Final Research Paper
Content
MAXIMIZING PROFIT AT EXXONMOBIL WHILE IMPLEMENTING INTERNATIONAL ACCOUNTING STANDARDS
Prepared for: ExxonMobil Corporation 5959 Las Colinas Boulevard Irving, Texas 75039
Prepared by: Association for IFRS Understanding 910 St. Andrews Drive, Apt D-3 Murfreesboro, TN 37128 April 22nd, 2010
Association for IFRS Understanding
910 St. Andrews Drive Murfreesboro, TN 37128 April 22, 2010 Phone: (615) 336-5368 Email: [email protected]
Rex W. Tillerson ExxonMobil Corporation 5959 Las Colinas Boulevard Irving, Texas 75039 IMPLEMENTING IFRS AND THE REQUIRED CHANGE TO FIFO COSTING The report that follows is the result of much research into the issue of possible changes in the normal flow of ExxonMobil inventory costs. Financial reports released by ExxonMobil mention the use of LIFO inventory costing. (Summary Report, pg. 39) Possible costs exist in the near future because of this method, and the company must prepare for a change unlike any yet faced in its history: inventory costing is about to undergo a forced change. All information presented is taken from professional journals or the websites of regulatory agencies contributing to changing inventory methods. ExxonMobil currently uses LIFO, but these agencies will require a change to FIFO costing within the next five years. Reasons for the change are presented, and possible treatments of the tax liability are discussed. Sources indicate a few cost-cutting options, but almost all options require a large payment for taxes. I have enjoyed researching this topic for ExxonMobil, and I am glad to have been of service. Please contact me should you require more research or answers to any questions that may arise.
Steven M. Bauer PRESIDENT - RESEARCH DIVISION
TABLE OF CONTENTS
List of Illustrations ..................................................................................................................... iv Executive Summary .................................................................................................................... v Study Methods and Purpose........................................................................................................ 1 Scope of Analysis ........................................................................................................... 1 Purpose of the Study ....................................................................................................... 1 Definitions....................................................................................................................... 2 Methodology ................................................................................................................... 2 Delimitations and Limitations......................................................................................... 2 Standards of the SEC, FASB, IASB, and Convergence Issues .................................................. 2 Governing Bodies and Standards .................................................................................... 2 Support for and History of Convergence ........................................................................ 3 Costs and Preparations for IFRS Implementation ...................................................................... 4 Where Analysis Should Begin ........................................................................................ 4 Possible Legal Issues ...................................................................................................... 5 Possible Benefits ............................................................................................................. 5 ExxonMobil's Primary Concern: As of December 2008, Mandatory Change to FIFO Will Cause $8.9 Billion of Tax Liability....................................... 5 IFRS Creates Huge Tax Liability by Rejecting LIFO Method ....................................... 5 Necessary Tax Treatment of Change to FIFO and Higher Income ................................ 6 Tax Solutions and the Benefits of FIFO ......................................................................... 7 Summary ..................................................................................................................................... 8 Conclusions ................................................................................................................................. 8 References ................................................................................................................................... 9
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LIST OF ILLUSTRATIONS
Figures Figure 1. Opinion of CPAs on IFRS Mandate ................................................................ 3 Figure 2. Location of Relevant Tax Code ....................................................................... 7
Tables Table 1. Highest Amounts of Taxes Due Upon IFRS Mandate (in millions) ................................................................. 6
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EXECUTIVE SUMMARY
Many steps are necessary to prepare for IFRS implementation, but the most direct involve recognition of inventory costs: 1. Analyze the current AIS to determine its ability to track correctly new FIFO inventory costs. AIS shortfalls should be especially researched to determine if patchwork can correct the issue. Should too many special reporting issues exist, a completely new AIS system may be necessary. 2. Tax code must be analyzed and, if possible, changed to diminish the tax liability that will be incurred upon IFRS adoption. Best options for tax change involve lobbying Congress; many other energy suppliers face this challenge and may join in lobbying. 3. Prepare investors and employees for the change to IFRS. Financial statements should be prepared beginning in 2012 or 2013 with comparative sections for both US GAAP and iGAAP. Investors should be made aware of the additional transparency that occurs with use of FIFO, and ratios should be included that show both standard treatments. 4. Legal issues may occur upon implementation; an in-depth analysis of contracts, debt covenants, pension plans, and employee profit-sharing plans is necessary. FIFO, for example, can cause ratios to change so significantly that debt covenants may be broken. Only a restructuring of these contracts will allow ExxonMobil to avoid the courtroom. Documents from journals, professional organizations, textbooks, and regulatory agencies were the only sources used for research. Wikis are not considered reliable, and internet sources are rarely updated. Many CPAs - as much as 90 percent - believe that the change to IFRS is a good idea. Further, although some CPAs argue for the effectiveness of LIFO costing, studies have shown that FIFO reveals better predications and ratios about a company's future. Experienced investors might have a difficult time reading US GAAP statements, but iGAAP statements are easier to understand. iGAAP also allows for a better long-term analysis of a company's standing by preventing management number manipulation. Information in the report contains answers to the following questions: 1. What agencies are creating this mandatory accounting change? 2. What effect will these changes have in the short-run on ExxonMobil income? 3. What long-term benefits exist (if any)?
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MAXIMIZING PROFIT AT EXXONMOBIL WHILE IMPLEMENTING INTERNATIONAL ACCOUNTING STANDARDS
Accounting standards in the United States, known as GAAP, are constantly changing due to new laws about the appropriate methods for financial reporting. ExxonMobil is subject to these standards in addition to standards set by other countries in which the company operates. Currently, over 100 countries either require or allow some form of international standard (AICPA A4). Each country will have slightly different standards, and these different standards require that the company make small changes before each filing. Financial agencies worldwide have joined an initiative to eliminate these differences through creation of a powerful new framework. Accounting under these International Financial Reporting Standards (IFRS) causes many changes, and all companies that trade on international markets will have to implement these changes in a timely fashion. Many major markets have already agreed to adopt the new standards; the United States is just a short distance behind. Concern regarding the additional costs and the length of time that is necessary to implement IFRS has grown, especially in the United States. ExxonMobil must begin to plan for these changes because it is especially susceptible to large changes in operating income. ExxonMobil must remain competitive; the following research summarizes the best course of action.
Study Methods and Purpose
Problems will arise in the form of additional tax liabilities, computer system updates, new employee training, and a massive change in inventory valuation. Cost-reduction strategies were researched to provide ExxonMobil the ability to accurately predict (and beat) future costs. Scope of Analysis Multiple areas were researched for complete understanding of the inventory issue: 1. Why is there international consensus regarding the creation of one accounting framework? 2. How should ExxonMobil implement the new standards? 3. How can ExxonMobil use the required inventory change to minimize costs (including tax liabilities) while transitioning to the new valuation method? Purpose of the Study Study was conducted to discover effects and possible treatments of new accounting standards. IFRS history and reasons for use were needed to remove bias and promote understanding.
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Definitions Familiarity with LIFO and FIFO inventory methods is necessary for this report. LIFO (last-in, first-out) uses the most recent purchase cost of inventory to determine cost of goods sold. FIFO (first-in, first-out) uses the oldest cost of inventory to determine the cost of goods sold. Methodology Research was limited to secondary sources only. Information was located through database searches, textbook review, scholarly journals, and use of committee websites. Many of the sources referred to each other for further information, so locations for proper research material were easy to determine. Delimitations and Limitations The following delimitations were met: • Online sources came from professional organizations with a direct stake in the new IFRS standards; use of wikis and other non-authoritative agents was not allowed. All material was dated within the last 10 years; older inventory analysis was unnecessary, and IFRS is a relatively new topic.
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Limitations exist due to possible actions in the external environment: • Changes in tax code or IFRS standards before acceptance by US policy-makers may render this research useless. Acceptance by the US of any IFRS standard may never even occur.
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The research that follows will present a summary of the creation of accounting standards, both with the United States and abroad, the implementation of international standards within ExxonMobil, and the many considerations that must be given to internal controls and inventory methods. The final portion of the report is most extensive. It presents tax liabilities, possible legal issues, training recommendations, and methods to diminish tax expense while using some hidden benefits of FIFO.
Standards of the SEC, FASB, IASB, and Convergence Issues
Governing Bodies and Standards The Securities Exchange Commission. Many legal reforms were birthed because of the Great Depression; the most important law passed was the Securities Exchange Act of 1934. This law created the Securities Exchange Commission (SEC) and helped protect investor interests.
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Companies now were required to give investors fair, honest, and transparent information about the current state of company holdings. The SEC is able to pursue criminal charges against companies that commit ethics or reporting violations (U.S. S.E.C. "The Investor's Advocate"). The Financial Accounting Standards Board. Professional accounting associations have come and gone since the inception of the SEC, but the Financial Accounting Standards Board (FASB) is here to stay. Created in 1973, it has built off the framework created by its predecessors. The SEC has commissioned the FASB to create, interpret, and adapt the accounting standards to maintain investor confidence (F.A.S.B. "Facts About FASB"). Generally Accepted Accounting Principles (GAAP), if bound in a single volume, would be nine inches thick before including the clarifying literature (AICPA A7). The International Accounting Standards Board. Accounting standards outside of the United States are set by the International Accounting Standards Board (IASB) in London (IASB "About the IASC"). International Financial Reporting Standards (IFRS), created by the IASB, amount to a two-inch thick book of information (AICPA A7). Support for and History of Convergence History and Creation of Convergence Issue. FASB and IASB members met in Norwalk, Connecticut in 2002 to discuss possible convergence or adoption of an international accounting standard. Both parties created this "Norwalk Agreement" as an approval to develop standards that were compatible (AICPA A5). Support for Convergence. GAAP, created by the FASB, is a rules-based system; the system determines a proper course of action for almost every situation that could ever arise. iGAAP is a principles-based system and allows professionals to use their judgment to determine proper treatment (Thompson 52). iGAAP gives general guidance and some specific cases, but accounting information should be accurate if a reporting entity practices ethical reporting. Some accountants within the US believe that iGAAP will allow companies more room to rationalize questionable reporting practices, and investors will likely be misled (Thompson 52). Most accountants, however, think iGAAP is a good idea because it will pull companies away from a mindset that worries only about ratios and provide investors with more long-term assurance (Thompson 52). A survey of 143 international accounting leaders revealed that 90% of believe convergence is important, as shown in Figure 1 (AICPA A4). Figure 1
Figure 1. Opinion of CPAs on IFRS Mandate
1% 9% "Very Important" "Important" 35% 55% "Somewhat Important" "Not Important"
Source: AICPA A4.
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The key players listed above are necessary knowledge for an understanding of IFRS and its implications. The SEC, for instance, released a plan on 14 November 2008 to implement IFRS on a national level (Albrecht et al 60). The FASB and IASB are working together to create a set of easier, principles-based standards -- taken from IFRS -- that utilize necessary GAAP rules that have been perfected over 75 years of standard-setting. Implementation and changes of accounting principle will result in high costs for ExxonMobil. Knowing who adopted these new standards will show concerned employees, managers, and investors that it was not an arbitrary decision, but a calculated and deeply researched choice by professionals from all over the world.
Costs and Preparations for IFRS Implementation
Implementing IFRS standards will require at least some reworking of the Accounting Information System (AIS) used by ExxonMobil. Users of the AIS will need to be aware of changes required by IFRS, and AIS programmers will need to write new code to adapt the program to give proper treatment of standards. The entire process (change in all departments) can take three to five years (Aguilar 12; "Convergence" 4), so analysis of company processes should begin soon in order to prepare for IFRS. Be prepared for large expenses due to the change. A survey of 110 large issuers determined that an average of $32 million per company could be spent to implement IFRS standards (Thompson 53). Changes proposed by the SEC were included in a timeline that estimated full conversion to IFRS in 2014. Progress reports will be released by the SEC starting in October 2010, but IFRS appears to have been pushed back until at least 2015. A vote in 2011 will determine whether iGAAP should become the new standard (Defelice and Lamoreaux). In addition to a minimum of three years of research before IFRS adoption, ExxonMobil must also issue the prior two years of comparative IFRS and GAAP statements in the year of adoption (Aguilar 12). Comparative statements allow investors some time to analyze the implications of IFRS on the balance sheets, cash flows, and liquidity ratios. Where Analysis Should Begin IFRS will cause dramatic changes in methods for accounting for assets, liabilities, and retained earnings. ExxonMobil should determine where these changes will occur before attempting to change current AIS or employee actions (Jaeger 65). Research is necessary to determine the exact differences between GAAP and IFRS. Actual examples from recent transactions may be a good place to start IFRS research. Take entries all the way through to a trial balance or trial statements. Estimates about possible costs to ExxonMobil's customers and vendors are also necessary. For instance, a vendor may experience decreased inventory costs when valuing their inventory. Is it possible for ExxonMobil to take advantage of this fact and get a price cut on inventory? Customers may experience higher costs due to IFRS and might not be able to afford current selling prices of ExxonMobil inventory. These factors increase the chance of negative effects due to external causes (PricewaterhouseCoopers 11).
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Employee training is a difficult subject. Training, if started too early, is forgotten by employees before implementation occurs. Training that occurs too late will cause a lack of understanding and error to develop in the AIS. A top-down approach should used to train managers first. Employees will follow suit after being instructed by managers through practice and observation (Aguilar 83). A manager from an ExxonMobil division in an IFRS country can transfer in for a short time to bring hands-on experience to the table ("Convergence" 5). Possible Legal Issues Legal risks increase with every possible adaptation of the AIS. ExxonMobil should not lose sight of the differences between IFRS and GAAP before the mandate is in effect (PricewaterhouseCoopers 11). An accidental change in standards by the company may result in fines, loss of investors, and even jail time for executives. However, when the change is allowed, the change should be made completely to be an integral part of the AIS (Jaeger 65). This prevents accidental omission and, again, fines, capital loss, or jail time for company employees. Income, assets, and liabilities can have significant changes in carrying amounts. Ratios are often used for debt covenants and investment agreements. A changed ratio may result in a broken covenant, and a broken covenant may result in a lawsuit or request for restitution. Investors may claim that the ratios -- old or new -- had a negative effect on their portfolio. ExxonMobil would likely be accused of hiding valuable information to receive more capital. Possible Benefits Readiness will allow the company to be ready for the maximum benefit of the IFRS mandate. ExxonMobil will be able to trade on international markets and be more easily comparable to other companies already using IFRS. Investors and a new share of the global market can be stolen from international rival companies. AIS systems will be streamlined due to the relative simplicity of IFRS standards. Costs will largely outweigh the benefits at first, but possible new income streams exist due to the mandate to follow IFRS and iGAAP. IFRS can cause changes to accumulated employee pensions, service contracts, and, most importantly, inventory methods (Aguilar 83). A benefit can be realized for each type of asset or agreement, but inventory changes cause many legal risks ("Accounting Expert Offers").
ExxonMobil's Primary Concern: As of December 2008, Mandatory Change to FIFO Will Cause $8.9 Billion of Tax Liability
IFRS Creates Huge Tax Liability by Rejecting LIFO Method LIFO costing is ExxonMobil's inventory valuation method of choice (ExxonMobil 37). LIFO causes many 'layers' of products, and older layers are usually a lower cost than current market price. IFRS standards do not allow the use of LIFO; only the FIFO or weighted-average methods are allowed (Aguilar 83). Adoption of IFRS will result in the following immediate changes to account balances:
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Inventory increases because of higher unit costs per item. Cost of goods sold decreases due to lower unit costs per item. Retained earnings increases to reflect additional net income that must be recognized by the accounting change; net income from the change will be over $25.4 billion for ExxonMobil (Bloom and Cenker 44). Tax Liability will increase by almost $9 billion. (qtd. in Whitehouse 27)
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Necessary Tax Treatment of Change to FIFO and Higher Income Change in net income is not a result of cash flows in the current operating cycle. Tax liability will be paid based on a number that is simply a restatement of the books. Payments will come from cash accounts accumulated during prior operating cycles, and new debt or equity can be used to pay hefty tax bills. A study of the tax liability as a percentage of on-hand cash showed an average tax bill of 13.6% of currently held cash (Ayres et al. 17). An analysis of only 30 companies using LIFO showed a $15.5 billion total liability, and ExxonMobil will owe more than half of that total (see Table 1). Table 1. Highest Amounts of Taxes Due Upon IFRS Mandate (in millions) Company Name Taxes Due on Switch to FIFO Taxes Due - % of Total Assets ExxonMobil $8,890 4% Valero Energy Corp. $2,170 5% Marathon Oil Corp. $1,412 3% Sunoco $1,354 11% Tesoro Co. $490 6% Eastman Chemical Co. $179 3% Carpenter Technology Corp. $175 9% Allegheny Technologies $131 3% Grainger Inc. $101 3% Solutia Inc. $84 3% Source: Whitehouse 27. Section 472(c) of the Internal Revenue Code (IRC) is the source of this tax. This section contains the "conformity rule" and requires that a company use the same method of inventory valuation for both tax and financial reporting (Bloom and Cenker 44). Adoption of IFRS requires that ExxonMobil file a Form 3115 to request permission to use another inventory method (Bloom and Cenker 48). Payment of tax liability can be delayed when changing to FIFO. According to IRC Section 481(a), a company can pay 25 percent of the liability each year
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for four consecutive years (Bloom and Cenker 45). Other necessary tax information is located in the Internal Revenue Code as shown in Figure 2 on page 7. Figure 2. Location of Relevant Tax Code: Title 26 - Internal Revenue Code Subtitle A - Income Taxes Chapter 1 - Normal Taxes and Surtaxes Subchapter E - Accounting Periods and Methods of Accounting Part II - Methods of Accounting Subpart D - Inventories Section 471 - General Rule for Inventories Section 472 - Last-in, First-out Inventories Section 473 - Qualified Liquidations of LIFO Inventories Section 474 - Simplified Dollar-Value LIFO Method for Certain Small Businesses Source: Bragg 163. Tax Solutions and the Benefits of FIFO Tax Solutions. Many analysts are currently proposing ideas to help alleviate some of the tax burden that will be placed on companies that switch to FIFO. An unlikely option exists if the United States chooses to converge key portions of US GAAP with iGAAP instead of adopting (and mandating) the entire IFRS code. Numerous countries have already chosen this route, but the United States will likely fully adopt IFRS. In the rare case that IFRS is not fully adopted, LIFO may remain a legal valuation method and the above tax considerations are negated. (Whitehouse 27) Tax code can also be edited or deleted from the IRC. For instance, the conformity rule can be relaxed or removed during transition to IFRS. ExxonMobil could value inventory at FIFO for its financial statements but use LIFO for its tax statements. Length of payment installments can also be changed. As stated earlier, the liability from a change to FIFO can be equally split over four years. Ten years will allow the company to pay an amount in taxes that is much closer to average costs from previous tax statements. (Whitehouse 27) FIFO Benefits. In addition to these possible tax solutions, ExxonMobil can begin to put a positive spin on a switch to FIFO. Deletion of LIFO standards will consume the many cost layers of inventory that are currently on the books. These layers create tedious work and large spreadsheets to keep track of the many prices used during the last few decades. A switch to FIFO will cause the spreadsheet to diminish in size and employee time spent on analysis will decrease (Bragg 113). Some analysts enjoy the use of LIFO because they believe LIFO produces more realistic inventory values. Research has shown that this is not a true statement, especially in cases with high inventory turnover. FIFO is much more useful for investors, for the method is more closely related to reliable ratios reported on the financial statements. (van Greuning 99) LIFO can also cause management to perform bad accounting practices; for instance, purchasing inventory at a
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certain time of year may result in different costs. Managers can use this practice to influence income to be higher or lower as rationalized in their own mind (Keiso, Weygandt, and Warfield 408). Other problems do exist with LIFO, so a change to a new valuation method is an opportunity to improve organizational goals.
Summary
Many professional accounting organizations and regulatory agencies are pursuing a change to IFRS. Convergence means a combination of standards from both US GAAP and iGAAP, and adoption means that the United States changes all code to that of iGAAP. The standards will be set in 2015 if the SEC timeline is correct. In addition, the implementation of the new standards will require new training and an analysis of the AIS currently used. An entirely new AIS may need to be created, or the old one can be edited to satisfy IFRS standards. Many considerations must be given to the relevant tax code well before implementation of IFRS and the mandatory change to FIFO. The tax code allows for special considerations already, but the special cases do not assist ExxonMobil in the change of inventory costs. Options are being discussed by accounting professionals, but many create additional difficulties that may not completely solve the issue. Large tax liabilities may exist for four consecutive years after implementation of IFRS. Although the change to FIFO many not occur with a "special" convergence of IFRS, it is much more likely that complete adoption will occur. Changing from LIFO to FIFO will result in huge differences in on-hand inventory. Such a large change will affect cost of goods sold, and this amount will flow through to net income. Additional costs of LIFO, such as administrative costs, will disappear with the adoption of FIFO, so some benefits do exist after the change.
Conclusions
ExxonMobil must undertake lobbying activities in Washington, D.C. in order to influence the tax code. Lobbying is the best option to convince politicians to change the code in favor of LIFO companies. If the code is not changed, the company stands to lose billions of dollars in tax charges. IFRS is almost definitely going to be accepted by the United States regulatory agencies. ExxonMobil should begin to analyze the AIS, personnel training systems, and differences between US GAAP and iGAAP within the next year. Minimum implementation time is three years, on average, so analysis should begin in mid-2012 at the latest. Reports must show comparative statements for at least three years of both US GAAP and iGAAP treatments. Finally, FIFO actually contains benefits after the tax liability has been paid. FIFO is much easier to account for, reduces administrative costs, and allows less accounting malpractice. The change to FIFO can occur with encouragement to employees about expected benefits. Legal analysis should be done to determine any contracts or promises to employees that may be broken. At the end of the road, IFRS is a definite win-win situation for investors and companies around the world.
Works Cited:
"Accounting Expert Offers Litigation Avoidance Techniques in GAAP to IFRS Conversion. " Business Wire 7 December 2009. ABI/INFORM Dateline, ProQuest. Web. 2 Mar. 2010. Aguilar, Melissa. "Don't Delay IFRS Preparations! Convergence Nears. "Compliance Week 1 Nov. 2008: 12,83. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010. Albrecht, Chad, Ricardo Malagueño, Konrad Lee, and Lance Larsen. "IFRS and the IFAC Member Body Compliance Program." Journal of International Taxation 1 Dec. 2009: 6061. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. American Institute of Certified Public Accountants. "International Financial Reporting Standards (IFRS): An AICPA Backgrounder. " Journal of Accountancy 206.3 (2008): A1A8. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. Anonymous. "Convergence Is Coming: Consider How Your CPA Firm Should Begin to Prepare." Accounting Office Management & Administration Report 1 Sep. 2008: 1,46. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010. Ayres, Frances L., Christine C. Bauman, Mark P. Bauman, and Yun Fan. "Inventory Accounting After LIFO. " Commercial Lending Review 1 Sep. 2008: 17-22. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. Bloom, Robert, and Willaim Cenker. "The Death of LIFO? " Journal of Accountancy 207.1 (2009): 44-48. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. Bragg, Steven M. "IRS Inventory Rules." Inventory Accounting: a Comprehensive Guide. Hoboken, N.J.: John Wiley & Sons, 2005. 163-173. Print. DeFelice, Alexandra, and Matthew Lamoreaux. "The SEC's IFRS Work Plan. " Journal of Accountancy 209.4 (2010): 22-26. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. ExxonMobil Corporation. 2009 Summary Annual Report. ExxonMobil Corporation, 2010. Web. 2 Mar. 2010. <http://thomson.mobular.net/thomson/7/3095/4222/> Greuning, Hennie Van. "Inventories (IAS 2)." International Financial Reporting Standards: a Practical Guide. Washington, D.C.: World Bank, 2006. 96-104. Print. Jaeger, Jaclyn. "IFRS Adoption Strategies Starting to Emerge. "Compliance Week 1 Feb. 2009: 16,65. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010. Kieso, Donald E., Jerry J. Weygandt, and Terry D. Warfield. "Valuation of Inventories: A CostBasis Approach." Intermediate Accounting. Hoboken, N.J.: Wiley, 2010. 380-434. Print.
PricewaterhouseCoopers. IFRS and US GAAP: Similarities and Differences. PricewaterhouseCoopers LLP, 2008. 11. Print. Thompson, Jr., Louis. "Questions Surface Around SEC's IFRS Roadmap. "Compliance Week 1 Feb. 2009: 52-53. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010. United States. Financial Accounting Standards Board. "Facts About FASB." About FASB. Financial Accounting Standards Board, n.d. Web. 2 Mar. 2010. <http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176154526495> United States. Securities Exchange Commission. "The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation." What We Do. Securities Exchange Commission, n.d. Web. 2 Mar. 2010. <http://www.sec.gov/about/whatwedo.shtml> Whitehouse, Tammy. "Study Documents IFRS Hit to Inventory Accounting. " Compliance Week 1 Mar. 2009: 26-27. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010.
Prepared for: ExxonMobil Corporation 5959 Las Colinas Boulevard Irving, Texas 75039
Prepared by: Association for IFRS Understanding 910 St. Andrews Drive, Apt D-3 Murfreesboro, TN 37128 April 22nd, 2010
Association for IFRS Understanding
910 St. Andrews Drive Murfreesboro, TN 37128 April 22, 2010 Phone: (615) 336-5368 Email: [email protected]
Rex W. Tillerson ExxonMobil Corporation 5959 Las Colinas Boulevard Irving, Texas 75039 IMPLEMENTING IFRS AND THE REQUIRED CHANGE TO FIFO COSTING The report that follows is the result of much research into the issue of possible changes in the normal flow of ExxonMobil inventory costs. Financial reports released by ExxonMobil mention the use of LIFO inventory costing. (Summary Report, pg. 39) Possible costs exist in the near future because of this method, and the company must prepare for a change unlike any yet faced in its history: inventory costing is about to undergo a forced change. All information presented is taken from professional journals or the websites of regulatory agencies contributing to changing inventory methods. ExxonMobil currently uses LIFO, but these agencies will require a change to FIFO costing within the next five years. Reasons for the change are presented, and possible treatments of the tax liability are discussed. Sources indicate a few cost-cutting options, but almost all options require a large payment for taxes. I have enjoyed researching this topic for ExxonMobil, and I am glad to have been of service. Please contact me should you require more research or answers to any questions that may arise.
Steven M. Bauer PRESIDENT - RESEARCH DIVISION
TABLE OF CONTENTS
List of Illustrations ..................................................................................................................... iv Executive Summary .................................................................................................................... v Study Methods and Purpose........................................................................................................ 1 Scope of Analysis ........................................................................................................... 1 Purpose of the Study ....................................................................................................... 1 Definitions....................................................................................................................... 2 Methodology ................................................................................................................... 2 Delimitations and Limitations......................................................................................... 2 Standards of the SEC, FASB, IASB, and Convergence Issues .................................................. 2 Governing Bodies and Standards .................................................................................... 2 Support for and History of Convergence ........................................................................ 3 Costs and Preparations for IFRS Implementation ...................................................................... 4 Where Analysis Should Begin ........................................................................................ 4 Possible Legal Issues ...................................................................................................... 5 Possible Benefits ............................................................................................................. 5 ExxonMobil's Primary Concern: As of December 2008, Mandatory Change to FIFO Will Cause $8.9 Billion of Tax Liability....................................... 5 IFRS Creates Huge Tax Liability by Rejecting LIFO Method ....................................... 5 Necessary Tax Treatment of Change to FIFO and Higher Income ................................ 6 Tax Solutions and the Benefits of FIFO ......................................................................... 7 Summary ..................................................................................................................................... 8 Conclusions ................................................................................................................................. 8 References ................................................................................................................................... 9
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LIST OF ILLUSTRATIONS
Figures Figure 1. Opinion of CPAs on IFRS Mandate ................................................................ 3 Figure 2. Location of Relevant Tax Code ....................................................................... 7
Tables Table 1. Highest Amounts of Taxes Due Upon IFRS Mandate (in millions) ................................................................. 6
iv
EXECUTIVE SUMMARY
Many steps are necessary to prepare for IFRS implementation, but the most direct involve recognition of inventory costs: 1. Analyze the current AIS to determine its ability to track correctly new FIFO inventory costs. AIS shortfalls should be especially researched to determine if patchwork can correct the issue. Should too many special reporting issues exist, a completely new AIS system may be necessary. 2. Tax code must be analyzed and, if possible, changed to diminish the tax liability that will be incurred upon IFRS adoption. Best options for tax change involve lobbying Congress; many other energy suppliers face this challenge and may join in lobbying. 3. Prepare investors and employees for the change to IFRS. Financial statements should be prepared beginning in 2012 or 2013 with comparative sections for both US GAAP and iGAAP. Investors should be made aware of the additional transparency that occurs with use of FIFO, and ratios should be included that show both standard treatments. 4. Legal issues may occur upon implementation; an in-depth analysis of contracts, debt covenants, pension plans, and employee profit-sharing plans is necessary. FIFO, for example, can cause ratios to change so significantly that debt covenants may be broken. Only a restructuring of these contracts will allow ExxonMobil to avoid the courtroom. Documents from journals, professional organizations, textbooks, and regulatory agencies were the only sources used for research. Wikis are not considered reliable, and internet sources are rarely updated. Many CPAs - as much as 90 percent - believe that the change to IFRS is a good idea. Further, although some CPAs argue for the effectiveness of LIFO costing, studies have shown that FIFO reveals better predications and ratios about a company's future. Experienced investors might have a difficult time reading US GAAP statements, but iGAAP statements are easier to understand. iGAAP also allows for a better long-term analysis of a company's standing by preventing management number manipulation. Information in the report contains answers to the following questions: 1. What agencies are creating this mandatory accounting change? 2. What effect will these changes have in the short-run on ExxonMobil income? 3. What long-term benefits exist (if any)?
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MAXIMIZING PROFIT AT EXXONMOBIL WHILE IMPLEMENTING INTERNATIONAL ACCOUNTING STANDARDS
Accounting standards in the United States, known as GAAP, are constantly changing due to new laws about the appropriate methods for financial reporting. ExxonMobil is subject to these standards in addition to standards set by other countries in which the company operates. Currently, over 100 countries either require or allow some form of international standard (AICPA A4). Each country will have slightly different standards, and these different standards require that the company make small changes before each filing. Financial agencies worldwide have joined an initiative to eliminate these differences through creation of a powerful new framework. Accounting under these International Financial Reporting Standards (IFRS) causes many changes, and all companies that trade on international markets will have to implement these changes in a timely fashion. Many major markets have already agreed to adopt the new standards; the United States is just a short distance behind. Concern regarding the additional costs and the length of time that is necessary to implement IFRS has grown, especially in the United States. ExxonMobil must begin to plan for these changes because it is especially susceptible to large changes in operating income. ExxonMobil must remain competitive; the following research summarizes the best course of action.
Study Methods and Purpose
Problems will arise in the form of additional tax liabilities, computer system updates, new employee training, and a massive change in inventory valuation. Cost-reduction strategies were researched to provide ExxonMobil the ability to accurately predict (and beat) future costs. Scope of Analysis Multiple areas were researched for complete understanding of the inventory issue: 1. Why is there international consensus regarding the creation of one accounting framework? 2. How should ExxonMobil implement the new standards? 3. How can ExxonMobil use the required inventory change to minimize costs (including tax liabilities) while transitioning to the new valuation method? Purpose of the Study Study was conducted to discover effects and possible treatments of new accounting standards. IFRS history and reasons for use were needed to remove bias and promote understanding.
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Definitions Familiarity with LIFO and FIFO inventory methods is necessary for this report. LIFO (last-in, first-out) uses the most recent purchase cost of inventory to determine cost of goods sold. FIFO (first-in, first-out) uses the oldest cost of inventory to determine the cost of goods sold. Methodology Research was limited to secondary sources only. Information was located through database searches, textbook review, scholarly journals, and use of committee websites. Many of the sources referred to each other for further information, so locations for proper research material were easy to determine. Delimitations and Limitations The following delimitations were met: • Online sources came from professional organizations with a direct stake in the new IFRS standards; use of wikis and other non-authoritative agents was not allowed. All material was dated within the last 10 years; older inventory analysis was unnecessary, and IFRS is a relatively new topic.
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Limitations exist due to possible actions in the external environment: • Changes in tax code or IFRS standards before acceptance by US policy-makers may render this research useless. Acceptance by the US of any IFRS standard may never even occur.
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The research that follows will present a summary of the creation of accounting standards, both with the United States and abroad, the implementation of international standards within ExxonMobil, and the many considerations that must be given to internal controls and inventory methods. The final portion of the report is most extensive. It presents tax liabilities, possible legal issues, training recommendations, and methods to diminish tax expense while using some hidden benefits of FIFO.
Standards of the SEC, FASB, IASB, and Convergence Issues
Governing Bodies and Standards The Securities Exchange Commission. Many legal reforms were birthed because of the Great Depression; the most important law passed was the Securities Exchange Act of 1934. This law created the Securities Exchange Commission (SEC) and helped protect investor interests.
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Companies now were required to give investors fair, honest, and transparent information about the current state of company holdings. The SEC is able to pursue criminal charges against companies that commit ethics or reporting violations (U.S. S.E.C. "The Investor's Advocate"). The Financial Accounting Standards Board. Professional accounting associations have come and gone since the inception of the SEC, but the Financial Accounting Standards Board (FASB) is here to stay. Created in 1973, it has built off the framework created by its predecessors. The SEC has commissioned the FASB to create, interpret, and adapt the accounting standards to maintain investor confidence (F.A.S.B. "Facts About FASB"). Generally Accepted Accounting Principles (GAAP), if bound in a single volume, would be nine inches thick before including the clarifying literature (AICPA A7). The International Accounting Standards Board. Accounting standards outside of the United States are set by the International Accounting Standards Board (IASB) in London (IASB "About the IASC"). International Financial Reporting Standards (IFRS), created by the IASB, amount to a two-inch thick book of information (AICPA A7). Support for and History of Convergence History and Creation of Convergence Issue. FASB and IASB members met in Norwalk, Connecticut in 2002 to discuss possible convergence or adoption of an international accounting standard. Both parties created this "Norwalk Agreement" as an approval to develop standards that were compatible (AICPA A5). Support for Convergence. GAAP, created by the FASB, is a rules-based system; the system determines a proper course of action for almost every situation that could ever arise. iGAAP is a principles-based system and allows professionals to use their judgment to determine proper treatment (Thompson 52). iGAAP gives general guidance and some specific cases, but accounting information should be accurate if a reporting entity practices ethical reporting. Some accountants within the US believe that iGAAP will allow companies more room to rationalize questionable reporting practices, and investors will likely be misled (Thompson 52). Most accountants, however, think iGAAP is a good idea because it will pull companies away from a mindset that worries only about ratios and provide investors with more long-term assurance (Thompson 52). A survey of 143 international accounting leaders revealed that 90% of believe convergence is important, as shown in Figure 1 (AICPA A4). Figure 1
Figure 1. Opinion of CPAs on IFRS Mandate
1% 9% "Very Important" "Important" 35% 55% "Somewhat Important" "Not Important"
Source: AICPA A4.
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The key players listed above are necessary knowledge for an understanding of IFRS and its implications. The SEC, for instance, released a plan on 14 November 2008 to implement IFRS on a national level (Albrecht et al 60). The FASB and IASB are working together to create a set of easier, principles-based standards -- taken from IFRS -- that utilize necessary GAAP rules that have been perfected over 75 years of standard-setting. Implementation and changes of accounting principle will result in high costs for ExxonMobil. Knowing who adopted these new standards will show concerned employees, managers, and investors that it was not an arbitrary decision, but a calculated and deeply researched choice by professionals from all over the world.
Costs and Preparations for IFRS Implementation
Implementing IFRS standards will require at least some reworking of the Accounting Information System (AIS) used by ExxonMobil. Users of the AIS will need to be aware of changes required by IFRS, and AIS programmers will need to write new code to adapt the program to give proper treatment of standards. The entire process (change in all departments) can take three to five years (Aguilar 12; "Convergence" 4), so analysis of company processes should begin soon in order to prepare for IFRS. Be prepared for large expenses due to the change. A survey of 110 large issuers determined that an average of $32 million per company could be spent to implement IFRS standards (Thompson 53). Changes proposed by the SEC were included in a timeline that estimated full conversion to IFRS in 2014. Progress reports will be released by the SEC starting in October 2010, but IFRS appears to have been pushed back until at least 2015. A vote in 2011 will determine whether iGAAP should become the new standard (Defelice and Lamoreaux). In addition to a minimum of three years of research before IFRS adoption, ExxonMobil must also issue the prior two years of comparative IFRS and GAAP statements in the year of adoption (Aguilar 12). Comparative statements allow investors some time to analyze the implications of IFRS on the balance sheets, cash flows, and liquidity ratios. Where Analysis Should Begin IFRS will cause dramatic changes in methods for accounting for assets, liabilities, and retained earnings. ExxonMobil should determine where these changes will occur before attempting to change current AIS or employee actions (Jaeger 65). Research is necessary to determine the exact differences between GAAP and IFRS. Actual examples from recent transactions may be a good place to start IFRS research. Take entries all the way through to a trial balance or trial statements. Estimates about possible costs to ExxonMobil's customers and vendors are also necessary. For instance, a vendor may experience decreased inventory costs when valuing their inventory. Is it possible for ExxonMobil to take advantage of this fact and get a price cut on inventory? Customers may experience higher costs due to IFRS and might not be able to afford current selling prices of ExxonMobil inventory. These factors increase the chance of negative effects due to external causes (PricewaterhouseCoopers 11).
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Employee training is a difficult subject. Training, if started too early, is forgotten by employees before implementation occurs. Training that occurs too late will cause a lack of understanding and error to develop in the AIS. A top-down approach should used to train managers first. Employees will follow suit after being instructed by managers through practice and observation (Aguilar 83). A manager from an ExxonMobil division in an IFRS country can transfer in for a short time to bring hands-on experience to the table ("Convergence" 5). Possible Legal Issues Legal risks increase with every possible adaptation of the AIS. ExxonMobil should not lose sight of the differences between IFRS and GAAP before the mandate is in effect (PricewaterhouseCoopers 11). An accidental change in standards by the company may result in fines, loss of investors, and even jail time for executives. However, when the change is allowed, the change should be made completely to be an integral part of the AIS (Jaeger 65). This prevents accidental omission and, again, fines, capital loss, or jail time for company employees. Income, assets, and liabilities can have significant changes in carrying amounts. Ratios are often used for debt covenants and investment agreements. A changed ratio may result in a broken covenant, and a broken covenant may result in a lawsuit or request for restitution. Investors may claim that the ratios -- old or new -- had a negative effect on their portfolio. ExxonMobil would likely be accused of hiding valuable information to receive more capital. Possible Benefits Readiness will allow the company to be ready for the maximum benefit of the IFRS mandate. ExxonMobil will be able to trade on international markets and be more easily comparable to other companies already using IFRS. Investors and a new share of the global market can be stolen from international rival companies. AIS systems will be streamlined due to the relative simplicity of IFRS standards. Costs will largely outweigh the benefits at first, but possible new income streams exist due to the mandate to follow IFRS and iGAAP. IFRS can cause changes to accumulated employee pensions, service contracts, and, most importantly, inventory methods (Aguilar 83). A benefit can be realized for each type of asset or agreement, but inventory changes cause many legal risks ("Accounting Expert Offers").
ExxonMobil's Primary Concern: As of December 2008, Mandatory Change to FIFO Will Cause $8.9 Billion of Tax Liability
IFRS Creates Huge Tax Liability by Rejecting LIFO Method LIFO costing is ExxonMobil's inventory valuation method of choice (ExxonMobil 37). LIFO causes many 'layers' of products, and older layers are usually a lower cost than current market price. IFRS standards do not allow the use of LIFO; only the FIFO or weighted-average methods are allowed (Aguilar 83). Adoption of IFRS will result in the following immediate changes to account balances:
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Inventory increases because of higher unit costs per item. Cost of goods sold decreases due to lower unit costs per item. Retained earnings increases to reflect additional net income that must be recognized by the accounting change; net income from the change will be over $25.4 billion for ExxonMobil (Bloom and Cenker 44). Tax Liability will increase by almost $9 billion. (qtd. in Whitehouse 27)
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Necessary Tax Treatment of Change to FIFO and Higher Income Change in net income is not a result of cash flows in the current operating cycle. Tax liability will be paid based on a number that is simply a restatement of the books. Payments will come from cash accounts accumulated during prior operating cycles, and new debt or equity can be used to pay hefty tax bills. A study of the tax liability as a percentage of on-hand cash showed an average tax bill of 13.6% of currently held cash (Ayres et al. 17). An analysis of only 30 companies using LIFO showed a $15.5 billion total liability, and ExxonMobil will owe more than half of that total (see Table 1). Table 1. Highest Amounts of Taxes Due Upon IFRS Mandate (in millions) Company Name Taxes Due on Switch to FIFO Taxes Due - % of Total Assets ExxonMobil $8,890 4% Valero Energy Corp. $2,170 5% Marathon Oil Corp. $1,412 3% Sunoco $1,354 11% Tesoro Co. $490 6% Eastman Chemical Co. $179 3% Carpenter Technology Corp. $175 9% Allegheny Technologies $131 3% Grainger Inc. $101 3% Solutia Inc. $84 3% Source: Whitehouse 27. Section 472(c) of the Internal Revenue Code (IRC) is the source of this tax. This section contains the "conformity rule" and requires that a company use the same method of inventory valuation for both tax and financial reporting (Bloom and Cenker 44). Adoption of IFRS requires that ExxonMobil file a Form 3115 to request permission to use another inventory method (Bloom and Cenker 48). Payment of tax liability can be delayed when changing to FIFO. According to IRC Section 481(a), a company can pay 25 percent of the liability each year
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for four consecutive years (Bloom and Cenker 45). Other necessary tax information is located in the Internal Revenue Code as shown in Figure 2 on page 7. Figure 2. Location of Relevant Tax Code: Title 26 - Internal Revenue Code Subtitle A - Income Taxes Chapter 1 - Normal Taxes and Surtaxes Subchapter E - Accounting Periods and Methods of Accounting Part II - Methods of Accounting Subpart D - Inventories Section 471 - General Rule for Inventories Section 472 - Last-in, First-out Inventories Section 473 - Qualified Liquidations of LIFO Inventories Section 474 - Simplified Dollar-Value LIFO Method for Certain Small Businesses Source: Bragg 163. Tax Solutions and the Benefits of FIFO Tax Solutions. Many analysts are currently proposing ideas to help alleviate some of the tax burden that will be placed on companies that switch to FIFO. An unlikely option exists if the United States chooses to converge key portions of US GAAP with iGAAP instead of adopting (and mandating) the entire IFRS code. Numerous countries have already chosen this route, but the United States will likely fully adopt IFRS. In the rare case that IFRS is not fully adopted, LIFO may remain a legal valuation method and the above tax considerations are negated. (Whitehouse 27) Tax code can also be edited or deleted from the IRC. For instance, the conformity rule can be relaxed or removed during transition to IFRS. ExxonMobil could value inventory at FIFO for its financial statements but use LIFO for its tax statements. Length of payment installments can also be changed. As stated earlier, the liability from a change to FIFO can be equally split over four years. Ten years will allow the company to pay an amount in taxes that is much closer to average costs from previous tax statements. (Whitehouse 27) FIFO Benefits. In addition to these possible tax solutions, ExxonMobil can begin to put a positive spin on a switch to FIFO. Deletion of LIFO standards will consume the many cost layers of inventory that are currently on the books. These layers create tedious work and large spreadsheets to keep track of the many prices used during the last few decades. A switch to FIFO will cause the spreadsheet to diminish in size and employee time spent on analysis will decrease (Bragg 113). Some analysts enjoy the use of LIFO because they believe LIFO produces more realistic inventory values. Research has shown that this is not a true statement, especially in cases with high inventory turnover. FIFO is much more useful for investors, for the method is more closely related to reliable ratios reported on the financial statements. (van Greuning 99) LIFO can also cause management to perform bad accounting practices; for instance, purchasing inventory at a
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certain time of year may result in different costs. Managers can use this practice to influence income to be higher or lower as rationalized in their own mind (Keiso, Weygandt, and Warfield 408). Other problems do exist with LIFO, so a change to a new valuation method is an opportunity to improve organizational goals.
Summary
Many professional accounting organizations and regulatory agencies are pursuing a change to IFRS. Convergence means a combination of standards from both US GAAP and iGAAP, and adoption means that the United States changes all code to that of iGAAP. The standards will be set in 2015 if the SEC timeline is correct. In addition, the implementation of the new standards will require new training and an analysis of the AIS currently used. An entirely new AIS may need to be created, or the old one can be edited to satisfy IFRS standards. Many considerations must be given to the relevant tax code well before implementation of IFRS and the mandatory change to FIFO. The tax code allows for special considerations already, but the special cases do not assist ExxonMobil in the change of inventory costs. Options are being discussed by accounting professionals, but many create additional difficulties that may not completely solve the issue. Large tax liabilities may exist for four consecutive years after implementation of IFRS. Although the change to FIFO many not occur with a "special" convergence of IFRS, it is much more likely that complete adoption will occur. Changing from LIFO to FIFO will result in huge differences in on-hand inventory. Such a large change will affect cost of goods sold, and this amount will flow through to net income. Additional costs of LIFO, such as administrative costs, will disappear with the adoption of FIFO, so some benefits do exist after the change.
Conclusions
ExxonMobil must undertake lobbying activities in Washington, D.C. in order to influence the tax code. Lobbying is the best option to convince politicians to change the code in favor of LIFO companies. If the code is not changed, the company stands to lose billions of dollars in tax charges. IFRS is almost definitely going to be accepted by the United States regulatory agencies. ExxonMobil should begin to analyze the AIS, personnel training systems, and differences between US GAAP and iGAAP within the next year. Minimum implementation time is three years, on average, so analysis should begin in mid-2012 at the latest. Reports must show comparative statements for at least three years of both US GAAP and iGAAP treatments. Finally, FIFO actually contains benefits after the tax liability has been paid. FIFO is much easier to account for, reduces administrative costs, and allows less accounting malpractice. The change to FIFO can occur with encouragement to employees about expected benefits. Legal analysis should be done to determine any contracts or promises to employees that may be broken. At the end of the road, IFRS is a definite win-win situation for investors and companies around the world.
Works Cited:
"Accounting Expert Offers Litigation Avoidance Techniques in GAAP to IFRS Conversion. " Business Wire 7 December 2009. ABI/INFORM Dateline, ProQuest. Web. 2 Mar. 2010. Aguilar, Melissa. "Don't Delay IFRS Preparations! Convergence Nears. "Compliance Week 1 Nov. 2008: 12,83. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010. Albrecht, Chad, Ricardo Malagueño, Konrad Lee, and Lance Larsen. "IFRS and the IFAC Member Body Compliance Program." Journal of International Taxation 1 Dec. 2009: 6061. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. American Institute of Certified Public Accountants. "International Financial Reporting Standards (IFRS): An AICPA Backgrounder. " Journal of Accountancy 206.3 (2008): A1A8. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. Anonymous. "Convergence Is Coming: Consider How Your CPA Firm Should Begin to Prepare." Accounting Office Management & Administration Report 1 Sep. 2008: 1,46. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010. Ayres, Frances L., Christine C. Bauman, Mark P. Bauman, and Yun Fan. "Inventory Accounting After LIFO. " Commercial Lending Review 1 Sep. 2008: 17-22. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. Bloom, Robert, and Willaim Cenker. "The Death of LIFO? " Journal of Accountancy 207.1 (2009): 44-48. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. Bragg, Steven M. "IRS Inventory Rules." Inventory Accounting: a Comprehensive Guide. Hoboken, N.J.: John Wiley & Sons, 2005. 163-173. Print. DeFelice, Alexandra, and Matthew Lamoreaux. "The SEC's IFRS Work Plan. " Journal of Accountancy 209.4 (2010): 22-26. ABI/INFORM Global, ProQuest. Web. 2 Mar. 2010. ExxonMobil Corporation. 2009 Summary Annual Report. ExxonMobil Corporation, 2010. Web. 2 Mar. 2010. <http://thomson.mobular.net/thomson/7/3095/4222/> Greuning, Hennie Van. "Inventories (IAS 2)." International Financial Reporting Standards: a Practical Guide. Washington, D.C.: World Bank, 2006. 96-104. Print. Jaeger, Jaclyn. "IFRS Adoption Strategies Starting to Emerge. "Compliance Week 1 Feb. 2009: 16,65. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010. Kieso, Donald E., Jerry J. Weygandt, and Terry D. Warfield. "Valuation of Inventories: A CostBasis Approach." Intermediate Accounting. Hoboken, N.J.: Wiley, 2010. 380-434. Print.
PricewaterhouseCoopers. IFRS and US GAAP: Similarities and Differences. PricewaterhouseCoopers LLP, 2008. 11. Print. Thompson, Jr., Louis. "Questions Surface Around SEC's IFRS Roadmap. "Compliance Week 1 Feb. 2009: 52-53. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010. United States. Financial Accounting Standards Board. "Facts About FASB." About FASB. Financial Accounting Standards Board, n.d. Web. 2 Mar. 2010. <http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176154526495> United States. Securities Exchange Commission. "The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation." What We Do. Securities Exchange Commission, n.d. Web. 2 Mar. 2010. <http://www.sec.gov/about/whatwedo.shtml> Whitehouse, Tammy. "Study Documents IFRS Hit to Inventory Accounting. " Compliance Week 1 Mar. 2009: 26-27. ABI/INFORM Trade & Industry, ProQuest. Web. 2 Mar. 2010.
