IFRSCanada:The devil is in the details

Update on new site

2009-02-11T13:34:00.005-05:00

The new site is active please go over and sign up now.

I posted the first technical post today. It deals with the long and the short of debt classification. This is a follow up from the previous post on this site.

An update - new IFRS site

2009-02-09T11:52:00.009-05:00

You may have been wondering what has happened to me? I am working on a new IFRS site and it will be ready very soon.

I have been working very hard on moving this blog to a new site. There are a number of reasons for this but I will not burden you with them here. The site shell is pretty much ready and you can go over and sign up now I suggest you do. As soon as I deem the site to be stable I will go live. You can go over and take a look and sign up for the feed and or an email (a new option). As well, I have tightened up the feeds. Boy, I have learned a lot about blogging since last May!

The new site is at http://ifrsnewsandviews.com. I am calling the site "The IFRS Exorcist" as I have been generally known by that name - my nom de plume. I will discontinue posting on this site after I start on the new site so if you want to continue to follow me you will have to do it on the new site. At this time I have not decided how to handle the nearly 200 posts that sit on this site. I have to be careful as Google penalizes you for duplicate posting. Please stay tuned for the announcement. If you are linking to me please change the link when I announce the move. I advise NOT deleting your subscription to the old feed for the time being. There may be some links that I am not aware of. I plan on telling the admins of the sites I know link to me. If I leave you out do not take it personally. Please let me know. When of the features of the new site is that I will be able to find out who is linking. I can do this for people on Technorati.

Please bear with me during the move it's very like any move - ugly. You always hope that it is for the better.

This is an advance notice there will be plenty of notice during the transition period and it might take several months to ring everybody over. I apologize for the inconvenience but it will be better for everyone.

Please join in the conversation. I need ideas and feedback. I plan on getting into more of the technical devils in future please remember there are probably more questions than answers. We need more public debate. Soon your year ends will be over. It's really time to engage. Yes I know there are a lot of matters on your plate. I ran the Finance Department of a large pension plan and I had a senior position at a major bank. Believe me I know and can empathize! At some point in the very near future you will wake up in the morning and IFRS will be on your top 3 to do items. It may not be there yet but it will be soon.

The long and the short of debt:
Last week I posted a teaser about debt classification under IFRS. It's an important issue. I will be doing a post on the issue at this site. It's a very important IFRS/Canada difference especially if this "credit crisis" thing goes on for a long time. I am finding people are getting gun shy. Nobody seems to be able to forecast even a few weeks ahead and many are in survival mode. Negotiating debt with the bank may be difficult and there could be surprising results if the "i"s an "t"s are not dotted at year end. Don't forget your opening balance sheet . You will not be able to go back and change conditions existing at year end. More later......

The SEC IFRS Roadmap

2009-02-04T14:41:00.007-05:00

I learned yesterday from the FEI Financial Reporting blog that the SEC has extended the comment date on the proposed IFRS Roadmap to IFRS adoption in the USA. You may recall that comments were previously due on February 19, 2009. The FEI and others asked the SEC for an extension since most companies are involved in year end activities in the most extraordinary period in recent memory. It's tough to stay focused.

The new deadline is April 20, 2009, a sixty day extension.

This is only an extension of the comment period on a very weighty document. There are wide ranging implications that need more study. Even the most ardent IFRS supporter should understand this. Mary Schapiro certainly has a lot on her plate and it must be difficult to decide what to fix next. President Obama must wake up every day with this dilemma. Let's hope he is actually getting his sleep.

There have been several comments submitted already on the Roadmap and these comments are posted on the SEC website. It's an interesting and transparent process.

Please be assured even though there are numerous rumours flying around, there has been no decision in the US on whether IFRS is to be adopted or if so when. That's the subject of the current debate on the Roadmap.

If you are following along in this blog you will know that we are on track in Canada for converting to IFRS effective for fiscal years beginning on or after January 1, 2011. There are many issues involved in implementing this timetable and I will continue to report on them. I will be moving to a new site very shortly to post under my IFRS Exorcist name but I will give you a lot of notice and allow a transition period.

Questions continue to be asked (by companies that have barely started the conversion - yes believe it or not) will there be a deferral of the implementation date of IFRS in Canada? The Accounting Standards Board in Canada continues to confirm that there are no plans to defer the implementation date. Companies are challenged to find funding for the resources to carry out the project.

Last year, about exactly a year ago in fact, the Canadian Financial Executives Research Foundation (CFERF) conducted a study on IFRS preparedness. The results of the study were published last April. (It's a free download). The study was sponsored by Ernst and Young in Canada. CFERF will be conducting a new study of IFRS preparedness very shortly. It will be very interesting to see if the level of preparedness is significantly higher over last year.

I should point out that I am a Trustee (Board Member) of CFERF (the opinions expressed herein are mine alone)

Implementation in Canada is also complicated by the high level of activity at the IASB as the Board and the FASB seek to converge standards in anticipation of adoption of IFRSs in the USA. Companies have to build in potential changes in the Standards into their conversion plans. This of course adds to the work depending on a company's particular situation.

There is a lot of anecdotal evidence of a high degree of lack of IFRS preparedness in Canada especially in the large number of small to medium size "publicly accountable" enterprises. These organizations do not have the staff who are devoted to financial reporting matters exclusively as many of the larger public companies have.

I am looking forward to the empirical data.

Debt Renegotiation 1876 Style

2009-02-03T13:06:00.010-05:00

Lessons for IFRS reporting from History.

I am a keen student of history and I came across this letter in our local Antique Market the other day. Please right click to read it in a new window.

It's quite interesting and was found in a lawyer's papers. I have deleted the name of the signatory. Nothing really changes, the writer is asking, indeed demanding, an extension of a few "weaks"(his spelling) to pay off the debt. Does a few more weeks make you weaker? And "you should say nothing of" the interest! An interesting approach - take the offensive?

What has this to do with IFRS? Have I gone completely loopy this time do you think?

It's a teaser of course. Debt renegotiation is a very important matter during the "credit crisis". Check out IAS 1 for the classification of debt as short or long term. You may be surprised about how many situations you think can be long term debt classification might have to be classified as short term. Check out !AS 1. Be sure to refer to the latest version and not the version in the Exposure Draft last April. I will discuss the issue later in the week.

Why the fuss over $130? Of course a dollar was worth more, even Canadian dollars in 1876.
It is not easy to do comparatives. I found no information for Canada. However you can get some information on the Measuring Worth Site. If one looks at consumer prices the $130 is a little over $2,500 now (most inflation in the post World War II period). If you look at other measures such as the relative unskilled wage the value of $130 (US dollars) would be about $18,000. I suspect the data would be similar in Canada.

Please read IAS 1 (NOT IFRS1 - there is a big difference) to find out the issues related to year end classification of debt. There are also a lot of other financial statement disclosure matters in that standard also.

Stay tuned. I am also doing a lot of work on moving this blog - please stay tuned. There will be a very concentrated set of articles when that happens.

I hope you enjoyed the retrospective look.

IFRS Exorcist Update

2009-02-02T12:21:00.014-05:00

It was a very busy week on the IFRS front last week.

First of all I attended the IQPC Summit in Toronto. There were many high profile speakers speaking about their IFRS experiences. When I am able to catch my breath I will be writing about some of this. However, I will respect the off the record aspect of the presentations. There were some themes though. Later on last Thursday I went as an Observer to the afternoon session of the Canadian Accounting Standards Board Advisory Group. Some interesting stuff there, especially concerning the role of the auditors from now into 2011. I will post about the issue very soon.

I presented a workshop on pension issues and IFRS at the Summit. The issue has not received much airtime. It is interesting that there has been so little written about the subject given the historic meltdown in pension assets. I predict that pension accounting will be as political, if not more political, than the fair value debate in the banking industry. My views on this are essentially do not shoot the messenger. How do you present the facts transparently? There may be cases when it is not appropriate for the accounting head to wave the the regulatory tail. Or is that the other way around? In any case you get my drift I hope. The pension accounting issues need debate and we expect an Exposure Draft from the IASB soon. The proposals in the Discussion Paper on Pension Accounting very much focused on getting away from smoothing for accounting purposes. That is writing off actuarial losses and past service costs for defined benefit plans immediately. Obviously given the long term orientation of pension plans this is not a good place to be for funding. There are few, if any, companies that can afford to make up a deficiency in one gulp. Do we really want to make defined benefit plans go the way of the Dodo? Do employees really want to take on investment risk given the dramatic stock market melt down last year. There are serious policy issues here. I predict active governmental involvement in the pension area. Involvement in the financial reporting aspects has not really started yet. There are hover, quite a few proposals on how to deal with funding issues. Just wait until legislators get a handle on the financial reporting issues!

I am of course available to help present the issues and develop courses in the area. Please take a look at my background on http://ifrsexorcist.com/.
As I have been telling regular readers here I plan to move the blog to its own site. There are a number of reasons for this and I will explain the rationale in a later post.

Right now like Mary Schapiro, the new Chair (Revision - erroneously referred to as "Chief Accountant"- my apologies of course I knew she is the new Chair) of the SEC, I am taking a deep breath and regrouping when it comes to IFRS. More IFRS to come I promise.

By the way speaking of SEC the comments are due on the IFRS Roadmap proposal very soon. The FEI has asked for an extension for comments and this proposal makes a lot of sense. It comes in the middle of a very difficult year end for most companies.

David Albrecht an accounting professor who publishes a blog called the Summa recently summarized the issues for comment. It's kind of a roadmap to the roadmap. You may now that David is part of the IFRS Resistance movement in the USA. It's all done in good spirits.

A few weeks ago I wrote a post about my IFRS Exorcist identity. I had an indication that someone had taken it as a user name on a site. I do police it. When I tried to sign up on a site I got a message that the name was taken. I wrote to the company to investigate and it took quite a lot of time to investigate. The reason was not that the name was taken it was because it was an unsuitable name it has "sex" in it -IFRSexexorcist you know. You don't want your kids reading about IFRS! Well if you find IFRS sexy you really do need a life!

Lessons from the IQPC Summit in Toronto

2009-01-27T20:21:00.004-05:00

The IQPC IFRS Summit was on today and continues tomorrow.

I made some interesting notes. There seems to be more than one company that has found lunch and learn sessions a useful tool for training and awareness of IFRS projects. They could even be a way of identifying individuals who have an interest in the project in general.

Another topic that got some traction was how to keep track of the IFRS financial data for the comparative year prior to implementation (2010 for calendar year companies). One person noted that their company would be keeping manual track of the IFRS adjustments. Interestingly one of the presenters said that they would be keeping a "shadow"general ledger. Other presenters and participants indicated a similar approach. Please let us know your thoughts. What are you doing to keep track of your 2010 data.

More thoughts later in the week.

Will the tortoise win over the hare in US IFRS conversion?

2009-01-23T18:56:00.007-05:00

There are signs on the horizon that the US changeover to IFRS may be in jeopardy or perhaps slowed down considerably.

I previously reported on the statements of the new SEC Chair about IFRS. The general tenor was to take a deep breath and take a second look. Comments on the SEC IFRS Roadmap are due February 19.

In this vein the FEI in the US has issued a letter to the SEC asking for a 45 day delay in the comment period. The pressures of year end reporting under unusual circumstances are restricting time that can be spent on responding to the important document.

Please read about it in the latest FEI financial reporting article.

My advice to anyone following this issue is not to jump to any conclusions. As I understand people seem to be asking for more breathing room all round. We must await the comments on the proposed IFRS Roadmap. As far as I have seen there has been no official repudiation of the document that was issued for comment under the previous Republican administration. There are reports of differences of opinion in the Obama administration. I will remind everyone that the proposed Roadmap would mandate a phased in approach with a significant review of progress in 2011. Just before the next presidential election. Just when you thought that it was over.

There are some that are saying that a Tortoise approach would be better. The proposed IFRS Roadmap seems a rather slow "hare"to me. What do I know I am a Canadian. You have to build in the requirement in the USA for two years of comparative data so it would be on top of us before we know it.

Canadian Pension Funds suffered worst losses on record in 2008: What are the IFRS accounting implications?

2009-01-23T14:17:00.011-05:00

So what's this got to do with financial reporting under IFRS? Read on.

According to a report this morning by RBC Dexia Canadian Pension Funds suffered the worst losses on record in 2008. You would have to go back to the Depression perhaps for comparable data. RBC Dexia note that prior to the 1960s information is spotty. In the total year the drop was 15.9 percent (compared with 12.7 percent in 1974! - that was still bad though). The drop in value was seven percent in the last quarter alone.

Watson Wyatt reported earlier this month that the ratio of a "typical"pension plan's solvency valuation ratio of assets to liabilities fell from 96 percent last January to 69 percent at year end.

The federal government and provinces have promised relief by lengthening funding periods. We may have more relief in next week's federal budget (especially for people with defined contribution plans such as RSPs).

Focus on funding and cash requirements. What about financial reporting and disclosure? How will you be affected when IFRS is adopted? Did you know that the IASB is planning to eliminate smoothing of actuarial losses by 2011. For you techies it means the elimination of the "corridor" method for accounting purposes. (We have it as an available option in Canada under Handbook Section 3461 but it is applied differently from IFRS methodology. Please refer to the IFRS Canada Differences Memo on the CICA website). There may be relief on what is charged to net income but that has not been decided.

Very little has been written about pension accounting and IFRS as a separate topic. There is a chapter on the issues in iGAAP:IFRS for Canada that is very extensive. There seems to have been little public debate in Canada. Recently Ernst and Young has issued a two page memorandum that discusses some of the issues in Canadian conversions related to applying IFRS pension rules of measurement and disclosure. As usual they extend beyond accounting. Please keep your eye on the road!

My advice is to get looking at it now an work with your actuary. Burying your head in the sand like an Ostrich will not help. (Yes I know this Ostrich thing is a myth - but you know what I mean).

I will be presenting a workshop on pension costs and pension plans next Wednesday at the IQPC seminar in Toronto. Hold on to your hats! Sorry a not so transparent plug for my blog on hats called Many Hatty Returns. There are so many issues I am having a tough time knowing what to leave out.

I will be reporting on the matters coming out of the IQPC seminar next week.

Congratulations

2009-01-20T13:10:00.001-05:00

Congratulations Barack Obama!

What a wonderful Inauguration!

How will Investment Funds apply IFRS?

2009-01-19T16:55:00.003-05:00

Do you know the issues related to how investment funds will be applying IFRS? It seems that this category will also include reporting on investment funds themselves held on behalf of pension plans. Pension Plans themselves will not be adopting IFRS and the Accounting Standards Board in Canada will be studying accounting issues regarding pension plans and making proposals in the next few months. In Canada we appear to be on track for the application of IFRS to investment funds. As always please stay tuned!

Deloitte has published an industry specific publication on investment funds. This is one of a series of industry specific publications. "IFRS for Pension Funds: More Than Just Accounting and Reporting" The 14 -page document covers a lot of potential differences between US GAAP and IFRS as well as other non-accounting considerations. Canadian readers should of course be careful in reading the document since the difference may be different - an alliteration to be sure!

Interestingly the publication notes that "The level of resistance to IFRS within the investment management industry appears to be stronger than other industries". This seems to be because of the "specialized" nature of the funds. Is resistance futile - it remains to be seen.

There is much sentiment that US GAAP in this industry is vastly superior to IFRS. Would lack of appropriate industry guidance in this industry lead to a deterioration in reporting on adoption of IFRS? The SEC Proposed Roadmap asks "is it appropriate to exclude investment companies and other regulated entities filing or furnishing reports with the Commission from the scope of (the) Roadmap?"

The discussion in the document is comprehensive and definitely worth reading if you have any connection with an investment fund. One issue that is raised is rules for consolidation of entities. In all likelihood there will be more entities consolidated under IFRS rules. Four pages - single-spaced of IFRS US GAAP issues are noted!

The document also suggests some useful matters for management and the Board of Directors to consider as they mull over their response to the possible coming of IFRS to American Investment Funds.

Clearly we will be watching this debate very closely in Canada.

Last call for Toronto Summit

2009-01-18T07:44:00.006-05:00

There will be a Summit on IFRS for Canada on January 27 - 28, 2009. The two day event will deal with practical issues on IFRS and representatives from various companies will be speaking on a number of issues related to IFRS conversions. The organizations represented at the Summit include:
Accounting Standards Board Canada
International Financial Reporting Interpretations Committee (IFRIC)
Microsoft Corporation
Bombardier Inc
AltaGas Ltd
The Finance Group
Canadian Financial Executives Research Foundation
Homes Trust Company
Hydro One
Axiotron
HEC Montreal
egX Group Inc.
The Kidney Foundation of Canada
Agrana Fruit US Inc
Canam International
Agrium Inc.
TD Bank Financial Group
Gildan Activewear Inc,

The session will deal with private company issues and small/medium size businesses as well as public company issues. The topics include "the usual suspects".

Project management for IFRS
IFRS1 Implementation issues
Property, Plant and Equipment
Mergers and Acquisitions
Fair Value Accounting

The presentations will be given by people with real life implementation experiences.

I (the IFRS Exorcist herself) will be giving a workshop on pension and other related areas . I will be covering IAS 19 Employee Benefits for the most part but I will also be talking about recent discussions on pension funds and pension plans. I will not be dealing with stock option plans. The session will be held post conference, on the second day of the event.

Although much has been said about current pension issues not a lot has been said about IFRS and pension issues for Canada. Perhaps I am walking in "where angels fear to tread?" Let's see!

I cannot overemphasize the need to look at your pensions issues now. Work with your actuary to develop a plan. Take your plans and analyze them under IFRS. Do not rely on trying to just find differences. You need to understand where the differences might be but you must take a fresh look. I will report on the meeting and issues that come out of it.

As a reader of this blog you are entitled to a discount. Please contact Kim Vigilia at to register for the best possible pricing. Please state that you are a reader of this blog.

IQPC || 535 Fifth Avenue, New York, NY 10017

Ph: 212-885-2753 || Fax: 888.231.7864 || kim.vigilia@iqpc.com

For details please go to the IQPC website.

Will the new SEC Chair derail IFRS plans?

2009-01-17T07:56:00.011-05:00

Mary Schapiro has been nominated by Barack Obama to replace Christopher Cox as the new Chair of the SEC. The buzz in the financial and accounting press and the blogs is speculation on whether there will be a change on plans to adopt IFRS in the USA.
Back in November the SEC issued a proposed Roadmap for implementation of IFRS in the USA. Comments are due at the SEC next month. Essentially the Roadmap proposes a phased implementation of IFRS in the USA, starting in 2014. Certain companies who qualify under restricted criteria would be permitted to adopt IFRS early but would still be required to provide reports following US GAAP. It is further proposed that there would be a review by the SEC to confirm the decision to proceed based on some milestones, such as progress on standards, governance of the IASB and educational readiness among other matters. You may also be aware that the SEC eliminated the US GAAP reconciliation requirement for foreign issuers in 2007.

The SEC had announced a decision to proceed with the roadmap to SEC during the summer but there was a delay in issuance of the formal proposals which were eventually issued for comment after the US election and on the eve of the G20 meeting last November. The delay led to a lot of speculation whether there was a will to proceed in the current economic environment. Others suggested that the train has essentially left the station and this was evidenced by the active international cooperation on valuation and classification of financial instruments.
Ms. Schapiro is undergoing her confirmation process. She was reported to have said in response to a question regarding IFRS, she has concerns with the SEC’s current road map for transitioning U.S. public companies to IFRS.

“I will take a big deep breath and look at this entire area again carefully and will not necessarily feel bound by the existing road map that’s out for comment,” . See the report on the USA AICPA IFRS site

In CFO.com there was an article that Obama's supporters are at loggerheads on this issue. The article Top Obama Advisers Clash on Global Accounting Standards, by David Katz and Sarah

Johnson refers to reports that Obama's economic adviser Paul Volcker has expressed support for the IASB, at at recent press conference where he delivered a ringing endorsement of the establishment of International Financial Reporting Standards as part of a retooled regulatory system that he envisions.

It is early days yet in the Obama administration and indeed it does not officially start until Tuesday. One would expect a new SEC Chair to step back and take a big breath on a topic like the IFRS Roadmap. We have still to see the comments on the proposed roadmap. Let the due process take its course. As I have reported here there are supporters and detractors. In any event the IASB and FASB are working vigorously toward conformity of standards and this exercise will proceed. I am not American and I can only comment from the viewpoint of an interested observer. It's my view that it is far too early to draw conclusions about whether IFRS is coming to America from recent comments, As an interested observer I can only say that, in my personal view,not of any organization to which I belong, it would be very unfortunate if the USA dropped out or significantly delayed IFRS adoption. We cannot surely deny that we live in a global environment? The ongoing economic crisis is delivering the message load and clear. We must deal with issues on a global basis , including financial reporting. Yes it has its difficulties but who said it had to be easy!

Ten critical points for preparing your pre IFRS preconversion MD&A

2009-01-16T11:45:00.009-05:00

This week the CICA put on a webinar in the pre-implementation communications under IFRS, as required by the CSA. The OSFI requires a similar set of dissimilar set of disclosures for federally regulated financial institutions. I posted about these requirements previously.

The webinar war presented by Peter Chant, a technical partner at Deloitte. He was one of the authors of the CCH publication iGAAP:IFRS for Canada If you did not listen to it when it was originally presented, it is archived and can be accessed here. (Please report any broken link). Some 1900 people had signed up for the presentation.

Chant emphasized that the conversion exercise really starts in the comparative period (January 1, 2010 for calendar year companies). I must confess that many do not seem to be showing a sense of urgency (see my post yesterday -there are of course a lot of other pressures right now). I have put a widget on this blog website with the now-famous White Rabbit, together with a count-down clock to January 1, 2010. Time is running very short and resources may not be readily available at the last minute.

What will be disclosed in the first crop of MD&A disclosures called for under the CSA rules? The CICA Corporate Performance Reporting Board published a very useful guidance document. You can read about it and get the link to the document at my previous post. Among other matters the document suggests the use of KPIs (key performance indicators) in explaining the impact of IFRS on the company - interesting! This document will also be useful for non-Canadian readers of this blog.

Some messages in the presentation:

1) There are going to be a lot of changes in IFRSs between now and reporting for the year end 2001. There may even be some consideration of early adoption of some standards. Clearly then a key component of any IFRS conversion will be to monitor key projects that affect your company. I spoke about this yesterday on this blog. All this instability provides a disincentive for early disclosure of preliminary impacts.

2) The current economic environment is, to say the least, unfavorable. Even though it will be critical for companies to approach lenders on the potential impact of IFRS adoption. There may even be a pressing need to renegotiate debt covenants. Do not wait until the last minute to renegotiate these.

3) A changeover should be broad based and one should consider not only the required changes to IFRS. One needs to consider any coincident other changes in accounting policies that are not necessarily required by IFRS.

4) There seems to be no benefit to a company to tip their hand prior to 2010 and even up to the very last minute. The exemptions under IFRS 1 need to be dealt with strategically. The volatility of the economic environment is not conducive for early decisions. Of course companies will do internal analysis but will not want to tip their hand too early.

5) Disclosure of potential accounting policy changes in MD&A will not necessarily lock companies into actual future use. However, it may be necessary to publish a comprehensive recap and analysis at the end of the first year of official reporting. This would show a reconciliation with previously reported potential changes - an aid for analysts.

6) Do not be too hasty in making any broad brush statements in you MD&A or other documents. Be careful for example in any statements about the effects of "cash" impacts. There may be tax impacts that you may not originally discover (one impact may be cash tax impacts - careful). Chant cautioned about cash reporting under IFRS - cash flow from operations may be affected. Try to explain that.

7) There is no standard format for the MD&A disclosures the CPRB report suggests a tabular disclosure for consistency and comparability.

8) Find some comparable IFRS reporting entities in your industry. However, be careful in interpreting the reported information (see my post on this matter).

9) Do not ignore IFRIC, the interpretation wing of IASB, in following IFRS and potential impacts on your company.

10) Make sure you have the appropriate IFRS competencies in your company and on your Audit Committee/Board.

Chant mentioned an interesting example in his presentation. Check out the 2005 Abbey National analysis they presented as a separate document on adoption of IFRS. (It was unaudited). A similar approach might be useful for your company too?

Will the Canadian IFRS Conversion be deferred?

2009-01-15T18:00:00.012-05:00

No deferral of the IFRS conversion date (for fiscal years beginning on or after January 1, 2011) is expected.

I have been speaking with a number of people about IFRS in Canada over the last week or so. A surprising number (perhaps) are asking whether the Canadian Accounting Standards Board plans a deferral of the conversion date. The answer is that there is no deferral and it is definitely not on the table for discussion.

The credit crisis has distracted many from the effort of converting to IFRS. It is quite difficult to concentrate on an exercise that seems to be two years away one one is concerned about meeting current commitments.

How prepared are publicly accountable enterprises? A survey by the CICA late last year indicated that the degree of preparedness has increased over 2008 but less than 50% had indicated their initial preparation for IFRS! Less than 4% of the companies surveyed by the CICA have appointed a project leader or team for IFRS. This is really surprising!

There is some anecdotal evidence that there has been some delay in IFRS projects. Many may not have gone much further than an initial diagnostic and some early stage training. We will see some information in the next few months as companies issue their MD&A for the December 31, 2008 year end under CSA requirements to disclose the progress toward IFRS conversion. The first voluntary results (discussed on the CICA webinar on the CSA MD&A requirements this week) seem to indicate that initial activity may have been minimal when compared with the large task ahead. However as the presenter, Dr. Chant from Deloitte, pointed out there may be a reluctance to disclose to much too early since it is simply too early to be too definitive. (I will give you some highlights from the CICA webinar and a link tomorrow - it was worth listening to).

Last year was a year of surprises. We knew about the credit crisis but we certainly did not call the extent of the market declines in the fall that caused a flurry of activity. Including the fair value discussion among accounting setters around the world. Commodity prices, especially oil, have come down dramatically. The Canadian Dollar declined by 20% or so. All these matters affect the psyche of accounting standards setters. We can expect more activities and indeed we have the right to actually demand more activity on critical issues such as fair value determination and impairments.

Another factor of some concern to some people is the activity at the IASB to conform with US accounting standards (the "Norwalk" agreement). The SEC's proposed IFRS roadmap sets out certain milestones and this has raised the ante somewhat.

Change is everywhere on the accounting horizon. Just take a look at the projects that are on the IASB's plate! To help us track these projects the AcSB has published a memorandum to help us understand the possible changes that may take place from now until 2011. We have not been provided with the same stability as the EU conversion a few years ago. It will be a critical part of everyone's conversion plan to monitor the IFRS changes that will be taking place and are pending over the next three years or so! Of course this will also be true for other countries (e.g Brazil and India) converting or converging with IFRS over the next few years.

According to Paul Cherry, the Chair of the Canadian Accounting Standards Board, there will be no deferral of the IFRS conversion date for Canadian Publicly Accountable Enterprises. Mr. Cherry was speaking at a Deloitte session last week on year end issues for Corporate Directors. We are still on track for 2011. We have still to hear the official positions about accounting rules going forward on private enterprises and not for profit entities from the AcSB. The word is that it will not be too much longer.

So it's not full speed ahead an d**n the torpedoes. It is go ahead expeditiously and watch for the icebergs ahead, you will need to keep a sharp look out for those changes.

David Tweedie Chair of IASB speaks out.

2009-01-10T15:08:00.011-05:00

The New York Society of CPAs has recently started a blog called the CPA Blog. I've added the link in the side bar of the site.

There were two recent posts related to comments by Tweedie. Both posts are authored by Cara Patterson.

Tweedie: IASB yielded to Political Pressure
http://www.nysscpa.org/blog/2009/1/6/tweedie-iasb-yielded-political-pressures

Sir David Tweedie admitted that he yielded to pressure from French President Sarkozy of France and Chancellor Merkel of Germany to allow reclassification of certain financial assets out of fair value classification - retroactive to July 1, 2008.

IFRS:Resistance is Futile
http://www.nysscpa.org/blog/2009/1/7/ifrs-resistance-futile

Sir David Tweedie expressed confidence that the US will remain on track to adopting IFRS despite new leadership at the SEC. He believes that conversion to IFRS in the USA is a market driven event.

The comments were made on a webcast provided by the Lubin School of Business at Pace University. It can be accessed through the first of the two posts noted above.

EU IFRS "equivalence decision"

2009-01-07T15:58:00.011-05:00

There was an interesting development at the EU just prior to the Christmas holidays. I received an e-mail from Edith Orenstein on the weekend before the annual holidays concerning a development at the EU. Edith is on the case and a vigilant as usual. She seems to operate 24/7 without downtime. Certainly she does a great job of monitoring financial reporting developments and blogging on them for the Financial Executives Institute (FEI) in the US.

Here is a copy of the release from the EU - the COMMISSION DECISION on the use by third countries issuers of securities of certain third country's national accounting standards and International Financial Reporting Standards to prepare their consolidated financial statements.

Edith published a very comprehensive post dealing with the issues. I will not spend a lot of time going over the issues here. I will just note a few points.

I am certainly not a securities lawyer or a lawyer of any stripe and I have had no experience with an issuer filing in the EU jurisdiction. I did read the document as an informed lay person and Edith included my comments in her blog. I really appreciated her remarks about me and my blog and a link is everything in the blogosphere. Please click on the link and read her comments.

Essentially the gist of this is that Canadian companies will be able to file Canadian GAAP financial statements under EU jurisdiction until December 31 2011 (a big oversimplification - read the document). There are similar positions for reporting by US, and a number of other countries on trajectory to conform or comply with IFRS. There will be a monitoring of the progress of IFRS convergence in the countries cited in the document.

My first question on reading this was what about non calendar year companies? My second reading was that they were covered by this dispensation. If you are in a company with a non calendar year reporting please check the situation carefully. Better not to have surprises.

Another question discussed in the FEI blog is whether the EU might ask for a reconciliation to IFRS as a "remedy"after further review of progress to IFRS (or perhaps lack of it?). I suppose that you would also consider if you might want to provide investors some IFRS information voluntarily in any case?

Presumably, if you are in a company where there has been approval to adopt IFRS early you would be filing under IFRS in the EU. There would have to be the disclosure of unreserved compliance with IFRSs required by IAS 1 in order to be on side. No partial compliance allowed.

Will there be a move for early adoption of IFRS as a result of this document and other pressures? The major banks in Canada have October 31 year ends and would be among the last to file IFRS financial statements. However, they are not currently permitted by the Regulators to adopt IFRS early (Currently they would be required to produce financial statements under IFRS in respect of the financial year ending October 31, 2012). Will this change? We do not know.

If you file financial statements in the EU my advice is to discuss the situation with a qualified securities lawyer. What are the correct interpretations of the EU release? Is there a possibility that IFRS reconciliations may be required prior to IFRS conversion in Canada? What is the situation for non calendar year end companies? Please let me know of any interpretations that may be at variance with my impressions here and in the FEI blog.

Management Discussion and Analysis and IFRS

2009-01-07T14:37:00.003-05:00

The CICA Report on Industry is holding a Webinar on IFRS on January 14 at 12.30 pm. The presentation will be made by Peter Chant, a senior technical partner at Deloitte. He is also one of the authors of the book iGAAP:IFRS for Canada: that I reviewed last November. It's an excellent reference source.

This Webinar will bring suggestions for what companies should be disclosing in their MD&A about the conversion to IFRS in the period leading up to the 2011 changeover. It will address both disclosures about the changeover plan and the impact of the conversion on an entity's financial reporting, including considerations in determining the timing for various disclosures.

I have covered this matter in previous posts on this blog. Everybody is asking so what when I make this disclosure in the first instance what do I say? What are the expectations of the CSA going forward? Won't they want to see a progression towards the goal? What if you have actually done little or nothing on IFRS to date, except for background reading and course attendance? Is there a penalty?

I will be very interested on what Peter Chant has to say.

You may wish to review the material in my previous post, linked to above,prior to attending the webinar

Teaching Advanced IFRS Accounting Topics

2009-01-05T16:57:00.010-05:00

The Canadian Institute of Chartered Accountants made a significant commitment to provide supplementary materials to assist in the teaching of IFRS to students. Last September the Institute issued some teaching material at the Intermediate level. The CICA has now issued IFRS teaching materials at the advanced level.

These teaching materials are distributed to Canadian Academics but can be downloaded free on the CICA's site. The document was prepared by a team of IFRS experts from National Accounting Firms and Academe.

The 280 page Filling the GAAP to IFRS is an exposition of some advanced IFRS implementation areas with illustrative examples.

This is not intended to replace existing advanced accounting textbooks. It is however, a very serious and thorough exposition of the topics. The document includes the "usual suspects" but a few extras (like "Biological Assets"- not covered under Canadian GAAP). Here are the contents

Biological Assets
Asset Impairment
Provisions, Contingent Liabilities and Contingent Assets
Joint Ventures
Income Taxes
Financial Instruments

Classification and reclassification
Fair Value Measurement issues
Impairments
Debt v Equity Classification
Disclosures
Hedge Accounting (were you afraid to ask)
De recognition (Securitization) of assets and liabilities

Employee Benefits (includes pensions)
Share Based Payments
Business Combinations
Consolidations and separate financial statements
Foreign Currency Translation
Earning per Share

When was teaching financial accounting ever this fun? The list does of course also include some topics that have been traditionally covered in upper intermediate level courses - hey just technicalities.

This document is required reading, especially for areas affecting you business. It will be a valuable piece of guidance going forward. There is a disclaimer at the beginning that the guidance is not authoritative in anyway. Nevertheless it reflects a lot of work by a lot of very informed individuals - not to be sneezed at! I will be going over this with a great deal of interest. I find the more I read the more issues come out of the woodwork.

These materials are written from a Canadian perspective and may be misleading from the point of view of other GAAP such as US GAAP, Brazilian GAAP, Indian GAAP or whatever. They could be useful as a guide on areas to be considered but please be careful, as we are careful when looking at IFRS presentations by US Accounting Firms. The SEC considers the development of teaching materials for IFRS an important milestone. Can similar materials for the US be far behind.

Happy New Year, Are you getting ready for IFRS?

2009-01-05T16:14:00.004-05:00

Well the IFRS Exorcist is back. I thought that you needed a break from IFRS so I did not post here for two weeks or so. Now I am back and there will be some catching up to do. Rather than posting a big post on everything that has happened I will feed it out to you in smaller bite sizes.

It is important that you have a plan for your IFRS implementation well under way this year. Even though the implementation date for "publicly accountable enterprises" is for years beginning on or after January 1, 2011 you have to have the comparative data in place for the prior year. I have added a count down box on this site to indicate the time to January 1, 2010. You will need to keep dual financial information on Canadian GAAP and IFRS. There may be some retrofitting to do though as you fine tune your research. It will not be optimal to leave you work until 2010 as this will encourage a quick fix - "just the changes ma'm approach". This was a feature of many conversions in the EU and companies have lived to regret this as they have to pick up the pieces later. Who wants to have errors that you have to restate for?

Do not forget that you will have to include information on the progress of your IFRS conversions in your MD&A for your latest year end. See my prior post for information on this. The Securities Commissions will expect to see significant progress on your conversion exercises during 2009.

By the way I spent quite a bit of time on planning over the holiday period. One of my activities involved the development of a new site on hats called Many Hatty Returns (http://www.manyhattyreturns.com). My hat blog is intended to be a bit of a beta for moving this blog to its own site. I have made preparations for this, including reserving a domain name. I will make sure that I iron out issues before transfer. I will be able to deliver a better product on the new site. If you want to look at the general framework you can take a look at my hat site.

Please refer this blog and the hat blog to people who may be interested.

I am hoping for more interactivity in 2009. Please comment and comment often. Please contact me a darla@ifrsexorcist.com with your suggestions.

XBRL For the record: What next for IFRS conversions?

2008-12-22T11:24:00.008-05:00

Last week the SEC confirmed its decision to proceed with a phased in requirement for submission of XBRL. You can find the press release here. According to the press release:

For public companies, interactive data financial reporting will occur on a phased-in schedule beginning next year. The largest companies who file using U.S. GAAP with a public float above $5 billion will be required to provide interactive data reports starting with their first quarterly report for fiscal periods ending on or after June 15, 2009. This will cover approximately 500 companies. The remaining companies who file using U.S. GAAP will be required to file with interactive data on a phased-in schedule over the next two years. Companies reporting in IFRS issued by the International Accounting Standards Board will be required to provide their interactive data reports starting with fiscal years ending on or after June 15, 2011.

Companies will be able to adopt interactive data earlier than their required start date. All U.S. public companies will have filed interactive data financial information by December 2011 for use by investors.

The taxonomy for US GAAP is very extensive, and includes industry specific issues as requested by users. The SEC has made it a condition of acceptance of IFRS that there be:

"improvement in the ability to use interactive data for IFRS reporting"

It is one of the benchmarks in the proposed IFRS SEC Roadmap.

XBRL was discussed here in a comprehensive post here a few months ago. Who's afraid of XBRL? Covered what XBRL is and why it is important in the context of IFRS.

There is no Canadian requirement at this time to implement XBRL. The CSA fear a backlash given the impending conversion to IFRS in 2011. XBRL Canada is working on an XBRL project for Canada. According to my previous post.

According to Gerald Trites, Project Director at XBRL Canada, XBRL Canada is working on a mapping from Canadian GAAP to IFRS taxonomy. This might be useful in helping with IFRS conversions. No specific details were presented at the Conference. The results of this exercise are planned to be available in early 2009.

Some believe that XBRL will help IFRS conversions. Others believe it will just get in the way and use time and resources that are precious in today's stressful environment. Some countries like Israel embraced both IFRS and XBRL. Perhaps we can learn from the brave experiments?

Happy Holidays

2008-12-19T12:16:00.006-05:00

My best wishes to you all for a wonderful holiday period.

Notwithstanding the dire predictions, let us all think positively about 2009 and make it a good year!

Here is a great video from You Tube. It was made originally by Warner Pathe in 1950. It refers to Christmas around the world but please take it as best wishes to all regardless of religious affiliation.

(You will not be able to view in you feeds, but please come to the site to view it. It is a charming retrospective of life some 58 years ago).

Forthcoming attractions

2008-12-17T14:12:00.003-05:00

Silence from me should not be taken as inactivity. I have been working on new material for this blog.

In the new year I plan to move the blog to a new site of its own. I have already done this with a sister blog on hats. That blog was known as Hat Nostalgia. I have moved it to a blog called http://www.manyhattyreturns.com. I have learned a lot in the process and it is my wish that when I do make the move of this blog it will be as seamless as possible. I don't want you to miss a minute of the IFRS fun.

I plan to get into some practical difficulties and how devils are to be identified and exorcised and I want you to be involved and provide your feedback. The fun is about to start as we develop solutions to IFRS conversions. I will be seeking out IFRS veterans and IFRS veterans in the making. Please let me know if you want to participate actively. I am open to this, including guest blogging. You may not have a whole blog in you but you might want to do a few guest articles or you might be interested in being interviewed by me.

Watch for information on the 10 most important things to consider in your IFRS conversions at this time. (I will post these individually).

Please stay tuned and have a great holiday period and a wonderful 2009. Let's hope it's better than 2009.

Training courses on IFRS

2008-12-14T11:04:00.004-05:00

There are some very useful video training courses on the PwC USA website. The courses are written from a US GAAP perspective but do review the main elements of IFRS. They can be accessed here.

Currently there are sessions on
First time adoption
Revenue Recognition
Provisions and contingencies
Impairments of non financial assets
Internally generated intangibles
Property, Plant and Equipment

You will have to register to view the courses.

The year ahead in International Reporting

2008-12-10T17:27:00.006-05:00

CFO.com reports on a speech by Sir David Tweedie, Chair of the IASB, at a breakfast meeting this week.

It deals with what is coming up at the IASB next year. It is interesting that Sir David noted the intention to take a firmer stance against government pressure with respect to financial reporting standards. You will recall that there was pressure to abandon "fair value"accounting"(the SEC has this matter under review and it seems likely that it will support "fair value accounting). There was also pressure to change financial statement classification (from MTM to hold to maturity) for certain financial instruments - an interesting saga!

The article Happy New Year, Global Accounting by Mary Leone makes interesting reading.

Vive La Differences

2008-12-10T17:04:00.003-05:00

An updated IFRS/Canadian GAAP differences memorandum prepared by the Canadian AcSB is available on the CICA website.