Regulatory Brief: October 26, 2012 Annual IFRS Conference – Paris, France
The annual IFRS Conference moderated by PwC took place on October 26, 2012 in Paris, France with Philippe Danjou, member of the IASB Board. We attended this conference where three major topics were on the agenda: the new IFRS mandatory for 31 December 2012 year-ends, the question of non-GAAP measures and the future direction of IFRSs. Here’s our brief.
First, we had confirmation that three new regulatory texts would become mandatory for 2012 year-ends . We’re talking about the amendments to IFRS 7 Financial Instruments: Disclosures relating to transfers of financial assets, the amendments to IAS 12 Income Taxes relating to deferred taxes (recovery of underlying assets) and the amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards on hyperinflation and fixed dates. These amendments do not call for further comment as they only have limited impact in most cases.
Secondly, we attended the roundtable discussion between Philippe Danjou (member of the IASB), company preparers, and users (auditors, securities regulator) of financial statements about the relevance of publishing non-GAAP measures. Non-GAAP measures are alternative performance measures, such as EBITDA (Earnings before interest, taxes, depreciation and amortization) or ROCE (Return on capital employed), that are not defined by the accounting standards. A large majority of participants believes that non-GAAP measures are essential for understanding companies’ performance as IFRS does not precisely define profit measures (such as operating profit). They are more divided on the need for more regulation. Some argue that non-GAAP measures as they are currently presented are not comparable from one company to the other. Therefore standardized profit measures would be helpful, ensuring that the same definition is applied by all IFRS users. The others estimate that performance measures cannot be defined by accounting standards as they strongly depend on the business model. All of them eventually agree that reconciliation with IFRS data as presented in the financial statements should be included to ensure transparency and improve non-GAAP measures’ reliability.
Finally, the last part of the conference dealt with the IASB Board’s agenda. Philippe Danjou insisted that the Board had three major projects to finalize in the near future: Revenue Recognition that aims to replace IAS 18, Leases that will replace IAS 17 and IFRS 9 on Financial Instruments. This is not a surprise but strengthens the consistency of the Board to make Financial Crisis related and Memorandum of Understanding projects a very high priority moving forward.
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