Quarterly reporting by listed & SPE’s • Audit procedures • Investor communications
• Prepare IFRS Opening Statement of Financial Position (SFP)
• PIE’s prepare opening SFP & comparative figs
• “Dry Runs” for Listed & SPE’s
• Dry Runs for PIE’s
• Prepare comparative figures
• IFRS reporting by Other SME’s • Audit procedures
• IFRS/Quarterly reporting by PIE’s • Audit procedures
2011
SME’s
Other PIE’s
2013 2012
• Transition adjustments
2010
Reporting Date: (Listed & Significant public entities) Transition Date: SME’s
• SME’s commerce transition planning
• PIE Investor communications
• Investor communications • Compliance monitoring
• Compliance monitoring for Listed & SPE’s • SME’s Prepare opening SFP & comparative figs • PIE/SME investor communications • Dry Runs for SME’s
Alignment with other initiatives and training for appropriate personnel realisation and standardisation of statutory reporting
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
17
Conclusion
" There are no secrets to success. It is the result of preparation, hard work, and learning from failure. "
Colin Powell
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
18
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
19
Outline
1
Overview of IFRS
2
Nigeria’s Transition to IFRS
© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are d with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
2
Overview of IFRS
What is IFRS What is IFRS? • IFRS is a globally-accepted set of ing standards and interpretations established by the International ing Standards Board (IASB) and its interpretative bodies the International Financial Reporting Interpretations Committee (IFRIC) and Standing Interpretations Committee (SIC). • IFRS are a set of investor-oriented standards and are more principles based rather than prescriptive (rule based) • IFRS is mainly designed for, and used by, listed, 'for-profit‘ companies • IFRS does not provide as much detailed and prescriptive implementation guidance as other GAAP e.g., U.S GAAP. As a result, there are more instances when judgment must be exercised.
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
4
Composition of IFRSs • IFRS comprise the following: − International Financial Reporting Standards (IFRS) – (13 in issue)
IFRS 10, 11, 12 & 13 are new
− International ing Standards (IAS) – (29 in issue) − Interpretations originated from the International Financial Reporting Standards Interpretations Committee (IFRIC) – (15 in issue) − Standing Interpretations Committee (SIC) – (11 in issue)
• Current individual IASs will remain – they will not be renamed IFRSs ∴ IAS 18 ≠ IFRS 18!!
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
5
The appeal of IFRS • Comprehensiveness • Comparability • Competitiveness • Dynamic & Responsive
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
6
The appeal of IFRS • Comprehensiveness
IFRS is robust, comprising of standards and interpretations where divergent practices have been noticed
IFRS covers many areas where local GAAPs do not provide specific guidance e.g., Revenue, Share-based Payments
IFRS literature includes Basis for Conclusions (BC), Application Guidance (AG), Illustrative Examples (IE), Implementation Guidance (IG), Dissenting Opinion (DO). The additional literature provide insights and transparency about the standards
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
7
The appeal of IFRS • Comparability
no industry/ country specific standards e.g., SAS 10, SAS 15, SAS 16, SAS 25
same ing principles across industries/ sectors
increased transparency in financial reporting providing investors with comparable and sufficient information to enable them understand the risk profiles of entities and make informed judgements and decisions
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
8
The appeal of IFRS • Competitiveness improved comparability of financial statements with peers and competitors improved access to global capital market and investment
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
9
The appeal of IFRS • Dynamic & Responsive
continuous review and evaluation of the relevance of each standard
amendments issued in response to global financial crises
consideration of expected loss model for impairment of financial instruments
continuous annual improvement project
issue of IFRS for SMEs
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
10
The appeal of IFRS
Conversion to IFRS is however not without its `birth’ pains: •
Significant one-time costs of converting to IFRS
•
Complexity of the new requirements
• Increased use of judgments which, coupled with the prevalence of options permitted by the standards have led to concerns about consistency of application
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
11
Current state of IFRS adoption IFRS is used around the world IFRS is used in many countries around the world, including China, Hong Kong and Russia, most European countries under the jurisdiction of the EU.
Countries in Africa include Kenya, Zimbabwe, South Africa, Zambia, Malawi, Tanzania, Ghana and Sierra Leone.
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
12
IFRS is fast becoming the globally accepted ing framework Widespread IFRS adoptions began in 2005, and the standards are now in use in more than 100 countries. IFRS Adoption Map
Countries that require or permit IFRS or have fixed dates to implement
Countries seeking convergence with the IASB or pursuing adoption of IFRS
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
13
IFRS vs. SAS: Key principles compared IFRS
SAS
Strictly Principles based
A mixture of principles and rules
Measurement based on concepts like
Measurement largely based on historical cost
Impairment largely based on rules
Fair valuation
Amortised cost
Net present value calculations
Effective Interest rate calculations
Current exit value (for insurance contracts)
Impairment based on principles and methodologies that are consistently applied
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
14
IFRS vs. SAS: a high level comparison of major statements IFRS
SAS
Statement of ing policies
Statement of ing policies
Notes to the s
Notes to the s
Balance sheet
Balance sheet
Profit and loss or income statement Statement of other comprehensive income
Profit and loss or Income statement
Statement of cash flows
Statement of cash flows
N/A
Value added statements
N/A
Five-year Financial Summary
Statement of changes in equity
N/A
Statement of financial position as at the beginning of the earliest comparative period when an entity applies an ing policy retrospectively or makes a retrospective restatement of its financial statements
N/A
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
15
Nigeria’s Transition to IFRS
Transition timetable Reporting Date:
IFRS Competence
Transition Date: Listed & Significant Public Entities (SPE’s)
Transition Date: Other public Interest entities (PIE’s)
• Awareness • Assessment • Legislative changes • Training • Planning/Impact analysis • Transition adjustments/Openin g Statement of Fin Pos
Reporting Date:
2014
• IFRS/Quarterly reporting by listed & SPE’s • Audit procedures • Investor communications
• Prepare IFRS Opening Statement of Financial Position (SFP)
• PIE’s prepare opening SFP & comparative figs
• “Dry Runs” for Listed & SPE’s
• Dry Runs for PIE’s
• Prepare comparative figures
• IFRS reporting by Other SME’s • Audit procedures
• IFRS/Quarterly reporting by PIE’s • Audit procedures
2011
SME’s
Other PIE’s
2013 2012
• Transition adjustments
2010
Reporting Date: (Listed & Significant public entities) Transition Date: SME’s
• SME’s commerce transition planning
• PIE Investor communications
• Investor communications • Compliance monitoring
• Compliance monitoring for Listed & SPE’s • SME’s Prepare opening SFP & comparative figs • PIE/SME investor communications • Dry Runs for SME’s
Alignment with other initiatives and training for appropriate personnel realisation and standardisation of statutory reporting
© 2011 KPMG Professional Services, a partnership ed in Nigeria and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Nigeria.
17
Conclusion
" There are no secrets to success. It is the result of preparation, hard work, and learning from failure. "
Colin Powell
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
18
© 2011 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms d with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
19
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