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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!

Tagged as: AcSB, IFRS, IFRS in Canada, IFRSCanada, Paul Cherry