uuppddaattee ooff uuss aanndd iiffrrss mmiinniinngg … · uuppddaattee ooff uuss aanndd iiffrrss...
Post on 21-Feb-2019
214 Views
Preview:
TRANSCRIPT
Update of US and IFRSUpdate of US and IFRSMining GAAPMining GAAP
September 23September 23rdrd, 2010, 2010
Presenters:Presenters:PaulPaul FitchettFitchettJames TerryJames Terry
PricewaterhouseCoopers
- Convergence Timeline- IFRS Standards Effective in 2010- US GAAP Standards Effective in 2010- US Financial Statement Updates- Upcoming US GAAP Updates- Upcoming IFRS Projects- Key IFRS / US GAAP Differences
Contents
Slide 2
Convergence Timeline
Slide 3
Currently Anticipated US GAAP / IFRS Convergence Timeline
* The consolidation project has been divided into two projects: one focused on investment companies and one that is more comprehensive.The FASB will decide how it wants to proceed on a comprehensive project after it performs additional stakeholder outreach.
** These are IASB projects that have the potential to impact the views of the FASB as it evaluates existing U.S. GAAP in these areas.
*** IASB timeline. The FASB will decide, once the IASB issues its exposure draft, how best to proceed and plans to obtain stakeholderfeedback on the IASB proposal.
Emissions trading schemes
IASB - contingencies**
IASB - insurance contracts***
IASB - postemployment benefits**
Fin. instr. with characteristics of equity
Discontinuedoperations
Financial statement presentation
Consolidation - investment companies*
Balance sheet netting
Fair value measurement
Statement of comprehensive income
Leases
Revenuerecognition
Financial instruments
Pre-exposuredraft deliberations Exposuredraft issuedor expected Comment periodandredeliberations Finalstandardexpected
Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q42011 2012
Slide 4
Convergence Resources
- www.pwc.com/usgaapconvergence.com
- Upcoming webcasts
- Publications
Slide 5
IFRS Standards Effective in 2010
Slide 6
PricewaterhouseCoopers
• Additional exemptions added for entities:
− Applying full cost accounting for oil and gas assets from retrospective application of IFRS
− With existing lease contracts from reassessing the classification of those contracts in accordance with IFRIC 4
• Effective for years commencing after January 1, 2010
IFRS 1 – Additional Exemptions for First-time Adopters
Slide 7
PricewaterhouseCoopers
• New requirements related to business combinations and non-controllinginterests
• Key Changes:
− Definition of a business including additional guidance for development stage enterprises
− Consideration
− Fair value of assets and liabilities acquired
− Step acquisition and non-controlling interest
− Post-acquisition accounting
− Disclosures
• Effective for annual reporting periods commencing after July 1, 2009
IFRS 3 (Revised) & Business Combinations & IAS 27 (Revised)
Consolidated and Separate Financial Statements
Slide 8
PricewaterhouseCoopers
• IFRS 2: Share-based Payments
• IFRS 5: Non-current Assets Held for Sale and DiscontinuedOperations
• IFRS 8: Operating Segments
• IAS 1: Presentation of Financial Statements
• IAS 17: Leases
• IAS 36: Revenue
• IAS 38: Impairment of Assets
• IAS 39: Financial Instruments
• IFRIC 9: Reassessment of Embedded Derivatives
• IFRIC 16: Hedges of Net Investment in a Foreign Operation
IFRS Annual Improvements Project
Slide 9
US GAAP Standards Effective in 2010
Slide 10
HealthCare Reform
Patient Protection and Affordable Care Act (the PPACA) - March 23, 2010,Health Care and Education Reconciliation Act of 2010 (HCERA) - March 30,2010
• Many provisions of the Act do not take effect until years in the future;however, their expected impact must be reflected in current reporting periods.
− Postretirement benefits accounting
• Plan changes, once adopted, should be accounted for as plan amendmentswith the effect on the APBO accounted for as prior service cost/credit
Slide 11
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act – July 21, 2010
• Requires over 533 rules, 60 studies, and 93 reports to clarify and implementthe Act’s requirements:
− Significant uncertainty regarding timing of implementation
• Exempts non-accelerated filers from compliance with SOX Section 404(b)requirements (still requires management attestation)
• Includes clawback provisions into incentive compensation for executiveofficers triggered by certain accounting restatements
Slide 12
Dodd-Frank Act (continued)
• Section 1504
− Payments made by the registrant to US and foreign governments
− Likely 2012 requirement
• Section 1503
− Mine safety disclosure information and pending actions before the Federal Mine Safety and Health Review Commission
− Currently effective
• Section 1502
− Disclosure of “conflict minerals” originating in the DRC
− Likely 2012 requirement
Slide 12
Example Form 8-K disclosure – MSHANewmont Mining Corporation
Slide 13
Example Form 10-Q / 10-K disclosure – SafetyCloud Peak Energy (Item 5 – Other Information)
Slide 14
Dodd-Frank Act (continued)
• Section 1504
− Payments made by the registrant to US and foreign governments
− Likely 2012 requirement
• Section 1503
− Mine safety disclosure information and pending actions before the Federal Mine Safety and Health Review Commission
− Currently effective
• Section 1502
− Disclosure of “conflict minerals” originating in the DRC
− Likely 2012 requirement
Slide 12
Transfers and Servicing
ASU 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfersof Financial Assets
• Recognition: on- or off-balance sheet treatment?
− Has a portion of the receivable been transferred?
− Transfer when consideration includes a deferred purchase price (DPP)
• DPP needs to be subsequently accounted under Investments-Debt andequity securities guidance
• Statement of Cash Flow – Operating or Investing?
− Receivable sold in entirety for cash and DPP
− SEC staff views: may be classified as operating subject to an accounting policy election
Slide 15
Consolidation
ASU 2009-17, Consolidation (ASC Topic 810): Improvements toFinancial Reporting by Enterprises Involved with VariableInterest Entities
• Significantly changes the consolidation rules as they relate tovariable interest entities (VIEs)
− Effective January 1, 2010 for calendar-year companies
− Changes the model for who should consolidate a VIE
− Addresses how often this assessment should be performed
• There are numerous implementation issues that companiesneed to consider triggered by the conclusion to consolidate
Slide 16
Consolidation (continued)
• ASU 2010-02, Consolidation (ASC Topic 810): Accounting and Reporting forDecreases in Ownership of a Subsidiary – a Scope Clarification
− Clarifies what decrease in ownership provisions apply to
− Clarifies what decrease in ownership provisions do not apply to
• Internal controls of consolidated VIE to be assessed
Slide 17
Fair Value
• ASU 2010-06 requires the following new disclosures:
− Details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers; and
− Gross presentation of activity within the Level 3 roll forward, presenting separately purchases, sales, issuances, and settlements.
• Requires fair value disclosures by class of assets and liabilities rather thanby major category, based on the nature and risks of the assets and liabilities.
• Reporting entities must disclose the valuation technique used and the inputsused in determining the fair values of each class of assets and liabilities
• The ASU was effective for 2009, except for the gross presentation of theLevel 3 roll forward, which is required for 2010.
Slide 18
Highly Inflationary Economies - Venezuela
ASU 2010-19, Foreign Currency (Topic 830) Foreign Currency Issues:Multiple Foreign Currency Exchange Rates
• Venezuela has met the threshold for being a highly inflationary, andtherefore calendar year entities will begin applying highly inflationaryaccounting beginning January 1, 2010.
• SEC has requested enhanced disclosures.
• Application of ASC 30-10-45-11 accounting.
Slide 19
Stock Compensation
ASU 2010-13, Compensation – Stock Compensation (Topic 718): Effect ofDenominating the Exercise Price of a Share-Based Payment Award in theCurrency of the Market in Which the Underlying Equity Security Trades
• Clarifies classification as equity for certain awards
Slide 20
Distributions to Shareholders
ASU 2010-01, Equity, (ASC Topic 505): Accounting for Distributions toShareholders with Components of Stock and Cash
• Distinction between share issuance and stock dividend.
• Effective for interim and annual periods ending on or after December 15,2009, and should be applied on a retrospective basis.
Slide 21
US Financial Statement Updates
Slide 22
Subsequent Events
ASU 2010-09, Subsequent Events (ASC Topic 855): Amendments to CertainRecognition and Disclosure Requirements
• Removed requirement for SEC filers to disclose the date through which anentity has evaluated subsequent events
• If the financial statements of an entity, other than an SEC filer, are revised,as a result of (a) correction of an error or (b) retrospective application of U.S.generally accepted accounting principles, the entity should retain the initialdate, but also disclose the date through which subsequent events havebeen evaluated in the revised financial statements
Slide 23
Climate Change
Interpretive Release No. 33-9106, Commission Guidance RegardingDisclosure Related to Climate Change
• Obligation under existing federal securities laws and regulations to considerclimate change and its consequences in disclosures
• Disclosure requirements may require a company to disclose the impact thatbusiness or legal developments related to climate change may have on thebusiness:
− These disclosure rules cover a company’s risk factors, business description, legal proceedings and management discussion and analysis.
Slide 24
Non-GAAP Measures
• Updated SEC Guidance – 32 Compliance and Disclosure Interpretations
• Encourages consistency in all communications.
• Removes certain constraints that discouraged companies from disclosingimportant non-GAAP measures in SEC filings (e.g. excluding recurring items)
• Companies prohibited from disclosing misleading non-GAAP measures andmust continue to present the most directly comparable GAAP measures withequal or greater prominence, along with a reconciliation.
• Required to disclose the reason why the non-GAAP measures provideuseful information to investors and any other material ways managementuses the measures (if any).
Slide 25
XBRL (eXtensible Business Reporting Language)
Phase-in Schedule:
Date Issuer Description
June 15, 2009 Domestic and Foreign Large Accelerated Filers using US GAAPwith Worldwide Public Common Equity Float above $5 billion as ofthe End of the Second Fiscal Quarter of their most recentlycompleted Fiscal Year
June 15, 2010 All Other Domestic and Large Accelerated Filers using USGAAP
June 15, 2011 All Remaining Filers using US GAAP, including Smaller ReportingCompanies
June 15, 2011 Foreign Private Issuers with Financial Statements prepared inaccordance with IFRS as issued by the IASB
Slide 26
Proxy Disclosure Enhancements
• Effective date: February 28, 2010
• Amendments require enhanced disclosures in the areas of:
− compensation policies and practices that present material risks to the company;
− stock and option awards of executives and directors;
− director and nominee qualifications and legal proceedings;
− board leadership structure;
− the board’s role in risk oversight; and
− potential conflicts of interest of compensation consultants that advise companies and their boards of directors
Slide 27
Statement of Comprehensive Income
• Joint Project of the IASB and FASB
• On May 26, 2010, the Board issued a proposed Accounting StandardsUpdate, Statement of Comprehensive Income. The comment period ended onSeptember 30, 2010.
See further detail in IFRS update
Slide 28
Upcoming US GAAP Updates
Slide 29
Accounting for Multiple Foreign Currency Exchange RatesEITF Issue
• In countries with currency exchange controls, a multiple exchange ratesystem sometimes exists where companies are able to access certainexchange rates for different types of transactions.
• Should a company re-measure transactions at one rate and translate itslocal currency financial statements at a different rate?
• Task Force to consider whether a company should use multiple exchangerates when a company has the intent and ability to access multiple rates, orwhen the existence of multiple exchange rates represents an unusualcircumstance which might indicate that the a company should use the samerate for re-measurement and translation.
− The Task Force asked the FASB staff to develop factors to consider when assessing whether an unusual circumstance has occurred.
Slide 30
Loss ContingenciesFASB Exposure Draft
• Most common contingencies expected to be in scope are litigation,environmental remediation, withdrawal liabilities related to a multi-employerpension plan, self-insurance liabilities, certain non-income-based taxuncertainties, and warranty liabilities
• A company should disclose publicly available information (quantitative andqualitative) to better explain the nature and potential magnitude of a losscontingency.
• A company may aggregate disclosures about similar contingencies (forexample, by class or type). Basis for aggregation should also be disclosed.
• Disclosure of certain remote contingencies may be necessary to alert usersabout a company's vulnerability to a potential severe impact due to thecontingency's nature, potential timing, or potential magnitude.
Slide 31
Goodwill ImpairmentEITF Issue
• Goodwill reminders and tips
− Fresh look at determining the fair value of your reporting units
− Assignment of assets and liabilities
− Include deferred tax assets and liabilities in the carrying value of a reporting unit in step one of the goodwill impairment test
− In step two of the goodwill impairment test, first measure the fair value of recognized and unrecognized assets and liabilities
− At risk for failing step one of the goodwill impairment test? Consider forward looking disclosures
Slide 32
IFRS Projects and Pending Standards
Slide 33
PricewaterhouseCoopers
• Income Taxes
• Lease Accounting
• Joint Arrangements
• Revenue Recognition
• Financial Instruments
• Measurement of Liabilities
• Employee Benefits
• Consolidation
• Financial Statement Presentation
IASB Proposed Timeline for Changes –What Impacts Mining?
Slide 34
PricewaterhouseCoopers
• Convergence project with FASB
• Exposure Draft issued March 31, 2009
• Decided subsequently not to proceed with Exposure Draft following thecomment period
• IASB is considering limited scope amendments to IAS 12
• An Exposure Draft of the limited scope amendments is expected in the thirdor fourth quarter of 2010
• Final limited scope amendments to IAS 12 are expected in the first orsecond quarter of 2011
Income Taxes – Exposure Draft Withdrawn
Slide 35
PricewaterhouseCoopers
• IASB is considering limited scope amendments to IAS 12 in the followingareas:
− Uncertain Tax Positions (UTPs)
− Deferred tax on re-measurement of investment property at fair value
− Recognition of a deferred tax asset in full and an offsetting valuation allowance to the extent necessary
− Guidance on assessing the need for a valuation allowance
− Guidance on the meaning of substantive enactment
− The allocation of current and deferred taxes within a group that files a consolidated tax return
Income Taxes– Exposure Draft Withdrawn
Slide 36
PricewaterhouseCoopers
• Single right-of-use model proposed, rather than finance vs. operating leasemodel
• Proposed model reflects asset and liabilities arising from all lease contracts
• Includes contingent cash flows in measurement
• Adjust for changes in estimates and re-measurements
• Exposure Draft is open for comment until December 15, 2010
Lease Accounting – Exposure Draft (August 2010)Lessee Accounting
Slide 37
PricewaterhouseCoopers
• Standard expected Q3 2010
• Definition of a joint venture changing
• Proportionate consolidation of corporate joint ventures no longer an option
• Substance over from approach
• Transitional provisions to ease application
Joint Arrangements – Exposure Draft (September 2007)
Slide 38
PricewaterhouseCoopers
• Single revenue recognition model
• Core principal is recognize revenue when goods or services are transferredto the customer in the amount of consideration the Company expects toreceive from the customer
• Identify separate performance obligations for distinct goods and services
• Probability weighted estimates of the consideration expected to be received
• Customer credit risk in measurement of revenue
• Allocate transaction price in proportion to estimated stand-alone price
• Expense acquisition costs
Revenue Recognition – Exposure Draft (June 2010)
Slide 39
PricewaterhouseCoopers
What’s Changing under IFRS for Financial Instruments?
IFRSChanges
Classification &Measurement
Impairment
HedgeAccounting
Others
Derecognition
Fair ValueMeasurement
• IFRS 9: Financial Instruments:Mixed Measurement approachbased on business model andfinancial asset characteristics
• Financial Liabilities ExposureDraft: Fair Value Options
• Incurred loss replacedwith expected cashflow approach
• Earlier recognition ofcredit losses
• Extensive disclosures
• A single approachto derecognitionbased on control
• Aim to simplify requirements
• May replace fair value hedgeaccounting with an approachsimilar to cash flow hedgeaccounting
• Clarifies the definition of fairvalue and enhances disclosures
• Largely consistent with FAS 157and IASB’s Expert AdvisoryPanel on measuring FV inInactive Markets
• Interaction with otherdevelopments
− Debt vs Equity
− Consolidation
− Insurance Contracts
Slide 40
PricewaterhouseCoopers
• ‘Probability of Outflows’ criterion will be removed
• Account for uncertainty in amount and timing of outflows by using aprobability weighed average
• The amount recognized is the amount of the entity would rationally pay atthe measurement date to be relieved of the liability
Measurement of Liabilities – Exposure Draft (January 2010)
Slide 41
PricewaterhouseCoopers
• Removal of corridor approach, immediate recognition in OCI required
• Presentation consistency to increase comparability
• Enhanced disclosures focused on risk
Defined Benefit Plans – Exposure Draft (April 2010)
Slide 42
PricewaterhouseCoopers
• Standard expected Q4 2010
• Replace IAS 27 and SIC-12 with one source of guidance on consolidation
• Control is “the power to direct the activities of another entity to generatereturns for the reporting entity”
• Guidance on control without majority of voting rights, investment companies,structured entities and agency / principal relationships
Consolidation – Exposure Draft (December 2008)
Slide 43
PricewaterhouseCoopers
• Statement of Comprehensive Income – Exposure Draft (May 2010)
− Required profit or loss and OCI to be shown as separate components of the statement of comprehensive income
− Require separate presentation of OCI items that will and will not be recycled
• IAS 1 / IAS 7 – Exposure Draft scheduled for Q2 2010
− Comprehensive change in format of primary financial statements
− Proposal to present primary financial statements by operating, investing and financing activities similar to current Statement of Cash Flows
• IFRS 5 – Exposure Draft (September 2008)
− Convergence with the FASB on definition of discontinued operations
Financial Statement Presentation Changes
Slide 44
PricewaterhouseCoopers
• Harmonized global reserves / resources definitions
• All exploration, evaluation and subsequent development expenditures arecapitalized when legal right to explore is acquired
• More onerous and details disclosures required (current or fair values ofreserves and resources, production revenues by commodity, disaggregatedcosts summaries)
Extractive Activities Project – Discussion Paper (April 2010)
Slide 45
Key IFRS / US GAAP Differences
Slide 46
PricewaterhouseCoopers
• Exploration and Evaluation Costs
• Deferred Stripping
• Joint Arrangements
• Income Taxes
• Impairment
• Mine Closure / Asset Retirement Obligations
Common Mining US GAAP vs. IFRS Differences
Slide 47
PricewaterhouseCoopers
• Expense under US GAAP until reserves and resources declared
• IFRS 6 allows the continuation of an entity’s existing policy, which includesthe capitalization of exploration expenditure
• Extractive industries project will supersede IFRS 6 when final standardissued
Exploration and Evaluation Expenditure
Slide 48
PricewaterhouseCoopers
• Varied practice under IFRS
• US GAAP (EITF No. 04-6) specifies stripping costs incurred duringproduction are included in the cost of inventory
• Canadian GAAP (EIC 160) requires capitalization if there is a ‘betterment’ ofan asset
• IFRIC currently considering the issue
• Staff Proposal:
− Will allow capitalization of stripping costs in the production phase of a surface mine if it adds to an existing asset
− Unit of account is the stripping campaign
− Strip ratio approach to be disallowed
− Cost of stripping campaign allocation to specific section of ore body
− Prospective application
Stripping Costs – Draft IFRIC (expected Q3 2010)
Slide 49
PricewaterhouseCoopers
• Under US GAAP, the entity must first be considered if it is a VIE
• US GAAP generally only allows equity accounting
• Currently, equity accounting and proportionate consolidation is stillacceptable under IFRS
• Convergence project between IASB and FASB will harmonize new standard
Joint Arrangements
Slide 50
PricewaterhouseCoopers
• Key Differences:
− No guidance on uncertain tax positions
− No exemption for recognition of temporary differences on non-monetary assets
− Deferred tax on intragroup profits
− Initial acquisition exemption
− Tax rates used may be different under IFRS and US GAAP
− Generally assets and liabilities have only one tax basis under US GAAP, whereas under IFRS there may be more than one
− Under IFRS all subsequent movements in equity-related deferred tax assets and liabilities are traced back to equity, whereas under US GAAP itis generally recognized through the income statement
− IFRS requires all deferred taxes to be presented as non-current
Income Taxes
Slide 51
PricewaterhouseCoopers
• Need to revisit grouping of assets into CGUs, which could result inimpairment testing at a lower level than that currently required under USGAAP
• IFRS uses a one-step test (based on discounted cash flows or fair valueless costs to sell) as opposed to the two-step approach required under USGAAP
• Reversals of impairment are prohibited under US GAAP, but are requiredunder IFRS when certain conditions are met (excluding goodwill)
Impairment Testing
Slide 52
PricewaterhouseCoopers
• Includes constructive obligations, not just legal obligations
• Re-measure the obligation at each reporting period, using prevailingassumptions, including discount rate
Mine Closure and Rehabilitation Provisions
Slide 53
top related