Applying IFRS - Online guidance and resource materials

The Chartered Professional Accountants of Canada (CPA Canada) maintain an IFRS web section to provide guidance and support for understanding and applying International Financial Reporting Standards (IFRS). Whether applying an existing standard, searching for information on new standards, preparing financial statements or communicating with clients or lenders about IFRS, check out these free online resources. The Reporting Alerts series summarizes new and revised standards.

 

In addition, the Viewpoint series discusses circumstances unique to the mining and the oil and gas sectors. CPA Canada and the Prospectors and Developers Association of Canada (PDAC) created the Mining Industry Task Force to share views on IFRS application issues of relevance to junior mining companies. CPA Canada, the Canadian Association of Petroleum Producers (CAPP) and the Explorers and Producers Association of Canada (EPAC) created the Oil and Gas Industry Task Force to share views on IFRS application issues of relevance to junior oil and gas companies. In addition, learn more about the importance of applying professional judgment when preparing or auditing IFRS-based financial reporting.

 

IFRS – The Second Wave

Canadian companies have issued their first International Financial Reporting Standards (IFRS) financial statements and most still face numerous challenges in implementing the new accounting standards on a day-to-day basis. It appears, however, that the transition exercise is far from over because the International Accounting Standards Board (IASB) has more than 30 review projects on its agenda over the next few years. This, the second unavoidable wave of changes — consolidation, financial instruments, leases, financial statement presentation — is already dubbed the Big Bang II in Europe.

Canadian publicly accountable enterprises must be equipped to deal with this flood of new material. These extensive reforms will not only have accounting implications, they will also affect management information (including performance indicators), the company’s strategic decisions, operations, internal controls and information systems. Given this change in management process, companies need to identify their challenges and prepare the key players, such as internal and external auditors, in the process of managing the change.

For more information, read the article “The Big Bang, II” in the March 2012 issue of CAmagazine online.

Canada’s IFRS Discussion Group - January 2012

Canada’s IFRS Discussion Group assists the Accounting Standards Board (AcSB) regarding the application of International Financial Reporting Standards (IFRS). The Group comprises members with various backgrounds who participate as individuals in the discussion.

Views expressed in the public meeting do not necessarily represent the views of the organization to which a member belongs or the views of the AcSB. The discussions of the Group do not constitute official pronouncements or authoritative guidance. Only the International Accounting Standards Board (IASB) or the IFRS Interpretations Committee can make such a determination.

Listen to the audio recordings of the topics discussed by the Group in January 2012. For additional information, see the Group’s agenda and description of items.

1. Opening Remarks and Updates;
2. Preparing Annual IFRS Financial Statements;
3. IFRS 1: Change in Date of Transition to IFRSs;
4. IFRS 2 & IAS 32/39: Recognition of Share Purchase Warrants;
5. IFRS 11: Classification of Limited Partnerships Subject to Joint Control;
6. IFRS 11: Guarantees of Debt of a Joint Arrangement;
7. IAS 8: Disclosure Requirements for Retrospective Application of New Standards;
8. IAS 10: Reissuing Financial Statements in Connection with an Offering Document;
9. IAS 23: Capitalization of Borrowing Costs on Major Renovations;
10. IAS 28: Dilution in Ownership Interests;
11. IAS 36: Impairment Test of Provisional Goodwill Acquired during the Current Period;
12. Issues Submitted but Not Brought Forward.

IFRS Outlook Survey for the United States

Corporate financial reporting in the United States is in a period of change and uncertainty. In light of these changes, PricewaterhouseCoopers (PwC) published, in December 2011, a report called 2011 US IFRS outlook survey: Companies' thoughts on the best timing and methods for incorporating IFRS into the US financial reporting system. The report presents the views of finance executives and other stakeholders on approaches to incorporating International Financial Reporting Standards (IFRS) that would best serve the interests of investors, preparers and other users of financial statements.

The key findings are as follows: 1) Respondents had differing perspectives on the timetable for any SEC announcement as well as whether aspects of IFRS incorporation should be mandatory or voluntary. 2) Many companies have taken a “wait and see” attitude. Although a majority of executives still see the transition from US GAAP to IFRS as inevitable, most have not yet committed resources to the process. 3) Support for the US transition to IFRS remains strong, but has declined over the past year. This is attributed to uncertainty about the timing and specifics of the SEC’s plans. 4) The endorsement approach to transition, as outlined by the SEC staff in their May 2011 staff paper, is widely seen as a viable – though not necessarily the most preferred – means for the US to transition to IFRS. 5) There is still considerable debate and uncertainty in the cost-benefit analysis of moving to IFRS. Each company is different, so there is no easy way to generalize about the impacts of IFRS on US companies.

Canadian IFRS adoption - some inconclusive evidence

What, if any, are the potential economic consequences or benefits of the Canadian IFRS adoption?

As the activities of preparing and auditing the first set of complete annual reports using international financial reporting standards (IFRS) are in full swing, it is easy to identify some costs of transitioning from Canadian GAAP to IFRS. So it is an appropriate time to ask, why are we going through this transition? Are there benefits that my company, my clients or the country as a whole might expect to realize from IFRS adoption?

Recent academic literature has examined IFRS transitions, mainly the European Union (EU) transition, which occurred in 2005, and provides evidence that some benefits have accrued to some IFRS-adopting firms. Here, these benefits are summarized, cases where the evidence to date appears to be relatively inconclusive are highlighted and some cautions about generalizing from the EU transition experience to Canada are noted.

(For more information, read the article “Inconclusive evidence” by David Godsell and Michael Welker in the January/February 2012 edition of CAmagazine online.)

Reporting Alerts on IFRS and related resources

Information on new and revised IFRS, together with CICA's Reporting Alerts are now made available on the CICA Canadian Standards in Transition website. Related resources that are targeted towards the needs of smaller public companies are also available.

Reporting Alerts provide an orientation to the standard by highlighting the significance, content and timing of the standard or regulation; summarizing key changes from any predecessor; and suggesting an action plan to follow.

Resources that provide application guidance will vary depending on the nature of the particular standard. They may include checklists, decision trees, questions and answers, and comparisons to former requirements.

Canadian GAAP at a crossroads: Which path should private companies choose: ASPE or IFRS?

In 2011, private companies will start issuing financial reports based on either Accounting Standards for Private Enterprises (ASPE), or International Financial Reporting Standards (IFRS). Although both sets of standards are derived from the existing Canadian GAAP-based CICA Handbook – which will be phased out that same year – there are distinct differences between the two financial reporting systems. Much discussion has revolved around the more demanding disclosure requirements of IFRS; however, that’s just one of many factors private companies need to consider.


The first step in making an informed decision is analysing the business, accounting and stakeholder considerations, and the impact of choosing ASPE versus IFRS. While both sets of standards enable credible financial reporting, allowing capital providers and other stakeholders to monitor the performance of the enterprise, the choice ultimately comes down to weighing the differences between the two sets of standards against the information needs of stakeholders and intermediaries. The answer will not be the same for everyone.

(For more information, visit the Deloitte website and read Canadian GAAP at a crossroads, updated in April 2011.)

CICA seminar on integrated reporting features Robert Herz

Robert Herz, the recently retired chair of the US Financial Accounting Standards Board (FASB), will be in Toronto, Canada on November 23, 2011, for a breakfast seminar organized by the Canadian Institute of Chartered Accountants (CICA). Mr. Herz will review the proposals outlined in a Discussion Paper, Towards Integrated Reporting – Communicating Value in the 21st Century, published by the International Integrated Reporting Committee (IIRC).

The IIRC was established in August 2010 by the Prince of Wales Accounting for Sustainability Project, the Global Reporting Initiative, and the International Federation of Accountants.  The IIRC brings together a cross section of representatives from the corporate, investor, accounting, securities, regulatory and standard-setting communities.

The Discussion Paper features proposals for the development of an International Integrated Reporting Framework and outlines the next steps toward its creation and adoption. The goal of integrated reporting is to provide more comprehensive and meaningful information about how an organization creates and sustains value.

(For more information, see the CICA media release on November 18, 2011.)

International Financial Reporting Standards - IASB Future Work Plan

In July 2011, the International Accounting Standards Board (IASB) issued a Request for Views, “Agenda Consultation 2011.” This paper seeks input on the IASB’s future work plan and the areas of financial reporting it proposes to give priority to over the next three years. The comment deadline is November 30, 2011.

An important part of balancing the future work plan is to understand the financial reporting needs and challenges of stakeholders. As such, Canada’s Accounting Standards Board (AcSB) encourages all Canadian stakeholders to review the Request for Views and submit comments directly to the IASB. Your views will help shape the IASB’s future agenda.

The AcSB will be responding to the IASB, as well, and is seeking the views of Canadian stakeholders to develop an informed response. The AcSB has organized a program of public consultations between mid-October and early November 2011 to help form its response, including conference calls and roundtables in Vancouver, Calgary, Toronto and Montreal. More information on the IASB Agenda Consultation, and the related roundtables and conference calls, is available online.

(For an update on recent activities of Canada's Accounting Standards Board, see the FYI Newsletter October 2011.)

Canadian Standards in Transition - ASPE Resources Available

The Canadian Institute of Chartered Accountants (CICA) has recently issued three new resources to help private companies make a smooth transition to the new accounting standards for private enterprises (ASPE).

A Guide to Understanding Transitional Options and Accounting Policy Choices
This CICA guide helps practitioners understand the choices and decisions available under the new accounting standards for private enterprises (ASPE) and provides practical examples and worksheets.

A Case Study: Financial Statement Comparison
This publication presents an example of non-consolidated and consolidated financial statements prepared in accordance with pre-changeover accounting standards - XFI Version, and financial statements restated in accordance with ASPE.

Transition Considerations for a Non-Complex Entity
This summary highlights significant changes in the new standards as well as items that require management consideration. The information, geared to non-complex entities, raises awareness for typical balances on a set of financial statements.

Reporting Implications of New Auditing and Accounting Standards, August 2011

There are a number of significant changes taking place to accounting and auditing standards in Canada. The Auditing and Assurance Standards Board (AASB) recognizes that these changes may have an impact on the form and content of practitioners’ reports. Therefore, the AASB formed a Task Force to develop guidance that will address complex reporting issues that may arise during this period of change with a view to promoting consistency in reporting.

This Guide presents a series of issues in Question and Answer format. It also presents a series of Illustrative Reports. These are designed to help practitioners understand and apply requirements and supporting guidance issued by the AASB relating to reporting. Practitioners are expected to use professional judgment in determining whether the material in this Guide is both appropriate and relevant to the circumstances of each audit engagement.

(Read the Guide, Reporting Implications of New Auditing and Accounting Standards, Issue No. 5 — August 2011.)

CICA conference explores post-transition issues

Now that IFRS is Canadian GAAP for most publicly-accountable enterprises, organizations with December 31 year-ends have already filed their first interim reports. There are experiences to learn from regarding the application of IFRS and the impact of new financial reporting frameworks on organizations.

IFRS and the new world of global accounting standards will be a continuous journey of learning. Issues such as how far to go with Canadian guidance, while still being true to the commitment to adopt IFRS without country- specific interpretations, will be a constant challenge. And, there will always be the need to keep up –to-date technically on new and proposed standards as they emerge.

Many of these important issues will be the subject of discussion and debate at CICA’s first post-transition Financial Reporting and Accounting Conference (FRAC), which runs September 26 to 28, 2011, at the Metro Toronto Convention Centre in Toronto. The robust agenda of this year’s conference includes a CFO panel discussion on lessons learned from their organizations’ transition, another panel discussion entitled IFRS — Walking the Tightrope between Canadian Guidance and Interpretation — How Far Can We Go? and a third on the application and implications of the New World of Fair Value Measurement. The conference also includes several technical IFRS updates, including revenue recognition, leases, joint arrangements and consolidations, and post-employment benefits.

Canadian FYI Newsletter August 2011

The Canadian Accounting Standards Board (AcSB) FYI Newsletter August 2011 includes the message from the Chair and articles on other topics of interest to stakeholders. It notes that high-quality standards take time to develop. Setting a June 30, 2011 deadline did motivate the International Accounting Standards Board (IASB) and the US Financial Account­ing Standards Board (FASB) to meet more frequently to redeliberate important issues in light of the many comments and suggestions received on their exposure drafts.

However, in April 2011, the Boards conceded that more time is needed to complete their joint projects on revenue, leases and financial instruments, and also the IASB’s standard on insurance contracts. The fourth “Progress Report on IASB-FASB Convergence Work” extended the completion targets for these projects to the second half of 2011. The extension is consistent with the objectives of the G20 leaders. It will also permit the Boards to consult with those affected about the proposed changes and work through concerns and issues raised by stakeholders.

IFRS: the first quarter

The first IFRS Canadian corporate report filings are now in. How did the implementation go? What went right? What went wrong? What can we expect in the future? With a number of major IFRS projects underway at the International Accounting Standards Board — such as leases and financial instruments — the reporting landscape is still a live environment. But, the transition to a new era is now formally in play on the balance sheets of Canada’s publicly listed companies. With more than 4,100 IFRS-infused first quarter reports being filed with regulators in 2011, these organizations have only the briefest of respites to look back at what was for many an unexpectedly daunting task. (Read the article "IFRS: the first quarter" in the August 2011 issue of CAmagazine online.)

Interim Reporting Under IFRS — An Update

CPR Alert (Issue 14, July 2011) is a non-authoritative bulletin prepared by staff of the Canadian Performance Reporting Board (CPRB) at the Canadian Institute of Chartered Accountants (CICA). This issue, Interim Reporting Under IFRS — An Update, reviews: Filing deadlines – no extension for Q2 and Q3; Items to include in Q2 and Q3 2011 interim financial reports; Auditor review of interim financial reports; MD&A considerations for Q2 and Q3 2011; and Classification of bankers acceptances under IFRS. In addition, the Ontario Securities Commission published IFRS Release No. 3 – IFRS Interim Financial Reports –Tips For Q2 And Q3 on July 7, 2011. That release provides a useful filing tip sheet for Q2 and Q3.

Canada - IFRS Discussion Group

The Canadian Accounting Standards Board (AcSB) established the IFRS Discussion Group (IDG) in 2009 to implement and maintain a regular public forum on the application of IFRS in Canada. The purpose of the IDG is to assist the AcSB by considering issues relating to the application of IFRS in Canada and making recommendations on whether particular issues should be referred to the International Accounting Standards Board (IASB) or IFRS Interpretations Committee. The IDG normally meets four times a year. At the discretion of the IDG Chair, meetings are generally open to public observation. Members of the public are encouraged to submit issues for consideration by the IDG.

Listen to the audio recordings of the ten topics discussed by the Group in June 2011, including preliminary observations of some of the provincial securities regulators staff on the first quarter filings under IFRS and six issues arising from the application of IFRS in Canada.

Access to Unaccompanied International Financial Reporting Standards (IFRS)

The Canadian Accounting Standards Board (AcSB) provides free access to the consolidated unaccompanied IFRS, including the core standards without implementation guidance and the basis for conclusions. All rights to the content are owned or controlled by the IFRS Foundation. (IFRS as issued by the International Accounting Standards Board at January 1, 2010.)

Ernst & Young - IFRS: a strategic opportunity

The move to International Financial Reporting Standards (IFRS) is the single most important initiative in the financial reporting world (Ernst & Young). Its impact stretches far beyond accounting to affect every key business decision, not just how it is reported. Access to up-to-date knowledge, insights and timely advice is essential. As IFRS becomes the financial reporting language in many more countries, consistent interpretation and application becomes ever more vital. The starting point of the journey is to conduct an IFRS diagnostic to assess the impact conversion will have on your business.

Deloitte - Moving ahead in an IFRS world

Canada is an International Financial Reporting Standards (IFRS) jurisdiction for all publicly accountable enterprises, as of January 1, 2011. Many enterprises are now shifting their interest from preparing for IFRS implementation to keeping up with IFRS changes and understanding how to apply the principles of IFRS on a day-to-day basis.

IFRS requires an entity-wide approach to financial reporting. Companies must build IFRS into flexible financial reporting systems and processes. Management must also review the assumptions and judgments made and the systems and processes implemented throughout their IFRS journey. This includes developing their initial IFRS solutions, incorporating new developments in IFRS standards and interpretations, and preparing for changes to their business and the overall economic environment.

(Deloitte: Featured Insights - Moving ahead in an IFRS world, IFRS Resources, IFRS e-Learning)

IFRS - Academic Resources

The transition to International Financial Reporting Standards (IFRS) poses a unique challenge for accounting academics. The Canadian Institute of Chartered Accountants (CICA) is pleased to provide a range of materials to help academics develop teaching strategies to prepare their students for this significant change for our profession. Visit the Canadian Standards in Transition website.