International Financial Reporting Standards IFRS Adoption and Implementation

International Financial Reporting Standards IFRS Adoption and Implementation in the World and in Latin America Seminario IFRS Colombia November 2011 Amaro Gomes IASB member Jan Engstrom IASB member IFRS Foundation The views expressed in this presentation are those of the presenter, not necessarily those of the IFRS Foundation or the IASB © 2010 IFRS Foundation. 30 Cannon Street | London EC 4 M 6 XH | UK. www. ifrs. org

Agenda 2 • Introduction • Global convergence: Progress and challenges Jan Engstrom • Implementing IFRS and IFRS for SMEs Amaro Gomes IFRS South America Conference (Sao Paolo) October 2011

International Financial Reporting Standards Global convergence: Progress and challenges Jan Engstrom July 2011 Project update and the future work plan

The IFRS Objective IFRS to be : • the single set of accounting standards • used worldwide • providing high-quality, • transparent • and comparable information For investors and other users of financial information © 2010 IASC Foundation. 30 Cannon Street | London EC 4 M 6 XH | UK. www. iasb. org 4

IFRS around the World today 120(+) countries permit or require use of IFRS 70 (+) countries use the IFRS for SME 5

6 © 2008 IFRS Foundation. 30 Cannon Street | London EC 4 M 6 XH | UK. www. ifrs. org

Why IFRS? 7 ?

Why IFRS? Investors are acting on a global market !! 8

Why IFRS? • National standards don’t work on a global market • Cross boarder business is hindered by national standards 9

Benefits to Capital Markets! • Credibility of local market to foreign investors • More cross-border investment • Efficient capital allocation • Comparability across political boundaries • Facilitates global education and training 10

Benefit to companies! • Lower cost of capital • Facilitates raising capital abroad • Integrated IT systems • “One set of books” + easier consolidation • Better understanding of financial statements from business partners abroad 11

FASB/IASB Agreement - 2002 • Remove major differences • Align Agendas (new joint standards where significant improvement required) • Interpretation 12

IFRS – FASB Convergence Process 13 2001 – 04 Reaction to investor desire for improved, global standards following Asian crisis and US financial scandals IASB is established; enters Norwalk Agreement with FASB 2005 – 07 Growing IFRS adoption by major economies; continued US support and recognition of IFRSs as being high-quality standards Mo. U accelerating convergence 2008 - 09 Financial crisis; G 20 pressure for convergence leading to adoption; focus on remaining major joint projects Updates to Mo. U with 2011 targets and SEC roadmap 2010 - 2011 Mo. U timetable adjusted to ensure critical issues are completed. Further SEC update to roadmap © 2010 IASC Foundation. 30 Cannon Street | London EC 4 M 6 XH | UK. www. iasb. org SEC removes reconciliation requirement Modified convergence strategy prioritizes major projects for completion

G 20 Summit – 25 September 2009 14 • Redouble efforts to: – achieve a single set of high quality, global accounting standards within the context of their independent standard setting process – complete convergence project by June 2011. • IASB’s institutional framework should further enhance the involvement of various stakeholders. • G 20 acknowledge that there could be differences between capital requirements and accounting rules

Mo. U projects completed in 2011 • Consolidations / Joint Ventures • Pensions • Fair Value Measurement 15

Challenges ahead 16 • Political turbulence • Implementation issues • Governance • Funding • Acceptance of an independent global standard setter and its work program

International Financial Reporting Standards Implementing IFRS and IFRS for SMEs Amaro Gomes July 2011 Project update and the future work plan

Implementing IFRS: Few current important debates • 1. Transparency v Financial Stability • 2. Ideology – Fair value v historical cost – IFRS v US GAAP – Performance presentation • 3. IFRS – international or regional? • 4. ADOPT don’t ADAPT • 5. Principles v rules 18

Principle-based standards Principles 19 Rules

A principle based standard • No exceptions • Core principles (objectives) • No inconsistencies • Tied to conceptual framework • Judgement • Minimum guidance 20

Implementing IFRS: Challenges § Commitment => Decision: leaders, law, regulation § Responsibility § Stakeholders involvement § Strategic planning: date for adoption § Opportunity (economic) : investors apetite, expansion (emergent markets), demand for investments (eg. infrastructure) © 2010 IFRS Foundation. 30 Cannon Street | London EC 4 M 6 XH | UK. www. ifrs. org

Implementing IFRS: Challenges § Solid financial system § Structure and expansion of capital markets. . . § Coordination: standards setter, regulators, and supervisors (internal and regional) § Training § Educational programs © 2010 IFRS Foundation. 30 Cannon Street | London EC 4 M 6 XH | UK. www. ifrs. org

Implementing IFRS: Challenges § Divergencies between local GAAP and IFRS: identify and reduce assymmetries § Consistent application of IFRS: principles- versus rules-based => professional judgment § Transition: systems, processes, professionals § Actively participate in developing IFRS § Tax neutrality (identified as key in many countries) © 2010 IFRS Foundation. 30 Cannon Street | London EC 4 M 6 XH | UK. www. ifrs. org

Implementing the IFRS for SMEs 24 Good Financial Reporting Made Simple. • 230 pages (full IFRSs are 3, 000+) • Simplified IFRSs – built on an IFRS foundation • Specific for SMEs – User needs for information about short-term cash flows, liquidity, and solvency – Costs and SME capabilities Copyright © 2011 IFRS Foundation | 30 Cannon Street | London EC 4 M 6 XH UK | www. ifrs. org

Who is the Standard aimed at? 25 Millions of companies (over 99%)! • 52 largest stock exchanges have about 50, 000 listed companies • Europe: 28 million SMEs • USA: 25 million • UK: 5 million • Chile: 1 million • Brazil: 6 million Copyright © 2011 IFRS Foundation | 30 Cannon Street | London EC 4 M 6 XH UK | www. ifrs. org

Jurisdiction plans for adoption 26 Today (December 2011), to the best of our knowledge: – 74 jurisdictions have either adopted the IFRS for SMEs or stated a plan to adopt it within the next three years – This includes in Latin America… Copyright © 2011 IFRS Foundation | 30 Cannon Street | London EC 4 M 6 XH UK | www. ifrs. org

IFRS for SMES: Plans for adoption in Latin America 27 • South America: Argentina, Brazil, Chile, Guyana, Peru, Suriname, Venezuela • Caribbean: Antigua & Barbuda, Aruba, Bermuda, Bahamas, Barbados, Cayman, Dominican Republic, Guadeloupe, Jamaica, Montserrat, St Kitts. Nevis, St Lucia, Trinidad • Central America: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama Copyright © 2011 IFRS Foundation | 30 Cannon Street | London EC 4 M 6 XH UK | www. ifrs. org

The future 28 2010 IFRS in +120 countries and US convergence programme 201? IFRS in +150 countries and US broadly converged Vision A single set of high quality global accounting standards

Thank you. Questions or comments? Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the presenter. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation. © 2010 IFRS Foundation. 30 Cannon Street | London EC 4 M 6 XH | UK. www. ifrs. org 29