The structuring of a company’s Canadian GAAP to IFRS conversion team will be based at least partially on an impact assessment. This helps to make sure all potential issues identified are addressed. Typically, a cross functional team will be required, which represents Finance, IT, HR, Operations, Sales, Investor Relations, Marketing, Governance, Legal, Training and Audit functions. It is best to base the team on the business wide impact IFRS will have. The size of the IFRS conversion team will depend on the size of the company.
When assembling the team, it will be important to consider the people outside of the accounting function that could be affected by and have influence over the change process. For instance, HR charged with setting compensation for employees and management will need to be aware of the implications of the changes. HR people will need to be involved when reviewing the accounting rules for pension plans, share based payment plans or employee benefit bonus incentives. Treasury might be required to review debt covenants. Sales might be required to review the technical nature of sales transactions.
It will be important to involve the Internal Audit staff, as they could potentially assist with managing the IFRS risk and ensure that key milestones are being met. Also, Internal Audit or equivalent will need to understand, and be involved in any changes in financial and business processes. For instance, with respect to a company’s certification of internal controls over financial reporting under national instrument 52-109, the controls and documentation are going to change to the extent that the financial processes have changed. This will need to be updated, which for most companies will represent a significant undertaking. Some of these companies will need internal audit to be involved with the year end testing and evaluation.
Some organizations also use an “Internal Control group” which also plays a role in the conversion. Both Internal Audit and Internal Control groups would be most affected as changes to systems, processes and controls affect management certifications. The IFRS project team and Internal Control group need to work together closely on the conversion.
It is essential to get systems and IT personnel involved with the financial reporting systems and on gathering information. Most information for the majority of the entity must be collected through the financial reporting system, but other systems may also work in tandem. The financial reporting system is currently geared towards Canadian GAAP. This obviously needs to change to IFRS financial statements and differences addressed from a systems standpoint. It is also important to note that IFRS disclosures are significantly more robust than Canadian GAAP, and existing systems may not be set up to collect the new required information at the level of detail needed. Therefore, it is important to review what the IT requirements are, and get IT personnel involved early.
In short, this is not solely an accounting project – it will affect just about every facet of the organization – and that’s why it’s so important to involve representatives from across the company with the appropriate skills and background to fulfill their responsibilities. Having a cross functional IFRS project team that has general oversight is important to keep everyone throughout the company accountable and focussed on their respective timelines.
The cross functional team provides an opportunity to build technical expertise and system visibility within the company. This conversion project will require considering choices, options, and making decisions that will impact the organization from a business, IT and policy perspective for years into the future. Having more people engaged in the work and in different parts allows people of varying experience and expertise to dialogue, exchange ideas and support in each other. The IFRS standards need to be reviewed in detail, so one approach may to identify the top 5 standards impacting the company, and use those as a starting point.
I hope this helps. This is one of a series of blogs that is meant to convey information relating to Canada’s transition from Canadian GAAP to IFRS.
For further information, please refer to the ongoing series of IFRS blogs on the Edelkoort Smethurst Schein CPA’s LLP web-site and please remember to contact your accounting professional for further guidance.
Edelkoort | Smethurst | Schein CPAs LLP is located in Burlington Ontario servicing the Golden Horseshoe and Greater Toronto Area and beyond. The firm is fully licensed with CPA Ontario to provide assurance, tax and accounting services as well as registered as tax preparers with the Canada Revenue Agency (CRA) & Internal Revenue Service (IRS). The firm is also registered as an IRS Certified Acceptance Agent.
All blog posts published on this site are for informational purposes only and do not constitute professional advice. Readers should contact a professional to discuss their individual situation. Neither the author or the accounting firm shall accept any liability for any reliance placed on the information posted.