In 2011, any Canadian publicly accountable
company will be required to report their
fi nancial results using the International Financial
Reporting Standards (IFRS) as opposed to
Canadian GAAP. These include publicly listed
companies; enterprises with fiduciary responsibilities
such as banks, insurance companies,
credit unions, securities firms, mutual funds
and investments; crown corporations and
other government business enterprises. The
Accounting Standards Board (AcSB) is also
currently considering options for changes
in GAAP for private companies, namely: a
top-down approach based on public company
GAAP, eliminating and modifying some IFRS
requirements; the adoption of the International
Accounting Standards Board?s (IASB) proposed
standards for small and medium-sized
enterprises; and an independently developed
set of Canadian standards for private
enterprises that shares the same conceptual
framework as IFRS.
This will not only have accounting and reporting
implications, but strategic management
implications across the entire company. Organizations
who are now considering the
changeover to the IFRS will be looking for
strategic direction and analysis on the impacts
on their companies, including: implications on
their current lending agreements, taxation
issues, executive compensation, debt
covenants, profit sharing and employee
incentive programs. Decision makers are also
asking questions surrounding their legacy IT
systems and the changes that will be required
to accommodate the new financial reporting
architecture. Investor relations professionals will
be required to explain and communicate the
implications of moving to the IFRS well in
advance of 2011, so their shareholders are
fully aware of the potential impacts on fi nancial
reporting. At the same time HR professionals
will be determining the best approach for
training, attracting and retaining finance professionals
to handle the demand for finance
people who understand the IFRS. The cost
of conversion will also be an important consideration
for budgeting purposes. While 2011
seems a long way away, the Accounting
Standards Board is advising that public
companies should be in a position to disclose
their plans for convergence in 2008.
To date, much of the information available to
Canadian decision makers has surrounded
the accounting differences in the IFRS and
Canadian GAAP. Our research begins to
fill the gap in the literature surrounding the
state of IFRS Readiness in Canada. In so
doing, it attempts to identify best practices,
current issues, and emerging challenges that
companies of all sizes should be aware of in
converting to IFRS. Please note that in this
research we have not attempted to do a deep
dive into sector specifi c accounting issues. We
recognize that certain standards most important
to rate regulated industries, insurance providers,
and the oil and gas sector, are still evolving.
While we do periodically focus on the views
of the executives surveyed in these sectors, our
aim is to provide a more general perspective
of financial executives across many industry
groups.