DH

1
DH Associates
xACT 2007

• Catherine Lien
• David Light
• Jared Marchiando
• Elizabeth Rahn
• Daniel Wenhold

2
Agenda

• Current Financial Reporting Model
• Recommendation for Change
• Impact of the Change

3
Agenda

• Current Financial Reporting Model
• Recommendation for Change
• Impact of the Change

4
Current Financial Reporting Model

• Why would I want to invest in a country that has
  numerous reporting standards?
• Principles based evolved into rules based
• Well over 200 current reporting standards

5
Problems Associated

• Not transparent enough
• Confusing to investors
• Potential for unethical reporting practices
• Each financial report is indeterminable

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Agenda

• Current Financial Reporting Model
• Recommendation for Change
• Impact of the Change

7
Recommendation

• Rules Based Reporting Model ? International
  Financial Reporting Standards (IFRS)
• IFRS is Principles Based
• Gives companies the chance to accurately reflect
  operations in financial statements
• IFRS is Utilized by over 100 countries
• Attract foreign capital
• Less complex, more responsive

8
Transition Period

• 3-5 years
• Whats best for Slobia
• 3 steps

9
Transition Period

• 1) Require financial reports in both old and new
  formats
• Beneficial to investors and companies
• 2) Government subsidization
• Tax breaks as incentives
• 3) Education
• Targeted to specific companies
• Nation-wide conferences for company
  representatives
• Utilize resources from IFRS countries

10
Sustainability

• GAAP Started as principles-based and evolved
• Need to avoid a repeat evolution
• Form a new independent international organization
• Create with support of the IASB, ruling body of
  IFRS
• Help enforce and sustain principles based system
• Make Slobia an international force
• Will be called Financial Reporting Review
  Association (FRRA)

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Financial Reporting Review Association (FRRA)

• Formed with support of IASB for use in all IFRS
  countries
• Evaluate companies within industries based on
  their annual reports, footnotes there-in and
  auditor testimony
• Assign Ratings within Industries (Five-Star
  system)
• Utilize business model similar to Moodys
• Ratings available free
• Must pay for written reports

12
Financial Reporting Review Association (FRRA)

• Positives
• All companies in IFRS countries will be included
• Investors will have insight into accurate
  disclosure of companies
• Easier for investors to research, more investor
  capital
• Takes capital from non-IFRS countries,
  encouraging them to conform
• Companies reporting more unfairly than peers will
  be hurt in stock price
• These firms will thus be encouraged to move their
  disclosure in line with peers
• Drawbacks
• Large capital outlay

13
Agenda

• Current Financial Reporting Model
• Recommendation for Change
• Impact of the Change

14
Businesses

• Minimal additional costs during transfer period
• Government subsidies
• Potential to attract more foreign capital
• Increase educational awareness
• Implementation of new educational system
• Target industry leaders

15
Government

• High short-term cost
• Subsidies to companies
• Implement educational system
• Creation of FRRA
• Long-term benefits outweigh initial costs
• Country as center of financial development
• Businesses attracted to Slobia
• Increase in investor capitol
• More listings on the equity exchange

16
Investors

• Ease of research
• Principles based
• International uniformity
• International investment
• Direct result of ease of research
• More capital will flow into FRRA countries
• Non-IFRS countries will be pressured to switch

17
Review

• To solve problem at hand
• Switch to IFRS
• Utilize transition period
• To make IFRS the system for a globalized world
  economy
• Start FRRA to drive growth and sustainability