Monday, January 19, 2009

How will Investment Funds apply IFRS?

Do you know the issues related to how investment funds will be applying IFRS? It seems that this category will also include reporting on investment funds themselves held on behalf of pension plans. Pension Plans themselves will not be adopting IFRS and the Accounting Standards Board in Canada will be studying accounting issues regarding pension plans and making proposals in the next few months. In Canada we appear to be on track for the application of IFRS to investment funds. As always please stay tuned!

Deloitte has published an industry specific publication on investment funds. This is one of a series of industry specific publications. "IFRS for Pension Funds: More Than Just Accounting and Reporting" The 14 -page document covers a lot of potential differences between US GAAP and IFRS as well as other non-accounting considerations. Canadian readers should of course be careful in reading the document since the difference may be different - an alliteration to be sure!

Interestingly the publication notes that "The level of resistance to IFRS within the investment management industry appears to be stronger than other industries". This seems to be because of the "specialized" nature of the funds. Is resistance futile - it remains to be seen.

There is much sentiment that US GAAP in this industry is vastly superior to IFRS. Would lack of appropriate industry guidance in this industry lead to a deterioration in reporting on adoption of IFRS? The SEC Proposed Roadmap asks "is it appropriate to exclude investment companies and other regulated entities filing or furnishing reports with the Commission from the scope of (the) Roadmap?"

The discussion in the document is comprehensive and definitely worth reading if you have any connection with an investment fund. One issue that is raised is rules for consolidation of entities. In all likelihood there will be more entities consolidated under IFRS rules. Four pages - single-spaced of IFRS US GAAP issues are noted!

The document also suggests some useful matters for management and the Board of Directors to consider as they mull over their response to the possible coming of IFRS to American Investment Funds.

Clearly we will be watching this debate very closely in Canada.

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