Monday, May 19, 2008

The Rules of Play: Blogging Responsibly

The purpose of this Blog is to offer information, provide views and to promote debate on the thorny implementation of IFRS in Canada and indeed North America. This Blog is “moderated” and for those of you who are not aware of what that means, it means that I will read posted comments prior to posting and some could not be accepted.

It does not mean that I will act like a petty dictator and reject the comments I disagree with. I will let the comment get posted if it means certain other criteria (more on that later). Of course do not be surprised if I respond to the comment. Everyone should feel free to respond to the comments of others as well as my postings. I relish controversy – let’s get it out in the open.

Please remember that this Blog is public and is searchable by “web crawlers” I believe that’s what they call them. Someone might correct me. The point is please do not post anything that you would not like to see on the front page of a newspaper, or “Breaking News” on CNN – well that’s going too far but you know what I mean!

The Blog is open to everyone including lawyers, investment analysts, employment consultants, actuaries, computer specialists, employee benefit specialists and others who might have a stake in the non-financial devils in the details. Please contact me with ideas. The contact me part can be found in my profile – click on the link.

I will respect confidentiality and I will look for explicit permission to post anything here that seems to be proprietary.

“The Rules”

Here are some rules (guidelines really) that I will use when moderating comments:

1. Acceptance for publication of a posting is at the sole discretion of the moderator (me).
2. Submission of a comment is prima facie approval for publication in the public domain.
3. No responsibility will be taken for opinions, comments or accuracy of posted comments. (I will not vouch or verify the accuracy of comments)
4. No views on this site are to be taken as a professional opinion to be relied upon. The comments are “grist for the mill” in the debate.
5. No personal attacks on any individual, company or organization will be allowed. Polite disagreements are OK.
6. No spam is allowed.
7. No profanity is allowed.
8. Privacy and Confidentiality should be respected at all times
9. No overt self promotion (or through surrogates) will be allowed. This is a difficult call though. Postings should add to the debate in a meaningful way not simply be a reference to a firm’s or individual’s products or services for IFRS implementation without any other information (i.e. unpaid advertising).
10. Every effort will be made to ensure the accuracy of my postings. I am human and do make mistakes. If you believe that I have made an error in fact or omission please e-mail me (you can find the address in my profile). I will attempt to resolve the matter ASAP and correct postings or withdraw them as indicated. On the other hand, if you have a different interpretation from me please feel free or even compelled to post for further debate.
11. If you are posting here and information or comments come from the work of others I expect that the appropriate attribution be made to the author and source. (I will not be able to police this - it's on an honours system).

The above list, although exhausting, is not necessarily exhaustive. Please let me know if I have omitted anything. My apologies, but I believe that it is always a good practice to get this stuff out of the way so that the good stuff can begin.

Please note that the views expressed here are my own and do not necessarily represent the views of any other person or organization.

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1 comment:

Anonymous said...

In the recent years, Canadian enterprises have been asked to cope with exceptional and breakthrough changes in their organization as result of external factors. With the Y2K compliance, enterprises went through an extensive review of their own information systems. More recently, with the SOX and Bill 198, their compliance framework has been strengthened and, for the financial institutions, with the implementation of the Basel II Accord their risk management system has been aligned with additional and more intensive requirements. What Canadian enterprises will be asked to cope with the IFRS implementation is well beyond a change in their accounting policies, with work streams in their information systems, internal control, risk management, human resources, to name only the most important.
I had the privilege to coordinate the IFRS adoption for the foreign network of the largest Italian banking group, leading this process in Croatia, Hungary, Slovakia, Russian Federation, Czech Republic, Luxembourg, Ireland, UK, France, Germany and Bosnia-Herzegovina. Each of the subsidiaries in these countries presented a different level of challenges, including the fact that the IFRS adoption was effective by January 2006 only in some European country while either was not foreseen or it was planned for a later introduction in others. A first important lesson learned from this experience has been the need to start with a project planning immediately, regardless if the transition date is two-three years ahead. A second lesson has been the multi-disciplinary characteristic of this project, with strong need of communication at all levels. Last and not least, while other projects require only a post-mortem assessment at their completion, the IFRS compliance becomes an on-going process, with a strong requirement to equip the enterprise with an internal control mechanism to promptly react to any further change in the standards.
During my experience, I lead the process in financial institutions already struggling for the adoption of BIS II, with changes in their corporate and internal control framework to comply with amended regulatory requirements and planned or in process mergers and reorganization activities.
Starting as earlier as possible with the IFRS planning has been useful to immediately evaluate the impact of the IFRS implementation with the on-going and future project plans of the financial institutions. With the participation in the project team of managers coming from these existing projects, we have been able to utilize fresh experience and avoid, in certain area, the internal assessment required for the IFRS adoption. For example, most of the European banks use the probabilities of default and loss given rates computed under BIS II for the measurement of impaired loans on collective basis, therefore not only harmonizing their financial results with the risk management framework but also reducing additional efforts for this computation. This approach is eventually well suited for the compliance with IFRS 7.
An effective communication approach, both internal and external, during the life of the project is a key factor for the success in the IFRS implementation. There are many standards that require a managerial decision on the right approach to be taken, which can only be evaluated individually by each financial institution and with a forward looking view. This implies that Directors of the enterprise and, possibly, external examiners and analysts, understand on which basis the option has been selected, for example when considering the classification of financial instruments and the consolidation of the entities under control, the latter a definition that is somehow different with IFRS than Canadian GAAP. Securitization, hedging techniques and long-term investments are all transaction impacted by IFRS and Management should be aware of for the compliance with covenants and all stakeholders have to buy-in the decisions taken. IFRS adoption might trigger changes in the financial indicators used for executive compensation and existing strategic plans subject to be amended.
Slight differences in the standards might lead to significant result on the financial results. A methodical approach reviewing each standard and evaluating its impact on the first time adoption, which eventually lead to changes in the available capital of the financial institution, must take in consideration both existing standards and expected amendments. Indeed, contrary to the European peers, the Canadian enterprises will adopt IFRS by 2001, although during the transition period some of the standards are likely to be amended.
Likewise in the existing system, when IFRS is adopted as starting point for calculating taxable profit the Income Tax Act will be applied without any difference. Management shall be however required to carefully consider the approaches used for calculating the impacts on deferred taxation, since both the value and the timing of the differences will change.
Finally, it has been quite difficult to manage the changes in the regulatory reporting in the European financial institutions. Regulators have adapted the substance and the form of the required reporting only few months before the transition date. An active participation of the regulators and external auditors through the setting of committees established by the industry associations is an additional way to smooth the implementation process.
Although Canadian enterprises will definitely benefit from the European experience in their IFRS implementation, it is impossible to exclude that the process shall be trouble-free. However, the IFRS conversion presents also potential opportunities for the Canadian financial institutions. Indeed, financial institutions have the opportunity to identify and to select options that more adequately represent their financial results and position. The overall implementation process is also an opportunity to strength and to enhance the accounting and internal control systems, with ultimately an opportunity to use the conversion as a driver for a reorganization leading to a more efficient and effective business outlook.
And now, for those interested, some information about me.
My name is Antonello Dessanti and I'm a professional banker with over 20 years of Canadian and International Banking experience as Chief Financial Officer. I coordinated the IFRS adoption for the foreign network of the largest Italian banking Group, publishing a large number of documents for the guidance toward the IFRS, communicating with the Senior Management and the external auditors in West and East Europe, constantly reporting to the Parent for the on-going implementation process and allowing a smooth and timely adoption at the transition date. During my mandate as CFO for the largest Croatian banking group, I actively cooperated with the Croatian National Bank for the implementation of the IAS 39 in Croatia, a country where IFRS are the accounting by-laws.
I have been member of the Three-Ways Dialogue Committee established by the International Institute of Finance, where participants from internationally active financial institutions, representatives from the International Accounting Standards Board and Basel Committee for Banking Supervision had the opportunity to discuss on the convergence between IFRS, FASB and BIS II. The Committee has been successful in granting a two years grace period by IASB during the IFRS adoption in Europe and for allowing the recognition of IFRS for financial reporting in the US. I'm now working as a Manager with Sunera ULC Canada (www.sunera.com), with the primary role in providing assistance to the Canadian enterprises for the IFRS conversion.