IFRS – International Financial Reporting Standards
This is a very top level and brief discussion regarding one of the most important developments in accounting – the transition to International Financial Reporting Standards (IFRS).
There are numerous excellent sources of information available from various organizations, and some web-site links are listed in this newsletter. Here are some important points to consider:
• IFRS – What is it and why is it needed? Essentially every country (during years / decades of refinement) has developed its own unique generally accepted accounting standards (GAAP). Although most of the standards are similar, there are many significant differences, even between the world’s largest trading partners Canada and USA. This requires companies to reconcile financial statements in order for comparative purposes. Imagine the administrative time and expense to do this, and imagine the difficulty in today’s global markets of trying to compare financial results in dozens of different countries. As a result, the accounting profession, led by the ISAB, has been moving steadily towards converging accounting standards and hence the transition to IFRS.
• When will IFRS be effective in Canada? Effective January 1, 2011 which means that for comparative reporting, 2010 financial results will also be required to conform to IFRS.
• Will IFRS pertain to all organizations, Public and Private? IFRS will be mandatory for all “Publicly Accountable Enterprises”, which include listed companies and any other organizations that are responsible to large or diverse groups of stakeholders, including non-listed financial institutions, securities dealers and many co-operative enterprises. There are about 4,500 such entities in Canada. It will also affect their stakeholders: their shareholders, employees, lenders, auditors, and advisors. The effect on not-for-profit and privately held companies is yet to be determined. Private companies can choose to use IFRSs but will not be required to do so. Financial reporting standards for private companies are now under careful review by the Canadian Accounting Standards Board (AcSB), which is in the process of conducting extensive consultation with stakeholders. These consultations are expected to continue until mid 2008. Please stay tuned.
The transition to IFRS will be a significant undertaking for companies, and as is the case with all large projects, it will require careful planning and implementation. Senior level commitment early in the process, solid accounting advice and project management concepts will play important roles in the successful conversion to IFRS. Remember that accurate financial reporting ties back to C-SOX regulations, so the IFRS consequences for publicly traded companies are that much more important. It means there is no better time than the present to begin the planning process.
There are several excellent sources of information. A partial list of suggested links:
• Canadian Accounting Standards Board (AcSB)
• Canadian Institute of Chartered Accountants (CICA)
• Certified General Accountants of Canada (CGA Canada)
• Ernest and Young (E&Y)
• Price Waterhouse Coopers (PWC)
Within each web-site, type IFRS in the search field on the home page, and you will be directed to the various topics. A wide variety of excellent information is available on these web-sites including specific Canadian Handbook sections and the corresponding IASB guidelines, and financial statements “before and after” templates.
The time to begin planning is now. If you have any questions, please don’t hesitate to contact me.
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.