THE INSTITUTE of Chartered Accountants of Jamaica (ICAJ) adopted International Accounting Standards (IAS), earlier this year, as the national accounting standards for financial reporting purposes in Jamaica. The new standards become effective for financial periods beginning on or after 1 July 2002.
Since 2000, the ICAJ has been preparing the business community, regulators and its membership for the transition to IAS. This included presentations to various interest groups such as the Private Sector Organisation of Jamaica (PSOJ), the Jamaica Manufacturers' Association, the American Chamber of Commerce and the general membership of the ICAJ. As part of the Institute's public education programme, a number of seminars and workshops were held to sensitise interest groups and the public about the new standards, how they impact the reporting environment, and how companies should organise themselves to convert to the new standards.
The ICAJ also adopted International Standards on Auditing (ISA) with effect from July 1, 2002. This was a step in the right direction as accounting standards must be supported by an infrastructure that ensures that the standards are rigorously interpreted and applied, and problematic practices identified and resolved in a timely fashion. High quality auditing standards are, therefore, an important element of this infrastructure. Subsequent to the adoption of IAS on July 1, 2002, a number of companies have expressed concerns about the timing of the implementation of IAS in Jamaica. The affected companies are seeking more time for the implementation of IAS and have requested the ICAJ to consider a deferment to July 1, 2003. The main points put forward for the deferment were:
1. Companies were required to migrate to the new standards using guidelines issued under the Standing Interpretation Committee (SIC) 8. However, a new standard on first-time adoption would be issued in 2003, which provide for a more cost effective methodology than that which presently exists.
2. An Exposure Draft had been issued with nearly 800 pages that contain changes to a number of existing standards.
3. Outstanding issues exist between the requirements of the Jamaican tax authorities and various regulatory bodies on the one hand, and conflicting requirements of the IAS, on the other.
4. The European Union will not be adopting these standards until January 1, 2005. Additionally, a project with US GAAP was in process and not likely to be completed in the short term.
The following summarises the ICAJ's response to the concerns raised:
1. First Time Implementation
The Exposure Draft issued in July 2002, provides certain changes to previous requirements. The main changes include:
a. Targeted exemptions in specified areas where retrospective application is likely to cause undue cost or effort. The previous requirements contained less specific exemptions.
b. Clarification regarding the fact that an entity applies the latest version of IAS. c. Clarification on how the first-time adopter's estimates under IAS should relate to corresponding estimates made under Jamaican accounting standards.
d. Enhanced disclosure about how the transition to IAS affected the entity's reported financial position, financial performance and cash flows. The implication of the proposed first-time implementation was conveyed to a private sector representative group at the September 10 meeting. Jamaican companies are in fact eligible to take advantage of this feature and will benefit from the more cost effective methodology than presently exists (SIC 8).
2. Pages of Exposure Draft still in issue While there are 800 pages of exposure draft in circulation, it does not convey the fact that:
a) When finalised, it is unlikely that the standards will contain significant changes, but rather improvements. For example, many of the internal inconsistencies and implicit and explicit alternatives now inherent or otherwise allowed, will be removed to simplify the standards.
b) There can be no guarantee that the International Accounting Standards Board will not have many other standards under review in another year's time. As a matter of fact, there is likely to be rapid changes until about the year 2007. The convergence project with US GAAP and the influence of the EU will continue to have strong influence on the projects of the Board, hence, next year and the following years may possibly see another round of changes.
3. Outstanding Issues with Tax Authorities & Regulatory Bodies
a) There will always be differences between tax accounting and standard financial accounting driven by differences between tax laws and accounting standards. Hence, it cannot be said with any confidence that tax issues arising from the adoption of IAS will be resolved in a year's time.
b) The Institute maintains dialogue with relevant regulatory bodies and they support our decision to adopt IAS and ISA.
4. European Union's adoption of IAS in January 1 2005
a) In our view, a better comparison would be some of our competitors in the world economy such as Costa Rica, Barbados Trinidad and Tobago, Guyana and the Dominican Republic. All of these countries have already adopted IAS.
b) The EU position, which affects mainly listed companies, does not mean that IAS has not been adopted in any EU member country. In fact, countries such as Austria, Denmark and Germany have already adopted IAS and other countries are close to full adoption, namely, the United Kingdom, Ireland, the Netherlands and Sweden. In addition, some companies in other EU countries (Finland, Greece and Italy) already apply IAS, even though they are not required to do so until January 2005. Many other countries use IAS as a basis for national standards.
5. Implementation Problems & Costs Some significant implementation problems/challenges are unavoidable as is the associated implementation costs to be incurred by businesses. Many Jamaican companies especially in the financial sector are very advanced in their IAS implementation activities, having noted and acted in a timely fashion on the Institute's signals over the past two years about the pending adoption of IAS.
The Institute has considered at length the issues raised by the private sector group and also met with the private sector group to further discuss their concerns. Following this discussion, the ICAJ carefully reviewed the issues and consulted with an international expert on the subject. Based on the review the ICAJ has decided not to defer the implementation date. It has concluded that the position to move forward with adoption of the IAS is in the best interest of the profession and the various publics.
The ICAJ, however, recognises the challenge faced by those companies that have not yet started the process of transition to IAS and will allow listed companies with financial years ending 30 June to 30 September to continue to file their Interim Financial Reports under Jamaican GAAP until 15 February 2003. This is outlined as follows:
Financial year end Interim Period Report Due Applicable Standards
30 June 2002 15 October 200215 February 2003 Jamaican GAAP or IAS
30 September 2002 15 February 2003 Jamaican GAAP or IAS
31 December 2002 15 May 2003 IAS
The Institute remains prepared to assist in whatever way possible to provide clarifications or other assistance to individual companies that require such assistance in carrying out the conversion to IAS. In addition, another series of Continuing Education seminars/workshops on IAS are being planned for the rest of the year to assist companies and individuals with the transition to IAS.
Accountants respond to private sector...
THE INSTITUTE of Chartered Accountants of Jamaica (ICAJ) adopted International Accounting Standards (IAS), earlier this year, as the national accounting standards for financial reporting purposes in Jamaica. The new standards become effective for financial periods beginning on or after 1 July 2002.
Since 2000, the ICAJ has been preparing the business community, regulators and its membership for the transition to IAS. This included presentations to various interest groups such as the Private Sector Organisation of Jamaica (PSOJ), the Jamaica Manufacturers' Association (JMA), the American Chamber of Commerce and the general membership of the ICAJ. As part of the Institute's public education programme, a number of seminars and workshops were held to sensitise interest groups and the public about the new standards, how they impact the reporting environment, and how companies should organise themselves to convert to the new standards.
The ICAJ also adopted International Standards on Auditing (ISA) with effect from July 1, 2002. This was a step in the right direction as accounting standards must be supported by an infrastructure that ensures that the standards are rigorously interpreted and applied, and problematic practices identified and resolved in a timely fashion. High quality auditing standards are, therefore, an important element of this infrastructure. Subsequent to the adoption of IAS on July 1, 2002, a number of companies have expressed concerns about the timing of the implementation of IAS in Jamaica. The affected companies are seeking more time for the implementation of IAS and have requested the ICAJ to consider a deferment to July 1, 2003. The main points put forward for the deferment were:
1. Companies were required to migrate to the new standards using guidelines issued under the Standing Interpretation Committee (SIC) 8. However, a new standard on first-time adoption would be issued in 2003, which provide for a more cost effective methodology than that which presently exists.
2. An Exposure Draft had been issued with nearly 800 pages that contain changes to a number of existing standards.
3. Outstanding issues exist between the requirements of the Jamaican tax authorities and various regulatory bodies on the one hand, and conflicting requirements of the IAS, on the other.
4. The European Union will not be adopting these standards until January 1, 2005. Additionally, a project with US GAAP was in process and not likely to be completed in the short term.
The following summarises the ICAJ's response to the concerns raised:
1. First Time Implementation
The Exposure Draft issued in July 2002, provides certain changes to previous requirements. The main changes include:
a. Targeted exemptions in specified areas where retrospective application is likely to cause undue cost or effort. The previous requirements contained less specific exemptions.
b. Clarification regarding the fact that an entity applies the latest version of IAS. c. Clarification on how the first-time adopter's estimates under IAS should relate to corresponding estimates made under Jamaican accounting standards.
d. Enhanced disclosure about how the transition to IAS affected the entity's reported financial position, financial performance and cash flows. The implication of the proposed first-time implementation was conveyed to a private sector representative group at the September 10 meeting. Jamaican companies are in fact eligible to take advantage of this feature and will benefit from the more cost effective methodology than presently exists (SIC 8).
2. Pages of Exposure Draft still in issue While there are 800 pages of exposure draft in circulation, it does not convey the fact that:
a) When finalised, it is unlikely that the standards will contain significant changes, but rather improvements. For example, many of the internal inconsistencies and implicit and explicit alternatives now inherent or otherwise allowed, will be removed to simplify the standards.
b) There can be no guarantee that the International Accounting Standards Board will not have many other standards under review in another year's time. As a matter of fact, there is likely to be rapid changes until about the year 2007. The convergence project with US GAAP and the influence of the EU will continue to have strong influence on the projects of the Board, hence, next year and the following years may possibly see another round of changes.
3. Outstanding Issues with Tax Authorities & Regulatory Bodies
a) There will always be differences between tax accounting and standard financial accounting driven by differences between tax laws and accounting standards. Hence, it cannot be said with any confidence that tax issues arising from the adoption of IAS will be resolved in a year's time.
b) The Institute maintains dialogue with relevant regulatory bodies and they support our decision to adopt IAS and ISA.
4. European Union's adoption of IAS in January 1 2005
a) In our view, a better comparison would be some of our competitors in the world economy such as Costa Rica, Barbados Trinidad and Tobago, Guyana and the Dominican Republic. All of these countries have already adopted IAS.
b) The EU position, which affects mainly listed companies, does not mean that IAS has not been adopted in any EU member country. In fact, countries such as Austria, Denmark and Germany have already adopted IAS and other countries are close to full adoption, namely, the United Kingdom, Ireland, the Netherlands and Sweden. In addition, some companies in other EU countries (Finland, Greece and Italy) already apply IAS, even though they are not required to do so until January 2005. Many other countries use IAS as a basis for national standards.
5. Implementation Problems & Costs Some significant implementation problems/challenges are unavoidable as is the associated implementation costs to be incurred by businesses. Many Jamaican companies especially in the financial sector are very advanced in their IAS implementation activities, having noted and acted in a timely fashion on the Institute's signals over the past two years about the pending adoption of IAS.
The Institute has considered at length the issues raised by the private sector group and also met with the private sector group to further discuss their concerns. Following this discussion, the ICAJ carefully reviewed the issues and consulted with an international expert on the subject. Based on the review the ICAJ has decided not to defer the implementation date. It has concluded that the position to move forward with adoption of the IAS is in the best interest of the profession and the various publics.
The ICAJ, however, recognises the challenge faced by those companies that have not yet started the process of transition to IAS and will allow listed companies with financial years ending 30 June to 30 September to continue to file their Interim Financial Reports under Jamaican GAAP until 15 February 2003. This is outlined as follows:
The Institute remains prepared to assist in whatever way possible to provide clarifications or other assistance to individual companies that require such assistance in carrying out the conversion to IAS. In addition, another series of Continuing Education seminars/workshops on IAS are being planned for the rest of the year to assist companies and individuals with the transition to IAS.
