Ifrs

“Contemplating adoption – our plans and issues”

CPC Felipe Pérez Cervantes
SEPTEMBER, 2007

INTRODUCTION
During more than 30 years, the APC (Accounting Principles Committee) of IMCP (Mexican Institute of Public Accountants) was in charge of setting the Mexican GAAP. Since June 2004, CINIF is responsible for setting the financial accounting standards in Mexico named Normas de InformaciónFinanciera – NIF (Mexican Financial Reporting Standards).

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CINIF – ¿WHAT IT IS?
CINIF is an independent organism as equity and operation are concerned. It was incorporated in 2001 by leading entities in the public and private sectors (ASSOCIATES) in Mexico. CINIF is responsible for setting Mexican Financial Reporting Standards (MFRS) with the highest degree of transparency, objectivity,reliability and quality. We are committed to converge with the IFRSs issued by the IASB in a reasonable timeframe.
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CINIF – ¿WHAT IT IS?

CINIF is already an answer to the need of having accounting standards developed by an independent and plural setter body that responds to the need of convergence with international standards.

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CONVERGENCE
CINIF is committed to attain convergencewith the international standards issued by IASB. According to the IASB vision, international convergence should be the work objective of the standards setters and their resources should be advocated to this purpose.

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CONVERGENCE

For the benefit of CINIF an interface with IASB should exist.

The international standards setters should get closer to the domestic setters and provide themmore oportunities to participate in the developing of the international standards.

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CONVERGENCE

CINIF has developed a strategic plan for attaining international convergence. We have considered the best ways to achieve the objective of convergence.

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ADOPTION
The IFRS adoption in Mexico is contemplated as a process that conducts to international convergence. A study by the WorldBank indentifies the following categories of “adoption”: Total adoption of IFRS Total adoption but trough a period of time Adoption of “certain” IFRS Adaptation of local standards to IFRS.
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CINIF STRATEGIES FOR CONVERGENCE

MFRSs are reviewed, reconciled with IFRSs and reissued. New MFRSs converge with IFRSs In the case of IFRS options we select the one which represents the best accountingsolution.
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WORDING OF MEXICAN STANDARDS
Why a different wording is needed? Adapt to the environment of a developing country, not to that of developed countries. To understand a standard it has to be written in the usual local business terms. It has to be oriented to the local circumstances. Training material has to be understandable.

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ADAPT VS. ADOPT
Therefore the Mexican standardsetter body decided to adapt rather than to adopt. This requires an additional effort to: Complete understanding of the IFRS Be sure that nothing is omitted in the MFRS Have an exposure process in Mexico for all MFRSs. Consider situations in Mexico not contemplated by the IFRS
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WHY ADAPTING INSTEAD OF ADOPTING THE IFRSs IN MEXICO
Adapting requires the incorporation of particular issues ofthe country, such as economic, politic and legal matters. Acquisition of IFRSs and subscription to IASB is expensive.

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WHY ADAPTING INSTEAD OF ADOPTING THE IFRSs IN MEXICO
The official text of IFRSs is in English, therefore they must be translated into Spanish. A book of IFRSs translated into Spanish (Castilian) exists, but it is necessary to review the text in order to put in theSpanish used by each Spanish speaking country.

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WHY ADAPTING INSTEAD OF ADOPTING THE IFRSs IN MEXICO

IFRSs are complex and in some cases include paragraphs extremely difficult to understand, therefore more interpretations and guides are required.

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ADAPT VS. ADOPT
The process of adapting maybe longer but the benefits are much greater: The understandability of the standard is...