The technical issue experienced appears to have been resolved thank you for you patience,
Hope you are having a great weekend.
Darla
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I am having technical Problems with this site please be patient. I believe that some parts of the installation have been hacked
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I have changed my Twitter user name from IFRS_Exorcist to darlasycamore. You can visit my profile at http://www.twitter.com/darlasycamore.
Nothing has changed other than my user name followers and followees stay the same.
This user name change does not signal a change in what I tweet about or how I tweet about it. I will continue to tweet about IFRS and other financial reporting matters. I will of course tweet about other matters, including hats (http://www.manyhattyreturns.com).
People were not comfortable with the Exorcist name and suspected me of being a spammer. I am therefore making the change to my own name. I will continue also to use one Twitter account for all my activities.
As for the IFRS Exorcist blog I have suspended posting for the time being and I am looking at a number of future possibilities and potential business opportunities – please stay tuned for further developments.
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The Canadian Accounting Standards Board (AcSB) has re-confirmed the “go date” for IFRS Canada for “publicly accountable enterprises” . The date will be for years beginning on or after January 1, 2011 (don’t forget you will have to have an opening balance sheet and a comparative figures on an IFRS basis (2010 calendar for calendar year companies). It will be a very busy period up to the conversion date and especially busy if you have barely scratched the surface of converting to IFRS.
The AcSB has issued its memorandum Changeover to IFRSs: January 1, 2011 confirming it’s decisions and the reasons for them. There has been some uncertainty recently given the unstable economic environment and the SEC’s Chair taking her “deep breath” on IFRS in the USA. We have seen many IFRS detractors in the USA. This uncertainty goes against the continuing and unwavering confirmation from Paul Cherry, the Chair of AcSB, that the 2011 had been deliberated in the past and the date confirmed. The memorandum does include a kind of faint hope clause in that the AcSB ” continues to monitor the situation in the light of the current market conditions and other factors”.
A number of factors (reasons) are cited in the memorandum leading to this re-confirmation. (My editorial comments mine not theirs have been added)
Ample lead time
Five years between decision time (2006) and Implementation time. My count is somewhat less. The date was not really confirmed definitively until early 2008 and actually companies have to have their ducks in a row by the beginning of the 2010 fiscal year (UPDATE error corrected from 2009). You could say really only two years notice was given. As well some entities were not sure they were covered until the definition of “publicly accountable” was confirmed in the fall of last year. Perhaps one could argue that even the two-year period is sufficient? Any thoughts on this?
The transition window
There are many countries with a 2011 conversion or convergence deadline and the IASB has allowed for this in their Standards issue and effective dates for Standards. Yes that’s true but there will be standards that are being finalized in 2011 to be effective later. There is an accelerated schedule at IASB to meet the requirements to converge US GAAP with IFRS – the Norwalk Agreement. There will be a need to consider transition issues on these standards.
Canadian GAAP is a no Man’s Land
According to the AcSB to some extent we have passed the point of no return – “Canadian GAAP” is neither US GAAP or IFRS. There is an English saying “Neither Fish nor Fowl” – perhaps this is lost in translation?
US GAAP Reconciliations
If the SEC continues its policy to allow IFRS issuers (under certain conditions) to file IFRS financials. Canadian entities will be able to file with the SEC without the US GAAP reconciliation
Canadian GAAP for EU Filers
An exemption from IFRS requirements in the EU is contingent on the adoption of IFRS in Canada in 2011.
Companies that already report in IFRS
Some Canadian Companies report in IFRS already (eg subsidiaries of IFRS reporters). They look forward to discontinuing “Canadian GAAP”.
Companies are already invested in the IFRS conversion exercise
Many (perhaps most) companies affected have invested heavily in the conversion exercise. There are varing degrees of “investment” in my view. The Canadian Financial Executives Research Foundation (CFERF) has surveyed companies on their actual preparedness as of this date. The results will be out in a few weeks. Earlier surveys of intentions might have been done prior to the full impact of the current crisis and based on expectations at that time.
Stranding Early Adopters
Canadian Securities Administrators have given companies the option to adopt IFRS early a change now might strand them. (I have no information available on the number of such companies affected but of course just one is a problem).
Support from G20 leadership
The G20 at recent meeting continues to support IFRS. Canada has an opportunity to show leadership here in active participation in the Standards.
Continued history of standards excellence
The AcSB has a tradition of excellence and they believe backing off from the decision to adopt IFRS is a retrograde step (my words).
Current Market Conditions
Their argument is no time is a good time in effect.
Following the US lead
Notwithstanding US developments and timetables we have always adopted a made in Canada approach. The USA has different options and avenues to pursue.
Please read the document for the words of the AcSB Please do not rely just on my comments.
In the concluding words of the Memorandum the AcSB states:
Investors and regulators worldwide are demanding the ability to compare financial statements for companies across borders and make efficient and informed decisions. The adoption of international standards will facilitate access to global capital markets for Canadian Companies. The benefits outweigh any drawbacks. In the AcSB’s view, the current financial crisis and the uncertainty in the US are not reasons to delay Canada’s adoption of IFRSs.
Delay of IFRSs will not improve the quality of Canadian financial reporting and it will increase the cost of implementation. By investing in the transition now, Canadian businesses will reap the benefits of this decision in years to come.
I have personally witnessed a decline in IFRS interest in the last few months. To some extent this can be attributed to information overload I think. Perhaps to some extent this declining interest was caused by the economy and the anti IFRS developments in the US. Perhaps this decline was caused by year end or other pressures. Just keeping your company afloat perhaps?
CFERF (the Canadian Financial Executives Research foundation, connected to FEI Canada) has undertaken a survey to ascertain the actual extent of preparedness for IFRS in Canada. The results will be available this month. (I am a Trustee (Director) of the Foundation and emphasize that these comments are mine and do not represent the views of FEI or it’s members or the views of CFERF – at least necessarily)
Will you be ready? How do you plan to get ready? How good is your IFRS conversion plan? Please send me your comments.
I have substantially reduced the frequency and number of posts on this blog for many reasons. Perhaps now we are over the year end hump interest will return? I will assess this. What do you think should be done in this blog (keep it clean please – remember I am the Moderator – the decision to publish or not rests with me). Would a weekly Podcast be of any interest?
Well the game is afoot Good Luck to you all. Let’s cheer for a successful IFRS conversion that we will be proud of. We have the opportunity to show the world what Canadians are made of!
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The Canadian Accounting Standards Board met this week to discuss accounting for financial instruments with particular reference to the recent FASB pronouncements and the ongoing IASB fair value project. I have previously reported on the Canadian reactions to the recent FASB positions.
Deloitte has issued a useful discussion of these Canadian deliberations. You can find the Decision summary from this week’s AcSB meeting on the AcSB website.
Yesterday the AcSB issued a press release on their positions.
The flavour of the responses was and has been a reaffirmation of the AcSB resolve to continue to move toward IFRS and not to make any abrupt diversion, albeit maybe temporarily to US GAAP. The Canadian Banks have been crying foul to this position since many have argued that all this puts them at a disadvantage vis a vis the US which is Canada’s major trading partner. The proposed changes though clarify the Canadian position and will provide some assistance to Canadian companies on valuation of financial instruments (including Canadian Banks).
There were two major areas covered in this week’s meeting.
Fair Values
The AcSB made NO changes to Canadian GAAP on fair values at this time at least. The Board reviewed the recently issued FASB FSP FAS 157-4 and concluded that it IS consistent with Canadian GAAP. Preparers can reason that they can follow FSP 157-4 and consider the results in accordance with Canadian GAAP under the general principles in CICA Handbook 1100 Generally Accepted Accounting Principles. Interestingly they also noted that following the IASB paper Measuring and Disclosing the Fair Value of Financial Instruments in Markets that are no longer Active, issued late last year, would also constitute Canadian GAAP. I have not done a detailed comparison. Clearly then much care will need to be taken in disclosing the methods used for fair value determination.
Of course we are still on track with the IFRS project on fair value and we expect the IASB to issue an exposure draft on the subject very soon.
Impairments of Debt Instruments
There are a number of proposed amendments that will bring current Canadian GAAP more into line with IFRS but according to Deloitte “may create additional differences between Canadian GAAP and US GAAP”.
The changes are not trivial and will change how some financial instruments are classified measured and disclosed. One interesting proposal is to adopt the definition of Loans and Receivables (carried at amortized cost subject to impairment write downs) from IAS 39. This will permit debt securities that are not traded in an active market to be classified in the loans and receivables classification. This treatment is not allowed under current Canadian GAAP.
An Exposure Draft of the proposed changes and the transitional provisions proposed is due to be issued by May 30, 2009.
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There is an update to the CICA publication The CICA’s Guide to IFRS in Canada 2009
You can download the publication as a free resource. Check out the CICA’s IFRS site for more resources.
There is a useful list and links to some examples of IFRS MD&A disclosures that has recently been added. It’s cool just click on the links to go to the live examples.
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If you are to understand International Accounting Standards fully you need to have a good knowledge of the IASB’s processes and procedures.
So what are annual improvements? This all sounds like an annual resolution to do better next year like a new year’s resolution. It’s closer to a sort of annual maintenance project where the IASB cleans up a number of technical issues in one great omnibus revision.
Why not do this through an emerging issues process? If you visit the IASB site you will realize quite quickly that the IASB is very reluctant to issue many interpretations even though there is a body, IFRIC, charged with this responsibility. IFRICs terms of reference can be found on the IASB site.
The process for these “annual improvements”can be found in the project listing on the IASB site. Essentally these are all non urgent but necessary amendments to IFRSs that come from various sources.
The IASB has issued the current Annual Improvements update recently. Read the press release on the conclusion of the 2007 – 2009 Annual Improvements cycle. Essentially there are improvemnts to a very diverse array of IFRSs. It’s very important that you use the most up to date version of IFRS that incorporate the changes – be careful and check to see if your version has the updates.
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I am obliged to Edith Orenstein at the Financial Executives Institute (FEI) blog for her article yesterday.
…..the documents which are now available by free download on the IASB website include International Financial Reporting Standards (IFRS) issued by the IASB and interpretations issued by the IASB’s International Financial Reporting Interpretations Committee (IFRIC), as well as standards originally issued by the IASB’s predecessor organization, the International Accounting Standards Committee (IASC)
Certain information such as the basis for conclusions is not included in this program. You will have to subscribe to a paid service. I believe that the complete material is available through the Knotia site of the CICA.
More information about this significant change in policy can be found on the IASB site. Check out the Education initiative.
As well, the IASB has announced that the bound volume of IFRS, previously only available from London, will now be distributed for sale in Canada, the USA (an possessions) and Mexico.
All this is a significant step. Thanks to IASB. I believe it is an essential step to encourage acceptance.
Edith also points out that comments are due on Monday on the SEC’s IFRS Roadmap. Looks like over 100 comment letters received by the SEC as of today – it will make interesting and heavy reading.
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The IASB requested views on the latest positions from the FASB in the following documents:
FSP 157 – 4 Determining Fair Value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly.
FSP FAS 107 – 1 and APB 28-1 Interim Disclosures about Fair Value of Financial Instruments
FSP FAS 115-2 and FAS 124-2 Recognition and Presentation of Other than temporary impairments
You probably recall that these pronouncements were brought out by the FASB in response to some arm twisting of FASB Chair Bob Herz in a US Congressional Hearing.
The IASB is interested in your views and has an open comment period to April 20, 2009. The fourteen page request for views document can be downloaded here. In view of the controversial nature of this project there have been relatively few letters received at the IASB. Perhaps there will be a last minute flurry of responses?
The FASB press release can be obtained at their website. There is an article on the issues at the CFO.com site. The FASB’s plain language summary can be found on the Ohio CPA site.
Apparently it is not a given that the IASB will rubber stamp the FASB documents and adopt them into IFRS. Although the FASB has sought to ease the effects of the fair value rules can it be that they have gone too far and was the short exposure period of the FASB proposals just too short?
What’s the Canadian position on this? In short we are waiting for the IASB to make it’s views known. The US is our major trading partner but as readers of this blog are probably aware Canada has made a commitment to adopt IFRS for “publicly accountable” entities for fiscal years beginning on or after January 1, 2011.(The Canadian AcSB continues to confirm this decision). We await the results of the IASB meeting on April 23 and 24 next week according to a quote in a recent quote in the Globe and Mail, Canada’s National newspaper. If you want to read the article that was in the April 8, 2009 edition you will have to purchase it from the Globe and Mail here. The whole idea is that we do not want to act too hastily. There is some debate as to whether the FASB decisions will have much affect. For example, from the Globe article the Chairman of the Bank of America said that the bank’s assets have been hit hard and already written down “pretty severely”. The rules may be too late to help the worst situations?
In my personal opinion (not to be associated with any company or organization I may be involved with) I think that more work needs to be done to sort out the fair value question. The current crisis was caused in great part by over-zealous seekers of profit and bonuses with extreme risk and unacceptable risk. We have to learn our lessons here. Do not blame the score keeper. We should hold the score keeper to account and make sure he/she is acting in a fair unbiased way. There is no doubt that there has been a conservative bias in many valuations. Let’s continue to work on this to make valuations more balanced and make sure we have a robust valuation situation. I do not agree with those who say fair value caused the problem. Where were these people when values were increasing? You provide the answer. I’m sure Regulators are taking careful note and we will have a better system going forward. Do not throw out the “fair value” baby with the bath water! We all need to take a deep breath and just consider this issue calmly.
Please check out the IASB project update to see how the IASB is progressing with it’s own fair value project. The project is part of the convergence efforts between USGAAP and IFRS. The IASB does caution that their final standard my differ from the FASB’s in requirements and wording. An Exposure draft on fair value accounting is expected very soon from the IASB.
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Last week the G20 met in London to discuss the economic crisis and to set some parameters for the way forward.
You can get information on the Summit at the official site. Download the Communique here.
I was heartened by the agreement for more and improved regulation. There is also an agreement to coordinate national regulations among the community of the G20. The trouble is one can never legislate against greed. Let’s hope that everyone has learned a lesson from the huge risks that were taken to achieve huge short term profits and major bonuses. I just hope that we do not swing the pendulum really far on the side of regulation so as to inhibit economic activity or worse a back door for protectionist measures. Laissez Faire clearly has not worked. More enforcement is needed also this has been graphically illustrated in the recent Madoff case.
We are quite proud here in Canada of the soundness of our banking system which unlike our Securities law is regulated nationally. We do not have the proliferation of banks here and lending guidelines have always been stringent. We had our own made in Canada asset backed paper issues. However, much of the problem was limited to one institution not one of our big four banks.
The World Economic Forum ranked Canada as having the soundest banking system in the world. See the Global Competitiveness Report released last fall. See a press report here. Stephen Harper, our Prime Minister, has expressed his pride and other countries have been looking at our regulatory system for banks as input to revised regulations in their own jurisdictions.
On the accounting front the G20 called on:
….the accounting standards setters to work urgently with supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high quality global accounting standards.
As you know the convergence in accounting standards has received varying interpretation in different jurisdictions even those purporting to follow IFRS. This wording would seem to allow for the US to continue the bilateral FASB/IASB convergence that is going on under the terms of the Norwalk Agreement. Several projects arising from this joint effort are coming to fruition on or around 2011.
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