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Moss-Adams: IFRS webinar on SME’s(Part2)

September 4th, 2009 Comments off

            Yesterday I covered the opening segment on my coverage of the Moss-Adams webinar on IFRS for SME’s. As a quick review, the overall definition of an SME, or Small Medium Enterprise is one that publishes financial statements for external customers, has no “Public Accountability” or fiduciary responsibility, and is a private entity. As the classification currently stands, there is no threshold on the level of revenues for the company; only that it is private in organizational structure. While some of the basic elements of general IFRS were covered, I’ll itemize some of the points that were covered on the call yesterday.

§  GAAP is a Rules-based set of guidelines whereas IFRS is a Principles-based structure.

§  LIFO is allowed under GAAP whereas it IS NOT allowed under IFRS.

§  GAAP calls for inventory valuations that are the lower of cost/market versus a lower of cost or Net Realizable Value under IFRS.

§  Unlike GAAP which DOES NOT allow for the amortization of goodwill, IFRS DOES ALLOW for this, along with the inclusion of a 1-step impairment test.

§  Unlike GAAP which does not allow for the reversal of impairments, IFRS DOES ALLOW for a reversal, except for in the case of goodwill.

§  Under GAAP, R&D expenses are capitalized if obtained through an acquisition and expensed if they are internally developed.

            With respect to the first rollout of IFRS for SME’s in the U.S., there would be a complete review after the first 2-year window to address any errors, omissions, or provide further clarity for specific topics. After the first 2-year review, this process would then happen every 3-years.  Also during the webinar there were a number of questions that were posed to the participants. As I mentioned in my posting yesterday, there were 245 participants on the webinar. Below are the questions & responses.

Do you believe your organization would benefit from IFRS for SME’s?
Yes 14%      
No 14%      
Not Sure 34%      
N/A MA employee 36%      
           
Do you believe your company will adopt within the following timeframes?
Immediately 0%      
1-3 years 19%      
3-5 years 34%      
Never 8%      
N/A MA employee 37%      
           
How much do you know about IFRS for SME’s?
Nothing 18%      
Very Little 50%      
Significant 6%      
N/A MA employee   24%      

            As I’ve mentioned in previous posts, I still have my doubts as to how aggressively this will really be rolled out in the U.S. and if the U.S. will allow GAAP to be so easily discarded in favor of such a new set of standards, regardless if they are being applied globally. We shall see….

Thanks for reading . . . . 

Jeffrey Ishmael

Moss-Adams conference recap; “Back in Black”

June 3rd, 2009 Comments off

     Today I was given an invite to attend the Moss-Adams conference, “Back in Black – Paving a Path to Profitability”. It was their first in what they hope is an annual event. The conference opened with a number of comments by key Moss-Adams personnel, was followed by three breakout sessions, and ended with a lunch and closing remarks by Pat Haden of Riordan, Lewis, and Haden. RLH was a prime participant in the conference, taking part in a number of the panel discussions.

     Interestingly enough, the previous CEO of Moss-Adams, Bob Bunting, delivered the opening remarks through a pre-taped video. What was worthy of note is that Bunting is currently in Dublin attending an IFAC summit regarding IFRS. Bunting spent quite a bit of time discussing the pending adoption of IFRS and the various considerations. As a bit of validation to some of my recent posts, he directly discussed the lack of training that is currently happening and the absence of an IFRS presence at the University level. As he discussed the specific rollout dates for each country it became apparent to thos in attendance that this is a legitimate issue. In an electroninc poll conducted w/ attendees through the room at the close of the video opening, 84% of attendees believe that IFRS will be mandated in the U.S.. However, Bunting was also quick to comment in his video that the adoption of IFRS was not going to be the result of actions taken by the SEC, but through overall Market pressures that would force the U.S. to adopt the new standards.

     I would like to say that the breakout discussions were incredibly informative, but there seemed to be little new information that was discussed or presented that isn’t already being actively covered daily by the media. Unfortunate for what could have been some very interesting topics. However there were a number of other polls taken in the morning that were interesting.

–  Attendees believed that Domestic opportunities would provide the highest area for growth, with a 54% weighting versus International at 46%.

-Attendees were still somewhat pessimistic when it came to growth in the second half of 2009. Approximately 63% of attendees believed business would be flat to negative 3-8%. Of this number, 29% believed they would encounter declines of greater than 8%.  Only 37% believe that business might improve. Of the optimists, 19% believed business would increase 3-8% and 18% believed business would increase greater than 8%.

-When asked what the biggest key to success would be in 2010, 48% responded it would be “Improved General Economic Conditions”. Of the remainder, 18% mentioned Access to Capital, 16% mentioned Production Improvements, 3% mentioned Competitive Pricing, and the remaining 15% mentioned Internal Efficiencies. What’s worthy to note is the 3% that mentioned competitive pricing. I find tremendous value in the statistic that companies are not looking to improve their situation by engaging in price wars. They are looking to improve operating and production efficiencies.

Thanks for reading . . . .

Jeffrey Ishmael

Internal Audits – embrace & value the process.

August 7th, 2008 Comments off

While I had always participated in the internal audit process and provided my portion of the contribution, I’m not sure I really appreciated the process until I was the person actually leading the Finance team and responsible for everything that happened “under my watch”. During my time with MGE, it was decided by our parent company, Schneider Electric, that they would be purchasing the remaining portion of our company and converting us to a wholly-owned subsidiary of their $13 billion conglomerate. At the close of the transaction, Schneider sent in a full team to conduct a comprehensive internal audit on our process, documented procedures, and potential areas or risk.

The audit was not going to cover just the Finance department, but encompass every area of the organization. This was going to be an 8-week process that was going to cover Inventory & Logistics, Sales & Marketing, IT, as well as Human Resources. Their main objective was to assess the potential risks within each one of these areas and rate those levels of risk according to their importance and the ability to potentially have a material effect on our financial results. We also wanted to determine what levels of internal control and monitoring we had in place to deal with the risk, and if necessary, propose recommendations to correct either the situation or our ability to follow the risk.

Since we had always had a very good relationship with Schneider Electric there was no significant anxiety of the proposed audit, but this effort was much more comprehensive than previous audit engagements. We were hosting individuals from Los Angeles, Chicago, and Paris, along with occassional visits from external auditors Mazars and Moss Adams. Perhaps there was no significant anxiety since we had always operated our entity with a high level of control and accountability. Ultimately, our audit concluded and in a very satisfactory manner with some areas that were noted for improvement and a timeline for follow-up and modifications.

This is obviously a process that can be addressed in much more detail considering this was an 8-week engagement, which I will in future posts. I will spend more time discussing the audit engagement for each area. The most significant takeaway was the additional insight that it gave us into our organization and receiving an unbiased view of our operations. For any new CFO, this is a critical step to go through and assess what the strengths and weaknesses are for the organization and what the areas of risk are for you in the execution of the company’s financial goals. An area that certainly shouldn’t be left to chance & is well worth the 4-8 weeks that you might invest.

Thanks for reading . . . .