IFRS + C-SOX Certifications – Ongoing certifications

/, SOX/IFRS + C-SOX Certifications – Ongoing certifications

As Canadian companies transition to IFRS during 2011, CEOs and CFOs must continue to provide their control certifications throughout this period. Most companies have begun working on their changeover to International Financial Reporting Standards (IFRS), because IFRS will replace Canadian generally accepted accounting principles (GAAP) for fiscal years beginning on or after January 1, 2011.

Most Canadian-listed domestic issuers will be required to report their first set of IFRS financial statements in the first quarter of 2011. At the same time, certifying officers of non-venture issuers will also need to certify on the design and implementation of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR). How will companies maintain effective control throughout the IFRS conversion and beyond?

This blog is one in a series of 3 blogs, which addresses the following important considerations with regards to IFRS and NI-52-109 CEO and CFO Certifications:

• Regulatory (Part 1 of 3).
• Initial reporting under IFRS (Part 2 of 3).
Ongoing certifications (Part 3 of 3).

A portion of this information is based on my personal observations and opinions. This has been augmented with information publicly available from KPMG. Therefore, acknowledgements are hereby made to KPMG.

Ongoing CEO and CFO certifications
Overall, IFRS is much less rules-based than Canadian GAAP, and therefore requires the application of more judgment. To ensure consistency of application of principles, larger organizations should consider promoting an environment which encourages active discussion of significant judgments. This dialogue may be accomplished for instance via monthly calls involving division controllers that address technical accounting matters. More summarized discussion should also occur at the disclosure committee level.

Management can also use the period after adoption to assess whether the effectiveness of their monitoring controls is once again sufficient to eliminate supplementary 2011 process level testing.

Some issuers may continue to improve their financial reporting systems, processes and controls after the year of adoption. For example, an issuer may be able to integrate into IT systems certain processes that had been performed through excel spreadsheets or other “work arounds”. If issuers plan to further enhance their IFRS reporting processes, they need to consider whether such improvements represent a material change requiring disclosure in MD&A. They also need to consider the impact of these further changes on their risk assessments in the year of improvement.

• Reconsider testing strategies to address areas where the IFRS changeover changes risk.
• Continue to focus on IFRS related controls well beyond the 2011 changeover.

In the first few years after adoption, several new or revised IFRS standards are expected based on current active projects that the International Accounting Standards Board has underway. Management will need to continue to monitor changes in IFRS and to consider the implications for ICFR of any changes to their accounting policies.

After the early years of adoption, and as more stable processes are put in place, management should reconsider its risk assessments. Moreover, as IFRS becomes “business as usual,” and all individuals throughout the organization become well versed in IFRS, financial reporting risks will likely decrease.

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, specifically as it pertains to CEO and CFO Certifications.

For further information, please refer to the ongoing series of IFRS blogs on the Edelkoort Smethurst Schein CPA’s LLP web-site or send me a note, 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.


Leave A Comment