Cost savings on IFRS conversion?

From Accounting Principles

In response to the economic crisis and continued regulatory uncertainty surrounding IFRS, 71% of companies are slowing their implementation efforts, specifically holding off allocating staff to the project, or postponing their accounting differences diagnostics. However, companies need to ensure that these cuts do not compromise their long-term plans, and must use 2009 for low-cost, targeted assessment and preparation activities.

Waiting Game:
In the last few months, companies have been slowing-but not suspending-their IFRS implementation efforts. This is manifested in two key areas – companies have avoided ramping up their overall project teams, either by cutting back on their budgets, or by holding off allocating staff. At the same time firms are postponing accounting and IT diagnostics, or conducting them internally instead of using more costly consultants as initially planned.

Other Things on the Plate:

There are two main reasons for this slowdown:
Regulatory Uncertainty: Companies are holding back because of the uncertainty surrounding the IFRS Roadmap; including conflicting comments by senior policymakers about whether the SEC will continue ‘full speed ahead’ towards adoption, and strong dissatisfaction with having to wait until 2011 for the ‘go/no-go’ decision. This should be temporary, and will probably go away when the administration’s intentions become clearer, but as of now, companies are scared of committing to an expensive, company-wide set of changes, only to revert back because of policy shifts.

The Economic Crisis:

Companies have much more immediate spending needs than IFRS – currency exchange issues, higher pension costs, and other ‘distractions’ all crowd out increasingly scarce dollars, and are making it difficult for companies to justify spending for an IFRS transition that may not happen until 2014.

Don’t Cut Back Too Far:
While cutting back on IFRS may be an attractive option, companies need to be wary of stopping their IFRS efforts altogether. IFRS is a long term process, and even with the current uncertainty, companies must lay the groundwork in 2009 for the ongoing project in targeted, low-cost ways, including:

Conducting preliminary IFRS accounting research:

As IFRS standards are still being written, conducting highly detailed accounting diagnostics may be counterproductive at this stage. However, companies should dedicate an individual to track and evaluate IASB standards as part of their job, determine which ones are in flux, and which are stable, and use publicly-available and Roundtable resources to understand the key differences. This allows you to prioritize your future workplans.

Evaluate your organization for IFRS competency: Even if you don’t plan to form your project team yet, use 2009 to evaluate your company for people with good project management skills (including ‘big project’ experience in SOX or an ERP implementation), as well as those who have practical IFRS experience, perhaps through a foreign subsidiary. Determine whether you will be able to move these people onto your team, and determine any competency gaps that might need to be filled by outside consultants.

Start reaching out to key stakeholders:

IFRS will have a broad impact on corporate functions, and you need to start making stakeholders aware of IFRS. Start letting IT know you may need to change your General Ledger and other systems (and make sure you are in their long-term work plans), and inform legal and treasury about any debt covenants and contracts that mention US GAAP terms, and may need to be changed.

The key is not to commit to expensive changes – the external environment may not give you that flexibility, and many of the detailed changes are unknowable at this point anyway-but to get an understanding of the specific challenges you face, so that you will be in a good position to start detailed planning when its appropriate.

Eastern Europe’s worries are not unmanageable, they are simply not being managed.

Outsiders tend to lump the ex-communist world or eastern Europe together, as though a shared history of totalitarian captivity was the main determinant of economic fortune, twenty years after the empire collapsed. Though many problems are shared, the differences between the ex-communist countries are often greater than those that distinguish them from Old Europe. Read more...

Fortune 100 Best Companies to Work For

Rank	Company	Job growth	U.S. employees
1	NetApp	12%	5,014
2	Edward Jones	9%	34,496
3	Boston Consulting Group	10%	1,680
4	Google	40%	12,580
5	Wegmans Food Markets	6%	37,195
6	Cisco Systems	7%	37,123
7	Genentech	5%	10,969
8	Methodist Hospital System	1%	10,535
9	Goldman Sachs	2%	14,088
10	Nugget Market	22%	1,536
11	Adobe Systems	9%	4,255

For Full list please click here

As might be expected, the Big Four Accountancy firms all feature on the Fortune 100 Best Companies to Work For list, but all of them are lagging behind a smaller, less well known company.

Plante and Moran, a financial services firm based in Michigan USA, features on the list for the 11th year running and, coming in at 42nd, is the highest ranked certified public accounting firm.

According to Bill Hermann, managing partner at the firm, the secret of the company's success is based on a simple plan which has been exercised over its 85-year history.

"We strive to be 100 per cent jerk-free and that has allowed us to find and retain talented staff who provide quality service to our clients," he said.

In tough economic times it is even more important that clients are able to deal with accountants who are "smart, trained, motivated and happy to serve", he added.

Plante and Moran is the 12th largest accountancy firm in the US and also has offices in China and Mexico.

This puts it in perspective

More than a billion people are using the internet

THE number of people going online has passed one billion for the first time, according to comScore, an online metrics company. Almost 180m internet users—over one in six of the world's online population—live in China, more than any other country. Until a few months ago America had most web users, but with 163m people online, or over half of its total population, it has reached saturation point. More populous countries such as China, Brazil and India have many more potential users and will eventually overtake those western countries with already high penetration rates. ComScore counts only unique users above the age of 15 and excludes access in internet cafes and via mobile devices.

Will reducing interest rates help?

• by Robert Peston

There is a good deal in Evan Davis's remarks this morning on Today that all the fuss about whether the Bank of England should cut interest rates may be the equivalent of bald men arguing over who should have the comb - and his apology to my old friend Roger Bootle, a follicularly challenged economist, was priceless.

To return to my boring refrain of the past 18 months, the biggest problem for our economy is not the price of money but the availability of it. Banks are contracting the amount they lend. So the question is whether a cut in the Bank of England's policy rate to a historic low would increase the supply of credit.

In normal times, a cut in the Bank Rate would help to boost the flow of new lending. But right now it's not clear that a reduction would have much positive impact

The reason is that the main headache for the banks is that both regulators and markets are forcing them to hold more capital relative to their loans, their assets.

The risks of lending are perceived to have increased. So lenders to banks and also the FSA officials paid to stop banks falling over want them to hold more capital as a cushion against future credit losses.

Capital is scarce. The main source of it right now is us, taxpayers. Banks aren't keen to be nationalised to any greater extent than happened last year. So the route the banks are taking to boost the ratio of their capital to assets is to lend less, to deleverage (to use that ghastly euphemism).

Here's the good news. When interest rates are cut, that provides an opportunity for banks to generate capital. How so?

Well if banks fail to pass on the reduced cost of funds to borrowers, such as companies and those with mortgages, banks' profits increase, which in turn boosts capital (so long as banks don't pay out the profits as dividends). To put it another way, if banks make greater profits from lending that's one of the best incentives for them to lend more.

Here's the less good news. With interest rates so low, banks are under intense and understandable political and populist pressure to maintain interest rates for savers while still passing on the rate cut to borrowers.

In other words, they are under massive pressure to generate reduced profits from lending - which of course serves as a disincentive to lend.

And as the Bank of England's Bank Rate moves closer to zero, the louder is the clamour for the banks to keep rewarding savers while charging next-to-nothing for loans.

Which would squeeze profit margins till the pips squeak.

And there's a further drain on their profit margin as interest rates fall, which is that there's an unstoppable shrinkage in the margin between their average lending rate and the 0% rate banks always pay to the millions of us who keep some of our money in current accounts that never pay interest.

All of which is to say that cutting the Bank Rate now that rates are so low won't cure the disease that's afflicting the economy - the shortage of credit. And there's a risk that cutting rates to almost zero could make the illness worse.

Which is why it won't be too many weeks before we see policies that would be the equivalent of giving a comb to a hairy economist.

These, as I've been saying for some time, would involve taxpayers lending more to businesses and households, the further nationalisation of the credit-creation system.

What's still unclear is what form this nationalisation will take.

It could involve taxpayer guarantees for some bank loans. It could involve extracting loss-making assets or toxic loans from banks, to give the banks greater confidence that their capital won't be eroded. It could involve the state taking direct control of the provision of some credit to the real economy.

There's a massive amount of work on all this going on in the Treasury. And ministers are doing a great deal of agonizing about it all. The results of that agonising matter a great deal more than whatever decision is taken today by the Bank of England on interest rates.

China overtakes Germany

Many Chinese people have not benefited from the boom

The Chinese government has increased its estimate of how much the economy grew during 2007. Read original article.

The revision means China's economy overtook Germany's to become the world's third largest in 2007.

Gross domestic product expanded 13%, up from an earlier estimate of 11.9%, to 25.7 trillion yuan ($3.5 trillion).

The figures underscore China's emergence as an economic superpower, although the country's growth rate is expected to have dropped to 9% in 2008.

China's government is taking measures to try and ease the slowdown.

The government has launched a 4 trillion yuan ($586bn) stimulus package and has promised measures to help struggling exporters and vehicle and steel makers.

Individually, most of China's more than one billion people remain poor.

Germany's GDP per person was $38,800 in 2007 compared with $2,800 in China, which has wide disparities between rich and poor.

China's economy has grown tenfold in the past 30 years.

Merrill Lynch economist Ting Lu predicted that it will overtake Japan as the world's second largest economy in "only three or four years".

Trade credit insurance tightens

• by Robert Peston

An essential element in the government's forthcoming package to stem the pernicious shrinkage of credit in the economy will be measures to compensate for the devastating impact on many companies of the withdrawal of trade credit insurance.

That probably sounds deeply dull and technical. But please read on, because this stuff matters to all of us.

For smaller companies, the importance of trade credit insurance is often that they can't borrow from banks, unless they've insured their sales to corporate customers.

The banks make this stipulation because it absolves them from having to assess the credit-worthiness of their borrowers in detail - because at least part of the credit risk has been laid off to an insurance company.

So the availability of such insurance is literally a matter of life and death for many businesses.

Woolworths is one of the more extreme examples.

When insurers would no longer provide cover to Woolies' suppliers in the autumn, that was the penultimate nail in the coffin of the ailing general retailer - because suppliers insisted that Woolworths pay cash upfront to them for orders, which meant that Woolies was forced to draw on its borrowing facilities, which in turn took the retailer up to the limit of what its bankers were prepared to lend.

And the rest is the sorry story you know: the demise of a historic high street name that was forced to liquidate everything so that the bankers could get their money back.

The point is that trade credit insurance is central to hundreds of billions of pounds in trade and the provision of finance to companies of all sizes.

When it's withdrawn, as has been happening for months, small companies are unable to fulfil valuable orders placed by big companies and those bigger companies lose access to vital supplies.

So a rational decision by insurers to scale back their cover on sales to companies perceived as vulnerable to our economic contraction is rippling through the economy in a damaging way: cover is being withdrawn because we appear to be in a sharp recession, and its withdrawal is making that recession significantly worse.

Part of the problem is that the insurers seem to me to have massively underpriced the cover they provide. Just as banks charged ludicrously low rates of interest during the years of the credit bubble, so the trade credit insurers insured hundreds of billions of pounds of trade for tiny premiums.

According to statistics from the Association of British Insurers, there were £334m of premiums written by the insurers in 2007, covering £282bn of sales by British companies.

Or, to put it another way: insurers were receiving premiums equivalent to the turnover of a medium-size business to protect more than 20% of the output of the entire British economy.

Scary or what?

Those aggregated premiums were equivalent to a minute 0.1% of the sum insured - down from 0.26% in 1995. Which would only make economic sense in a world where there are never recessions.

One illustration that the premium was too low is that claims received by insurers in 2008 are likely to have been rather more than total aggregated gross premiums received in the previous year, extrapolating from trends in the first nine months of the year.

But the insurers have been protecting themselves from the worst losses by simply withdrawing cover for new orders to companies seen as weak. In other words, unlike insurance provided to you and me on our homes, for example, the trade credit insurers have been able to withhold protection as soon as they detected stormy conditions.

To restate the painful paradox: insurance designed to give confidence to companies that they would be paid by corporate customers is being scaled back in a way that's magnifying the woes of businesses big and small.

What's to be done?

Well, in France, a new system is being implemented whereby taxpayers are sharing the insurance risk with private-sector insurers on supplies to viable companies.

And I would expect the Business Department and the Treasury to implement a similar system of co-insurance by taxpayers.

But that can only be a short-term solution.

In the longer term, the supply of finance to small and medium-size businesses has to be overhauled, so that the viability of those businesses is no longer dependent on insurance that's only available when the sun is shining.

The Credit crunch in Numbers

More or Less BBC Radio 4 and iPlayer Subscribe to the podcast

As the downturn takes hold, BBC Radio 4's More or Less programme looks at the maths behind the credit crunch. Read original article.

Since 2007, presenter and economist Tim Harford has been exploring and explaining the numbers which have contributed to - and have characterised - the global economic downturn.

He met the mathematicians at the heart of the City - and found out why some say they are to blame for the financial crisis.

He uncovered the flaws of the bankers' bonus system, and discovered a mathematical error which might have led the banks into trouble.

He interviewed quantitative finance expert Paul Wilmott and The Financial Times journalist Gillian Tett.

And he met the guardians of what could be the financial world's most important number.

You can listen to all of Tim's reports here.

PAUL WILMOTT, QUANTITATIVE FINANCE EXPERT

Paul Wilmott is a lecturer in financial mathematics and runs the profession's most popular website.

He is a fan of quantitative finance - but he thinks that its misuse has played a part in creating the current banking crisis.

In November 2007, More or Less asked whether the financial mathematicians known as "quants" - short for quantitative analysts - were to blame for what was then being termed "the credit squeeze".

WHO ARE THE QUANTS?

Paul Wilmott discussed his concerns with Professor William Perraudin of the Tanaka Business School at Imperial College London.

Tim Harford chaired the discussion.

The risks of risk management

In December 2008, Tim invited Paul Wilmott back to talk about the problems in more detail.

Banks and hedge funds rely on highly-paid mathematicians and economists - "quants" - to evaluate risk.

So why did they not they see the credit crunch coming?

Paul Wilmott says some mathematicians have a tendency to get fixated on the numbers, failing to think about the big picture.

RISKY RISK MANAGEMENT

He posed a scenario.

Imagine you are at a magic show. The magician takes an ordinary pack of 52 playing cards, and gives it to a man in the audience to shuffle. He then asks a volunteer to think of a card. "The ace of spades," she replies.

The magician turns to the man with the pack of cards and removes a single card from the deck. What is the probability that the card is the ace of spaces?

To hear the answer listen to the interview, or read Paul Wilmott's article on the risks of risk management.

A fundamental mathematical error

Paul Wilmott says an additional cause of the credit crunch is that people simply got their sums wrong.

GETTING THE SUMS WRONG

He told More or Less these errors might have contributed to the mispricing of financial derivatives, and thus to the travails of the banks, the credit crunch, and the economic downturn.

The maths of the bonus system

Many traders were paid bonuses if they made money.

And yet, collectively, their trades bankrupted some banks and nearly bankrupted many more.

THE TRADER'S DILEMMA

Why did traders, paid for performance, all make the same mistake at the same time?

Paul Wilmott set out the trader's dilemma.

AT HOME WITH THE QUANTS

In October 2007, Tim Harford got a glimpse into the world of the quants.

The most successful of these talented mathematicians will come up with mathematical formulae that make them and their bank or hedge fund employers millions of pounds per year.

They are highly secretive about their work, not wanting others to know the details of their systems.

MEET THE QUANTS

But one of them, William Hooper, invited Tim Harford into his beautiful London home.

Read more about quantitative analysts

A trader's apology

William Hooper has since left the world of finance to start his own business.

He has been reflecting on the global economic problems and the question of who is to blame - read A trader's apology.

GILLIAN TETT, THE FINANCIAL TIMES

Gillian Tett is an assistant editor of the Financial Times and oversees the global coverage of the financial markets.

Five years ago, she was shocked to discover what she says could best be described as an iceberg in the middle of the City.

The role of the media

She was studying media coverage of the City and began to realise journalists were doing lots of stories on stocks and shares, mergers and acquisitions, but nothing on what had become a much bigger part of finance - the credit and derivative markets.

She says business journalists were simply not covering the City in a representative way.

THE FINANCIAL ICEBERG

You had a small part of the financial system bobbing above the water but a vast shadowy mass of activity pretty much hidden beneath the waves.

And hidden not just from ordinary people, but hidden from politicians, from many regulators, and unfortunately from much of the media too.

UNDERSTANDING LIBOR

The London Interbank Offered Rate - LIBOR - has been dubbed the financial world's most important number.

Published each day in the UK, it is the rate at which the banks lend to each other and it influences over $150 trillion (£100 trillion) of funds worldwide.

The Libor number is compiled by putting together the estimates of the cost of borrowing from at least eight banks, and then discarding the highest and lowest of the sample to leave an average rate which then becomes the daily 'Libor Fix'.

LIBOR

But the figure's validity is being questioned, with critics dubbing it "the rate at which banks won't lend".

Tim Harford was granted exclusive access to the operations centre where the daily rate is compiled.

More or Less is broadcast on BBC Radio 4. To find out more, visit the programme website, or subscribe to the More or Lesspodcast.

IFRS Around the World

Updated Map of Status of International Financial Reporting Standards 3/1/2009

• RED IFRS APPROVED
• ORANGE STATED MOVE TO IFRS ADOPTION - BRAZIL, CANADA...
  
• YELLOW ADAPTING TO IFRS - USA, MEXICO, CHINA

• See original article dated 27/08/2009
• IASB Website

ORIGINAL POST 27/08/2007

• The US SEC announced that it will issue a Proposing Release this summer that will request comments on proposed changes to the SEC’s rules. The changes would allow the use of IFRSs as issued by the IASB in financial reports filed by foreign companies registered in the US. Currently, foreign companies are required to reconcile their financial statements according to US generally accepted accounting principles (GAAP). The SEC also plans to issue a Concept Release on the question whether all registrants (including US companies) should be able to report under either IFRSs or US GAAP.

• The Council of the Institute of Chartered Accountants of India decided in July to adopt IFRSs with effect from the accounting periods commencing on or after 1 April 2011, for public interest entities such as listed entities, banks, insurance and large entities.

• China announced that its central-level State-Owned Enterprises and large to mid-scale companies will all adopt China’s new accounting standards that comply with IFRSs by the end of 2009. The decision does not include SMEs, which make up the majority of China’s companies.

• The Brazilian Market Regulatory Agency (CVM) published in July an instruction that openly traded Brazilian companies will have until 2010 to present their consolidated statements in accordance with IFRSs. From 2007, listed companies can opt to present their consolidated financial statements based on IFRSs.

• The Korean Financial Supervisory Commission and the Korea Accounting Standards Board unveiled a roadmap for the adoption of IFRSs at a ceremony in Seoul. All companies in Korea, apart from financial institutions, will be permitted to apply IFRSs, as adopted by Korea, by 2009. Full adoption of IFRSs for listed companies, including financial institutions, will become mandatory by 2011.

• Representatives of the IASB have attended the regional standard-setters meeting in Manila and met standard-setters from Brunei, Indonesia, Malaysia, Philippines and Taiwan.

The IASC Foundation held its third IFRS conference in Zurich on 23 and 24 May. Nearly 400 people from 42 countries attended. ‘Delegates appreciate the opportunity to discuss theirspecific circumstances with Board members and senior staff’, said Michael Wells, Senior Manager of the IASC Education Initiative, who organised the conference. ‘Our conferences are aimed at anybody who is involved in or affected by IFRSs’, underlined Wells. ‘It provides the opportunity to meet and discuss IFRS developments with IASB members and project managers.’ The Zurich conference was opened by Sir David Tweedie, Chairman of the IASB. The first day was dedicated to presenting views on IFRSs from the analyst and preparer community.Presentations were given by senior representatives from Novartis, UBS and Standard & Poors,followed by discussion rounds. Keynote speaker for the conference was the Chief Accountant of the US Securities and Exchange Commission (SEC), Conrad Hewitt. His speech focused on the underpinnings of the international financial reporting system. Of particular interest were the next steps the SEC intends to take relating to the acceptance of IFRSs.The second day focused on the IASB’s active agenda projects. The programme began with a general presentation on the Board’s recent activities followed by five intensive break-out sessions on developments in major projects: the conceptual framework, the reporting entity,consolidations and joint ventures, financial statement presentation, and business combinations.‘Feedback is invaluable, and has been very positive’, said Wells. He added ‘We listened to comments from past conferences, and this year extended the duration of break‑out sessions to allow more interaction. Furthermore, we held separate half-day pre-conference workshops on specialised aspects of financial reporting.’ In August this year the conference and workshops will, for the first time, take place in Asia, being hosted in Singapore. ‘We have decided to change location every year to underline the Foundation’s global objective’, said Wells. But this is not the only effort to be inclusive. ‘We also offer discounts of up to 70 per cent to people from emerging and developing countries’, he added.

Resources

	Accounting Bodies (Worldwide list)
	CICA IFRS
	CIMA
	Deloitte IFRS
	Domain Search
	Dun & Bradstreet
	Economist Chart Gallery
	Economist Intelligence Unit
	EDGAR
	EY IFRS
	FASB Financial Accounting Standards Board
	Harvard ManageMentor Plus
	IASB International Accounting Standards Board
	IAS Seminars
	IFAC Net
	IFRS.com
	IFRS.com Blog
	International Business Research
	Lexington Seminars
	Management Consultancy
	Marketwatch
	McKinsey
	MMU Business School
	National Statistics Offices (Worldwide list)
	PWC IFRS
	SEC Securities and Exchange Commission
	Translation Services
	World Bank
	World Check
	World Economic Forum
	World Trade Organisation