Wednesday, September 24, 2008

Time to hit the road to IFRS in Canada

When is the right time for Canadian Companies to start their projects to convert to IFRS?

Answer if you are procrastinating, please stop..
Do not be late for the very important date.

I have urged everyone in “publicly accountable enterprises” (PAEs) to start as soon as possible on their project to convert to IFRS. There are many issues to be resolved prior to 2010. Although the conversion date is January 1, 2011 for calendar year companies, it will be necessary to run in parallel during 2010 to provide for a smooth collection of the information for IFRS 1. Systems will need to provide for keeping two sets of books – Canadian GAAP and IFRS during the transition period. Time is running out – and don’t forget that grooming disclosures will be required under CSA requirements. These “grooming” disclosures will require a status report on your IFRS conversion project in the MD&A with ever increasing granularity of quantification of the effects of the changes to IFRS.

Yesterday, the Economist held a seminar in Toronto on IFRS Compliance in Canada.

The seminar was an update on recent developments on IFRS conversion in Canada and a discussion of experiences of senior financial executives in their IFRS projects to date. I will be referring to some of the comments in future postings over the next couple of weeks or so. I had planned to write on a number of topics and the credit crisis struck! Hopefully we can get back to “normal”.

Ron Salole, the CICA’s Vice President, Standards, was asked if there might be a deferral of the effective date of implementation. He said that it was very unlikely there would be a deferral as there had been extensive consultation prior to the confirmation of the date earlier this year.

Notwithstanding this date certain it seems that most “publicly accountable enterprises” have not started their IFRS conversion projects in earnest. The vast majority of small to medium size PAEs have not started their projects. The situation has not changed much since the beginning of the year when CFERF reported on IFRS Readiness in Canada.

Once again the message is that conversions go beyond the numbers into systems, contracts, tax, governance, compensation arrangements and a whole host of other things.. As well, a deferral in starting the project may mean that resources might become scarce or even unavailable. There might be shortcuts taken increasing risk. These are not new issues. You have heard them all before and they sound like a broken record and cynics might say that accounting firms are being self serving. However, everyone who has gone through a conversion has said with the benefit of 20/20 vision that they wished that they had started earlier!

As part of the seminar The Economist Intelligence Unit has issued a paper entitled IFRS Coming to a Canadian Company near You. The paper was sponsored by Ernst & Young. The paper discusses the nature of IFRSs and the actions that need to be taken to convert to IFRS.

I attended another seminar today on XBRL I will be covering that here in this blog shortly.

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