Focus on specifics in IFRS training

Transcription

1 The Bottom Lie March Focus o specifics i IFRS traiig By KARINE BENZACAR ll professioal accoutats, regardless of the area i which they are practisig, eed to keep up to date with the developmets i the field. Iteratioal Fiacial Reportig Stadards (IFRS) represet oe of the most dramatic chages the accoutig professio has witessed i a log time. There are a large umber of semiars, cofereces, ad courses available to accoutats ad the list will oly get loger as the Ja. 1, 2011 deadlie approaches. How does oe choose amog the semiars? Part of the aswer, as with ay other purchase, is cost, but that is rarely a decidig factor. These days, everyoe is busy. There is o greater disappoitmet tha spedig a day or two sittig i a class, oly to f id out that time could have bee more effectively spet doig somethig else. Too may people register for a course just for the sake of takig some traiig without givig much thought to the specif ics. I order to get the most out of a IFRS course, the f irst step for ay participat is to determie what he or she wats to lear. The differeces betwee IFRS ad Caadia GAAP are so substatial that it is ot realistic to expect to sit through oe or two days of traiig ad become a IFRS expert. After all, it took more tha four years of uiversity educatio to lear Caadia GAAP. How would it be possible to lear the equivalet iteratioal stadards i just a few days? The more productive route is to first determie which areas of iteratioal GAAP you wat to focus o ad the f id the course that offers the most selectio i those areas. If you are a ovice to IFRS ad wat to uderstad some of the key differeces betwee IFRS ad Caadia GAAP, the you will wat to look for a course that covers at least the followig: related to the purchases of assets. Caadia GAAP allows firms to either expese or capitalize the iterest. May f irms choose to expese it immediately. IFRS requires compaies to capitalize the iterest ad i additio, has much more detailed guidace tha Caadia GAAP o how to do so. A Fixed assets Uder Caadia GAAP, fixed assets are accouted for at historical cost ad the depreciated regularly. Uder IFRS, there is a choice of accoutig method. Either a compay ca choose a cost model, which is very similar at the coceptual level to Caadia GAAP, or the compay ca use the revaluatio model, a model which regularly There is o greater disappoitmet tha spedig a day or two sittig i a class oly to fid out that time could have bee more effectively spet doig somethig else. Karie Bezacar, Kowledge Plus Corporatio revalues assets to their fair value. Impairmets Impairmets are calculated differetly uder IFRS ad Caadia GAAP. I Caada, a asset is cur retly cosidered impaired whe its book value is less tha the future cash flows the asset expects to geerate. Uder IFRS, a asset is cosid- Impairmet reversals Uder Caadia GAAP, oce a asset is writte dow, its value caot be icreased, eve if the coditios which caused the impairmet reverse themselves. Uder IFRS, the reverse is true. Not oly are impairmet reversals allowed, they are madatory, should the coditios warrat them. to isolate the cash flows of a particular asset from those of other assets. Usually i a busiess, assets work closely together to geerate cash flows ad it is hard to isolate the cash flows which come solely from oe asset. Where assets caot be tested idividually for impairmet, CGUs should be tested for impairmet ad the the assets B ENZACAR It might also be worthwhile to look for a review of IFRS 1, the stadard which describes the rules related to iitially adoptig IFRS. Karie Bezacar, Kowledge Plus Corporatio ered impaired if its car ryig value is higher tha its recoverable amout. The recoverable amout is def ied as the greater of the asset s expected sellig price (less costs to dispose) ad its value i use, which is defied as the preset value of future cash flows expected from the asset. By aalyzig the def iitio of impairmet, it is easy to see that impairmets will be more likely uder IFRS tha uder Caadia GAAP. Cash geeratig uits IFRS has a cocept called a cash geeratig uit (CGU), a term which does ot exist i Caadia GAAP. The stadards def ie a CGU as the smallest idetifiable group of assets that geerates cash iflows from cotiuig use that are largely idepedet of cash iflows from other assets or groups of assets (IAS 36). The cocept of a CGU is used for impairmet testig. I some cases, it may be diff icult writte dow proportioately. Iterest capitalizatio There are some small differeces betwee iterest expeses Fiacial statemet presetatio Last but certaily ot least, IFRS has a differet f iacial statemet presetatio tha Caadia GAAP. I additio, the regulators recetly issued a discussio paper which proposes to drastically chage the look ad feel of the statemets from their curret state. At f irst glace, a balace sheet does t look like it balaces ad looks more like a cash flow statemet. Of course, whe oe looks at the details, it is easy to see that the balace sheet still balaces, although ot at all i the same format that Caadias are used to seeig. Ayoe who would ejoy seeig assets balacig to liabilities plus equity o a balace sheet will eed to chage their expectatios. There are also ew statemets required uder IFRS. For example, the statemet of retaied earigs is replaced by a more detailed statemet of chages i equity. I additio, there is a ew statemet required i the otes to recocile et icome to cash flow. The above topics preset some of the key differeces betwee the two accoutig methodologies that ayoe seekig a uderstadig of IFRS should look for i a course. However, the list above is certaily ot comprehesive ad there are may other differeces. It might also be worthwhile to look for a review of IFRS 1, the stadard which describes the rules related to iitially adoptig IFRS. Fially, there are specif ic issues to various idustries, such as oil ad gas, utilities, ad isurace. The f irst step i uderstadig IFRS is to uderstad the basics. Oce that is doe, the ext step is to uderstad the particulars as they relate to oe s specific idustry. Karie Bezacar, MBA, CMA, CPA (Del.) (karie@kowledgeplus.ca), is maagig director of Kowledge Plus Corporatio ( w w w. k o w l e d g e p l u s. o r g ), which provides IFRS traiig across Caada ad the U.S.

2 12 The Bottom Lie March 2009 Lower oil prices raise budgetig hurdles By MATT BOOTLE AND MICHAEL COX It s ow less tha two years util Caadia public compaies must covert to iteratioal fiacial reportig stadards (IFRS). Followig the 2005 adoptio of IFRS by Europea coutries, the Iteratioal Accoutig Stadards Board (IASB) took a break from issuig ew stadards. But as of Jauary 2009, that holiday is over. The IASB expects to issue a deluge of ew stadards, both up to ad past the 2011 coversio date. The implemetatio timelie of some of the IASB s curret projects could result i three differet GAAPs i three years for Caadia adopters 2010 Caadia GAAP, 2011 IFRS ad 2012 IFRS revised. Fiacial istitutios will have to carefully moitor the IASB s activities ad pla their implemetatio strategy accordigly. While the effort will be challegig for may, orgaizatios i the oil ad gas, utilities ad fiacial services sectors face some uique issues. Oil ad gas At the momet, the vast majority of Caada s 400-plus publicly traded oil ad gas exploratio ad productio eterprises accout for their oil ad gas operatios usig CICA Hadbook Accoutig Guidelie 16, Oil ad Gas Accoutig Full Cost. IFRS, however, does t permit the full cost method. Istead, issuers must Fidig the budget is difficult i a eviromet of tight credit ad sharply lower oil ad gas prices. Matt Bootle ad Michael Cox, Erst & Youg accout for productio ad developmet activities usig a successful efforts-based method of accoutig. This will have a sigificat effect o their fiacial statemets. For example: Issuers must record a expese for results of usuccessful exploratio drillig activities much earlier. Issuers must track producig oil ad gas properties at a more detailed level for impairmet purposes at what IFRS terms the cash geeratig uit? rather tha at the aggregated cost cetre (usually coutry) level. This will require greater accoutig effort ad cause earlier recogitio of impairmets to developed ad producig properties. Issuers will have to recogize gais ad losses o a greater umber of exchages of properties ad iterests that ivolve developed ad producig properties. Issuers must also adapt their accoutig systems to these chages. IFRS coversio ca require cosiderable resources. Fidig the budget is difficult i a eviromet of tight credit ad sharply lower oil ad gas prices. Fortuately, the oil ad gas idustry has bee actively gatherig ad sharig detailed idustry-specific IFRS kowledge with its costituets. The Caadia Associatio of Petroleum Producers ad the Small Explorers ad Producers Associatio of Caada will soo publish detailed IFRS implemetatio guidace for their members. Ad through these orgaizatios, the oil ad gas idustry has persuaded IASB to cosider a trasitioal exemptio that will cosiderably reduce the challeges of retroactively adoptig IFRS i the issuer s opeig balace sheet. COX Utilities IFRS also presets the utilities sector with a umber of uique challeges. For starters, highly specialized capital ifrastructure? geerally built with log service lives ad ofte accouted for i accordace with the requiremets established by idustry regulators? meas there will be sigificat adjustmets to fixed-asset ledgers ad the processes used to capture the uderlyig iformatio. Ad sice the idustry s iputs ad outputs are ofte commodities with volatile pricig, such as atural gas or crude, utilities will also be affected by differeces i the accoutig for commodity purchase-ad-sale cotracts ad tollig agreemets, ad will potetially require more sophisticated hedge accoutig documetatio practices. I additio, icreased focus o the applicatio of fair values uder IFRS will chage how utilities measure such thigs as decommissioig provisios ad log-lived asset impairmets ad reversals. Further complicatig matters, IFRS curretly offers o equivalet guidace to Caadia GAAP for the accoutig for rate-regulated operatios. I all likelihood, these etities will be burdeed with the eed for additioal disclosures to bridge the gap betwee audited IFRS fiacial statemets ad the iformatio ivestors ad other stakeholders have come to expect. Oe issue affectig Caadia rate-regulated utilities i particular See Europe o page 13 Learig from the IFRS experieces of others Caadia orgaizatios will face uique challeges that were ot experieced i Europe. Christia Wray, Wallace Cosultig Group By CHRISTIAN WRAY Caadia compaies are i the advatageous positio of beig able to lear from the experieces of Europea firms that have already bee through covertig to iteratioal fiacial reportig stadards (IFRS). It is commo for professioals tasked with maagig the trasitio to IFRS to ask how it will impact their primary fiacial statemets. There is certaily a lot of talk about the scale of the udertakig. However, it s also quite possible that at least some of the alarmig statistics beig cited about the size of adjustmets to icome ad equity that occurred i other territories are beig used to ecourage fiace teams to begi their IFRS trasitio plas. Fear ca be a motivator. However, experts who have studied the task at had are ot as worried. Ad it s a bit disappoitig that may people who will be leadig the IFRS trasitio have t as yet spet more time gaiig a uderstadig of how the Caadia experiece will differ from the Europea oe. Caadia orgaizatios will beefit from the fact that Caadia geerally accepted accoutig priciples (GAAP) have already adopted several IFRS stadards (i their etirety or i part) ad that they have, i the past, bee closely aliged with U.S. GAAP. The combiatio of the implemetatio of IFRS stadards ito Caadia GAAP ad the covergece project betwee the Fiacial Accoutig Stadards Board (FASB) ad the Iteratioal Accoutig Stadards Board (IASB) have reduced may of the GAAP differeces that caused a good portio of the material trasitio adjustmets i Europe. For most Caadia orgaizatios, the effects o reported icome ad equity (icludig both first-time adoptio adjustmets ad the volatility of icome goig forward) will be less dramatic tha those experieced i Europe. Some of the commo GAAP differeces i Europe that led to WRAY material adjustmets but are ot likely to do so i Caada iclude: Derivatives: Several Europea atios GAAPs did ot require that derivative istrumets be recorded at fair value i the balace sheet. This led to material trasitio adjustmets to equity ad a icrease i earigs volatility for most fiacial istitutios ad compaies that udertook tradig/hedgig activities. Caadia GAAP is curretly closely aliged with IFRS, with respect to the reportig of fiacial istrumets, so material adjustmets are ot expected i most orgaizatios. Goodwill: May Europea GAAPs amortized goodwill rather tha testig aually for impairmet. I may orgaizatios, material adjustmets to equity were required to write-back goodwill that had bee previously amortized. This adjustmet also caused future icome to rise as goodwill would oly be tested for impairmet (ad ot amortized). Caadia GAAP does ot allow See Allocate o page 15

3 The Bottom Lie March Europe saw sigificat cost overrus Cotiued from page 12 is the fact that some IFRS stadards ad guidace are still i a state of chage. A proposed amedmet to IFRS 1 would exempt certai rate-regulated etities that meet certai coditios from havig to restate their fixedasset accouts to meet IFRS requiremets. Ad the IASB recetly aouced that it iteds to issue a exposure draft o regulatory accoutig by May The ucertaity resultig from these chages meas that these utilities are developig a Pla A ad Pla B approach to their IFRS coversios, addig precious time ad effort to what is already a very expesive trasformatio project. tutios curret leverage targets are based o Caadia GAAP umbers, with their respose to the potetial impact of IFRS o this ratio curretly uclear. Isurace accoutig is aother area of ucertaity ad is a stadard that will cotiue to evolve post-ifrs coversio i Caada, ad will have sigificat fiacial reportig, IT ad actuarial implicatios. Fail to pla, pla to fail The magitude of IFRS coversio requires a robust project goverace structure, with executivelevel ivolvemet ad close moitorig of the project s progressio ad costs. I the Europea experiece, a lack of plaig resulted i sigificat cost overrus. Ivolve IT early. Some of the IT requiremets are sigificat, par- ticularly the requiremet to produce both Caadia GAAP ad IFRS i the trasitio year. Curret IT iitiatives, whether ew system implemetatios or upgrades, should cosider IFRS requiremets to avoid costly upgrades after IFRS has bee adopted. The coversio to IFRS is the sigle most importat iitiative i the f iacial reportig world. This article was co-writte by Eri Dooghue ad Tammy Thompso Matt Bootle ad Michael Cox are assurace parters with Erst & Youg LLP. Eri Dooghue ad Tammy Thompso are seior maagers with Erst & Youg LLP. To lear more about how we ca help you prepare to report uder IFRS, visit us at ey.com/ca/ifrs. what you eed...whe you eed it... where you wat it CICA Cotiuig Educatio 09 B OOTLE IFRS PROGRAMS: Fiacial istitutios Caadia fiacial istitutios, too, face myriad challeges i their IFRS coversio. Chagig stadards, capital implicatios, IT challeges ad maagig the coversio i light of competig priorities oly add to the pressures of the diff icult ecoomic climate. Fiacial istitutios eed to maitai a cotiued focus o their IFRS trasitio plas to mitigate these risks. They will have to juggle the implicatios of curret stadards while at the same time developig a strategy to respod to ew stadards that are ot yet fialized. For example, ew stadards relatig to asset de-recogitio, cosolidatio ad isurace accoutig are expected, each of which will have a sigificat impact o fiacial istitutios. Asset de-recogitio will sigificatly affect fiacial istitutios balace sheets. The majority of Caadia securitizatio structures will o loger achieve offbalace sheet treatmet uder IFRS, puttig real pressure o etities total assets to capital leverage ratios. The Office of the Superitedet of Fiacial Isti- ON-LINE SELF STUDY: (Available ow) Itroductio to IFRS Implicatios for Caadia Busiess Free, three hour itroductio to IFRS Research Skills for a IFRS World Approx. 20 hours IFRS Award Programme Learig ad Assessmet Approx. 70 hours COURSES: I-depth IFRS 1 First Time Adoptio: Calgary March 25-27, 2009 Toroto May 6-8, 2009 Vacouver September 23-25, IFRS Immersio: Toroto March 23-26, 2009 Vacouver May 11-14, 2009 Halifax August 10-13, 2009 Toroto December 14-17, CONFERENCES: CICA Aual IFRS Coferece Implemetig IFRS Toroto, Jue 4-5, IFRS Adoptio: Practical Solutios for Deposit Takig Istitutios Toroto, March 25-26, Plus more idustry focused evets comig this fall/witer icludig: Oil & Gas Calgary Rate Regulated Idustries Toroto For more details o these programs, visit ad click o Fiacial Reportig/Goverace.

4 14 The Bottom Lie March 2009 Expect to pay more if you wait loger By GORDON BEAL Blutly put, a lot of what we kow as accoutats is about to chage. With the Caadia accoutig ad auditig stadards about to udergo the most sigificat alteratios we ve see i decades, makig a persoal commitmet to professioal developmet has probably ever bee more importat. A quick sca of the stadards eviromet tells the story. Iteratioal auditig stadards will be implemeted at the ed of this year. New fiacial reportig stadards for private eterprise are i developmet ad the future of fiacial reportig for ot-forprofit orgaizatios is uder review. Arguably the chage with the most widespread impact is the trasitio to iteratioal fiacial reportig stadards (IFRS) for publicly accoutable eterprises. Preparig for IFRS The move to IFRS is part of a worldwide shift iteded to brig greater clarity ad cosistecy to fiacial reportig i the global marketplace ad facilitate the flow of global capital. The fact the curret ecoomic ucertaity ad rattled ivestor cofidece is occurrig at this importat phase of the IFRS trasitio puts our professio uder a itese spotlight. BEAL All accoutig professioals, ot oly those ivolved with publicly accoutable eterprises, eed a basic uderstadig of the ew stadards ad their implicatios. Beyod that, the level of IFRS fluecy you require depeds o where you are, ad where you hope to be. For some, a basic uderstadig will be sufficiet; for others, sophisticated techical expertise will be eeded to lead their orgaizatios through the trasitio. Yet evidece suggests that affected busiesses may be fallig A self-assessmet is the first step. How much IFRS traiig do you eed? How much time ad moey is available? behid i their plaig, traiig ad implemetatio activities. A recet survey by the Caadia Istitute of Chartered Accoutats/RBC Busiess Moitor idicates while 80 per cet of respodets requirig coversio to IFRS believe their compay will be ready by 2011, oly 12 per cet of those respodets have started educatig staff o the chages ad oly four per cet idicated their compaies have appoited a trasitio leader/team. The survey results may idicate that busiesses ad perhaps idividual practitioers are deferrig IFRS expeditures ad traiig i light of curret market coditios. However the reality is that coversio to IFRS is ot a discretioary activity for affected busiesses ad those who serve them. I fact, Accoutig Stadards Board Chair Paul Cherry has provided a uequivocal o to queries about whether Caada s move to IFRS would be delayed due to curret market coditios. Cherry poits out that the fiacial crisis demostrates just how closely liked the global capital markets are today ad reiforces the case for global accoutig stadards. Ad do t be misled by the 2011 coversio date. Practitioers i idustry should keep i mid that to have meaigful comparative iformatio i 2011, affected compaies will eed to Gordo Beal, CICA begi collectig this iformatio i This meas i 2009 compaies eed to idetify IFRS impacts ad establish ad execute a pla to maage the chage. Compaies delayig their traiig ad plaig ow will most certaily face higher costs dow the Chartered accoutats are takig a leadership role i helpig prepare for a seamless IFRS trasitio. Check out ad visit ofte, it s a trusted source for everythig IFRS. A sample of resources available through the CICA ad Provicial Istitutes/Ordre: Courses: IFRS Survey of the Stadards (2-days) IFRS Immersio (4 day program. Toroto: March ad Dec Vacouver: May Halifax: Aug 10-13) I-depth IFRS 1- First Time Adoptio (3 day program. Calgary: March Toroto: May 6-8. Vacouver: Sept 23-25) Idustry-focused courses icludig: Miig, Oil & Gas, Real Estate, Fiacial Services - Bakig Topic-focused courses road as they hire outside support i a scramble to catch up. Where to begi? There are may IFRS professioal developmet opportuities available to get you started. Focus is critical: with so much iformatio ad so little time, you eed to idetify what you eed, ad make sure you get it whe you eed it. A self-assessmet is the first step. How much IFRS traiig do you eed? How much time ad moey is available? As part of its ogoig effort to help make the IFRS trasitio as seamless as possible, the CICA offer a excellet primer course that should be part of every accoutat s IFRS educatio pla for Itroductio to IFRS Implicatios for Caadia Busiess is a e-learig course that provides basic IFRS kowledge. The course is free, available i Eglish ad Frech ad qualifies for cotiuig professioal developmet credits. It is orgaized ito four modules ad ca be completed i about three hours. It will give you a geeral overview of the impact of the move to iteratioal stadards, makig it easier to determie your future IFRS educatioal eeds. Accoutig professioals who eed more tha a fudametal uderstadig of the ew stadards will fid valuable iformatio o the istitute s dedicated IFRS website at It provides a icludig: Property Plat ad Equipmet, Fiacial Statemet Presetatio, Reveue Recogitio Web-based resources: Itroductio to IFRS Implicatios for Caadia Busiess (complimetary three-hour o-lie IFRS primer. Qualifies for CPD credits) Research Skills for a IFRS World (approx. 70 hours self study) IFRS Award Programme Learig ad Assessmet (approx. 70 hours self study) Webiars o a variety of IFRS topics are uder developmet for Visit for the latest offerigs. Cofereces: IFRS Adoptio: Practical Solutios for Deposit Takig Istitutios. (Toroto: March wide rage of professioal opportuities ad resources to steer compaies ad idividuals through the trasitio. Referece materials, dowloadable publicatios, ideas o how to get started ad implemetatio tools such as sample fiacial statemets ad disclosure examples are easily accessible. The site also provides valuable iformatio specifically geared toward boards ad audit committees, chief fiacial officers, as well as accoutig ad fiacial reportig professioals ad accoutig academics. The IFRS trasitio is big. Curret global market coditios make a smooth trasitio eve more imperative. The busiess commuity may be preoccupied with global ecoomics right ow but as the IFRS coversio date draws earer, accoutig professioals will be looked to for IFRS leadership. Be ready for the storm. Acquait yourself with IFRS without delay. Get the traiig you eed to provide IFRS leadership to your orgaizatio or cliets. This is a historic time i Caadia busiess ad, yes, a excitig time to be a accoutat. Gordo Beal is the project leader for the CICA s IFRS ad ISA trasitio strategy. He works closely with the provicial istitutes/ordre, ad a broad rage of iteral ad exteral stakeholders, to help facilitate a seamless trasitio to iteratioal stadards. Resources available to help 25-26) CICA Aual IFRS Coferece Implemetig IFRS (Practical techical sessios ad workshops. Toroto: Jue 4-5) Publicatios: The CICA s Guide to IFRS i Caada 20 Questios Board of Directors ad Audit Committees should ask about IFRS Coversios IFRS Coversios: What CFOs Need to Kow ad Do Pre-2011 Commuicatios about IFRS Coversio Fiacial Reportig i Caada Uder IFRS (Practical explaatios ad illustratios for preparers of fiacial statemets ad practitioers. Comig soo) Visit for additioal resources ad courses.

5 The Bottom Lie March Allocate budget, avert delays, headaches Cotiued from page 12 the amortizatio of goodwill. Share-based paymets: Several local Europea GAAPs did ot require the recogitio of a expese for share-based paymets (i.e. employee stock optios). While there are curretly subtle differeces betwee Caadia GAAP ad IFRS i this area, material adjustmets are ot expected for most orgaizatios. While the effect o reported icome ad retaied earigs is likely to be less dramatic, Caadia orgaizatios will face uique challeges that were ot experieced i Europe. These differeces icrease the importace of preparig a trasitio pla ad embeddig IFRS ito reportig systems prior to the opeig balace sheet date (Ja. 1, 2010 for compaies with a caledar yeared). Oe of the issues will be certificatio of cotrols. At the time of trasitio, Europe did ot have a cotrols certificatio regime similar to Multi-Lateral Istrumet (Bill 198) i Caada. I order to meet the trasitio deadlie, may Europea compaies placed a overwhelmig reliace o spreadsheets. That is, compaies tried to maually adjust for GAAP differeces rather tha embed the differeces ito their reportig packages. While this practice may occur i Caada as compaies struggle to meet the trasitio deadlie, this will ot be a optimal solutio as it could lead to a material cotrol weakess. I short, Caada is held to a higher stadard regardig iteral cotrols over fiacial reportig. This practice also makes it difficult to report i a timely matter after the trasitio date. For larger multiatioals, there ca be thousads of ecessary maual adjustmets eeded to recocile all of the differeces. I Europe, several compaies were still embeddig IFRS ito their accoutig systems two years after the trasitio, which added days to the fiacial close process ad icreased the overall coversio costs. There is also the issue of impairmet. While the impairmet rules uder IFRS were differet from most local Europea GAAPs, they trasitioed durig a ecoomic boom. The Caadia experiece is goig to be much differet give that we are ow i a severe dowtur. Impairmet rules uder IFRS will lead to higher impairmets tha uder Caadia GAAP rules. Aside from determiig the proper The Caadia experiece is goig to be much differet give that we are ow i a severe dowtur. Christia Wray, Wallace Cosultig Group recoverable amouts for assets, it will also be importat for Caadia compaies to commuicate the reaso for ay uexpected impairmets to their stakeholders prior to Firms ivolved i IFRS cosultig are seeig that the fiacial crisis is havig a devastatig effect o Caadia compaies. This has caused several orgaizatios to delay allocatig a budget for the IFRS trasitio process. That approach igores the urget importace of creatig a competet trasitio team o a timely basis. The trasitio will require better project maagemet executio tha took place i Europe. Christia Wray, CA, is the maagig pricipal of Wallace Cosultig Group, which focuses o IFRS trasitio services. He spet two years i the UK with a Big Four accoutig firm ad has bee through the IFRS trasitio process with several Europea compaies. He ca be reached at cwray@wallacecosultiggroup. ca, or visit fiaciial reporttig & gove erace IFRS Adoptio: A Practical Solutios ffor or Deposit De Takig Istitutios MARCH 25-26, 2009 HILTON HILTON TORONTO FEBRUARY 12-13, 2008 HOTELHOTEL TORONTO Program desiged by the idustry, for the idustry. This coferece will address the uique challeges facig small, medium ad large deposit takig istitutios i their trasitio to IFRS. SPECIAL FEATURE: Rex Murphy as lucheo speaker March 25. Coferece Highlights Highlights Iclude: Keyote Address: Lessos To Be Leared from the EU Adoptio preseted by Emmauelle Yaakis, a executive with Crédit Agricole, oe of Europe s largest baks IFRS updates from Caada Reveue Agecy, AcSB, IASB ad CSA (icludig MD&A requiremets) OSFI update o progress reports, expectatios goig forward, ad prelimiary views o capital ad policy decisios Techical updates o securitizatio/derecogitio, loa impairmet, securities, provisios ad cotigecies, Pillar 3 disclosures o risk ad capital, ad IFRS 1 First Time Adoptio ALL techical sessios delivered usig a team approach techical issues explaied by a parter level idustry expert, followed by a idustry executive discussig their orgaizatio s approach ad experiece Pael of idustry executives discussig their approach to the broad orgaizatioal reach of the IFRS trasitio, icludig Ivestor Relatios, Systems ad Credit Risk This coferece is a must for ayoe ivolved with a deposit takig istitutio adoptig IFRS icludig fiacial professioals, public accoutats, IFRS advisors, auditors, securities idustry regulators ad fiacial aalysts. Coferece Exhibitors: For the complete program ageda ad registratio iformatio go to or call Carrie Sutherlad at

6 The Bottom Lie March Research Solutios Iteratioal Fiacial Reportig Stadards (icludig IAS Iterpretatios) 2009 Iteratioal Accoutig Stadards Board Will You Be Ready for 2011? Iteratioal Accoutig Stadards ad Iterpretatios Icludes Everythig You Need to Kow for a Smooth Trasitio! Chagig over to the ew iteratioal fiacial reportig stadards is creatig a huge impact o Caadia accoutig procedures. As you kow, all public compaies must begi plaig ad reportig i 2009 for the 2011 trasitio to the Price: TBD Softcover 2009 Iteratioal Accoutig Stadards Board ISBN: ew iteratioal stadards. Make sure your trasitio is a smooth oe, by gettig all the iformatio you eed to kow, ow! Updated for 2009, the official IFRS boud volume cotais all Iteratioal Fiacial Reportig Stadards ad all Iteratioal Accoutig Stadards, together The Road to 2011 Starts Today! Order Now! Order Today! with all the associated IASB prooucemets ad applicatio guidace. This is the defiitive set of iteratioal stadards which set out the authoritative requiremets of iteratioal fiacial reportig. Take advatage of the 30-Day Risk-Free Examiatio! Please quote Reservatio Code 3306 whe orderig. (Price ad other details are subject to chage without otice. We pay shippig & hadlig if paymet accompaies order.) Pre-paymet required for first-time purchasers. LexisNexis ad the Kowledge Burst logo are registered trademarks of Reed Elsevier Properties Ic., used uder licece. Butterworths is a registered trademark of Reed Elsevier (U.K.) Limited ad its affiliated compaies. Other products or services may be trademarks or registered trademarks of their respective compaies LexisNexis Caada Ic. All rights reserved.

7 The Bottom Lie March Will busiess valuators be ready? By RICHARD TAYLOR The prevalece of the term fair value i Iteratioal Fiacial Reportig Stadards (IFRS) bodes well for busiess valuators. It is icumbet o busiess valuators, with the assistace of the Caadia Istitute of Chartered Busiess Valuators (CICBV), to esure that they gai sufficiet theoretical ad practical kowledge of IFRS to provide relevat iput ad advice to both preparers ad users of IFRS compliat fiacial statemets. The quest for this kowledge must begi immediately as both preparers ad potetial users of IFRS compliat fiacial statemets have already started to seek assistace. The most obvious area where IFRS will require the iput of busiess valuators relates to the preparatio of IFRS compliat fiacial statemets. Areas where the skill ad judgmet of busiess valuators will be required i fiacial statemet preparatio iclude: IFRS 1 Trasitio. Compaies have the optio to adopt fair value as deemed historical cost for certai assets icludig: property plat ad equipmet, ivestmet properties, biological assets, ad itagible assets (where markets The most obvious area where IFRS will require the iput of busiess valuators relates to the preparatio of IFRS compliat fiacial statemets. Richard Taylor, charted busiess valuator are active). Compaies must assess the cost-beefit of electig for this fair value optio i light of trasitioal issues related to goodwill ad asset impairmet testig requiremets, the eed to determie cash geeratig uits ad asset compoetizatio requiremets. IFRS 3 Busiess combiatios. Cosideratio must be give to the covergece project with FASB 141R for prospective busiess combiatios, IFRS 1 exemptio optio for historical busiess combiatios ad the fair value exposure draft (expected to be similar to FAS 157) due for release this year. IFRS 16 Plat, property ad equipmet. Compaies have the optio to choose a cost model or a revaluatio model, requirig periodic revaluatio. Compoetizatio of assets will also be a issue as historic cost may ot be readily available at a compoet level, requirig cost segregatio studies by appraisers IFRS 36 Impairmet of assets. For log lived assets there will o loger be a step 1 udiscouted cash flow scree. Impairmet tests will be required upo trasitio for all cash geeratig uits with o IFRS 1 trasitio exemptio. IFRS 38 Itagible assets. Compaies have the optio to choose the cost model or revaluatio model if a active market exists. Advisory services Busiess valuators will also have the opportuity to provide sigificat assistace to their cliets i areas outside of fiacial TAYLOR statemet preparatio. Such assistace will be required i a umber of areas icludig: Corporate assistig compaies ad their cousel i addressig the impact of IFRS o pre-existig cotracts ad agreemets as well as providig iput i the draftig of cotracts ad agreemets such as licesig arragemets, compesatio plas, joit veture agreemets ad royalty agreemets that are tied to GAAP determied fiacial performace or other fiacial statemet metrics; Mergers ad acquisitios, private equity due diligece ad assistace i uderstadig the impact o earigs accretio ad/or dilutio resultig from IFRS trasitio. I additio we ca assist M&A professioals i uderstadig the impact of IFRS o ear outs, compesatio plas, price adjustmet clauses ad other cotiget items that are calculated referable to GAAP determied earigs or fiacial statemet balaces; Bakig, isolvecy aid i re-examiig, draftig or recostitutig fiacial coveats as well as performig pro-forma impact assessmets i expectatio of trasitio to IFRS; ad, Corporate goverace members of boards of directors ad their legal advisors will seek our expertise with respect to IFRS literacy ad risk maagemet. Sources of ifo Chartered busiess valuators who are part of iteratioal accoutig firms or those with iteratioal affiliatios have access to a sigificat amout of iformatio related to both the accoutig aspects ad valuatio See Wealth o page 18 Big opportuities i chageover By FRED PETERS Like most good accoutats, as you come out from uder the year-ed audit ad reportig cruch, your thoughts are probably ot turig to Caribbea getaways ad sprig flowers, but rather IFRS the ew iteratioal fiacial reportig stadards. Well maybe ot, but you should be thikig about that. By 2011 public compaies i Caada will eed to chage over to reportig i IFRS, ow i use i over 100 coutries. For a accoutat this is oe of those career alterig shifts either get with the program or risk gettig left behid. I about two years time it will be almost impossible to be hired as a cotroller, vice-presidet of fiace or chief fiacial officer without a solid groudig ad experiece i IFRS. So if that is oe of your career objectives the you eed to make a persoal commitmet to rise to the occasio. For those that get to be part of their compay s formal IFRS trasitio team, this may provide the career boost they have bee lookig for. For most others, this is For those that get to be part of their compay s formal IFRS trasitio team, this may provide the career boost they have bee lookig for. Fred Peters, Fiace Group evertheless a shift i approaches, with some ew cocepts, ad a learig experiece that will likely shape some of your day-to-day resposibilities, maybe eve your career. If you have t started to lear about IFRS, do t worry, you are i good compay. The ew reportig stadards ecompass a broad rage of cocepts differet from Caadia GAAP ad have fewer rules. The good ews is that ot all of it is relevat to your compay or to your role. Few of us are experts i GAAP, so do t worry about becomig a expert i IFRS. The typical reactio of participats i IFRS sessios is geerally that there are more movig parts tha most expect. Idividually, othig is overwhelmig but collectively there is a lot to do ad a rage of optios available. Tryig to arrow that dow is oe of the challeges. May take comfort i the more rules-based Caadia GAAP ad attedees are ofte lookig for specific aswers uder IFRS. This ca be a challege sice IFRS is priciples-based, meaig more judgmet eeds to be applied. There is more tha oe acceptable aswer uder IFRS ad the appropriate aswer ca vary, depedig o the situatio of each compay. Gordo Heard, pricipal advisor with the Fiace Group, observes that i the workshops he has ru, some of the participats feel stressed over the scope of the project, about how to arrow the focus to relevat issues for their compay, ad whether they will PETERS have the resources to get the work doe. He believes that as log as they have access to adequate resources they should t be worried there are effective methodologies that make the IFRS chageover maageable. Whether you are part of the frot-lie IFRS team i your compay or ot, the reality is there is goig to be the eed for a lot of self-study. The frot-lie team may get some formal compay-paid traiig to help them uderstad the stadards ad guide them i assessig the compay policy optios available, but most corporate traiig will likely come i 2010 ad be arrowly focused o the specific solutios adopted by the compay. You ca wait for that it will likely be helpful for your job, but may ot be the best strategy for your career. Uiversities ad colleges are ot goig to be much help to you i the short term for traiig i IFRS sice they are busy adoptig their course framework to IFRS. So if you wat to lear about it, you eed to get started o a selfstudy program. Here are some suggestios, but be prepared for a lot of readig. Good places to start are the web sites of the Accoutig Stadards Board (AcSB), the Caadia Istitute of Chartered Accoutats (CICA) ad the major audit firms. There are brochures ad presetatios o the timelies, the basic cocepts ad the geeral issues. I 2009, as focus shifts toward policy level issues, expect to fid more policy-specific materials. Some good examples are o the BDO See Gettig o page 18

8 18 The Bottom Lie March 2009 Gettig hadle o IFRS ca be a career booster Cotiued from page 17 Duwoody Ltd. website. The IFRS stadards are available o the AcSB web site as part of the April 2008 exposure draft. Evetually you will have to pay for a copy, but they are free for ow at d/42194/la_id/1.htm If you have resposibility or ivolvemet i plaig ad maagig IFRS chage over i your firm but have ot started, the oe good place to begi would the e- learig tutorial o the CICA website. These sessios walk you through the broad level of topics that a effective IFRS coversio pla eeds to cosider, ad are a good primer o what ca be referred to as Project Maagemet 101 issues. Depedig o the size of your orgaizatio you may pare dow the focus or effort aroud the topic, but better to have a iclusive list of thigs to cosider right up frot, so as to miimize the risk of leavig somethig out. I the shift to IFRS, as metioed, there are a umber of ew cocepts ad basic accoutig policy differeces from Caadia GAAP. Some suggested documets for uderstadig the policy areas: Guide to IFRS i Caada, CICA IFRS Compared to Caadia GAAP, KPMG Compariso of IFRS ad Caadia GAAP (Summary & Detailed), AcSB Liks to most of the source material idetified i this article ad other referece materials are available uder the resources tab at or o the idividual compay websites. Policy guides o IFRS will be ivaluable to ayoe who is ivolved i assessig the primary optios that are available uder IFRS ad settig accoutig policies. For everyoe else they ca be The typical reactio of participats i IFRS sessios is geerally that there are more movig parts tha most expect. Fred Peters, Fiace Group a good source for i-depth uderstadig of key topics. There are four policy guides you may wat to cosider for the very simple reaso they are the guides used by the major auditig firms, ad have bee reviewed ad edited to fit closer to the Caadia eviromet. Whichever policy you adopt will eed to be reviewed ad supported by your auditor. Therefore, it is recommeded that you at least start with the guide beig used i the field by your audit firms, audit maagers ad parters. For importat policy issues you will wat to review the other guides. They may help you i articulatig your situatio ad offer isight ito alterate optios ad treatmets. If your audit firm is ot oe of the four listed below, you should ask them which guide they are usig. All four listed are available to cliets i book form. The igaap ad E&Y guides are also available olie o a subscriptio basis. PwC LLP: IFRS maual of accoutig 2009 (Global Guide to IFRS) Deloitte & Touche LLP: igaap: IFRS for Caada KPMG LLP: Isights ito IFRS Erst & Youg LLP: Iteratioal GAAP (2009) For those o the frot lie of the chageover to IFRS, there is much to do ad precious little time to do it. For everyoe else, this is a ew learig opportuity ad a chace to boost your career prospects. Fred Peters is a seior IFRS Advisor with the Fiace Group where his focus is o IFRS impact assessmets, policy advisory support ad IFRS project maagemet services. He ca be reached at fpeters@fiacegroup.ca. Wealth of resources available overseas Cotiued from page 17 implicatios of IFRS. Deloitte has developed volumes of excellet material related to both the techical ad practical aspects of IFRS that is readily uderstadable by o-techical accoutats. Some of this material is refereced below. Perhaps more importat is access to Deloitte valuatio professioals i other parts of the world who have bee through IFRS implemetatio ad are livig i a IFRS world. Valuatio professioals i Europe ad Australia have bee particularly helpful i providig real life experiece relatig to IFRS implemetatio ad ogoig compliace. Charted busiess valuators should esure that they liaise with valuatio professioals i other coutries to gai from their kowledge ad practical experiece. For valuators who are ot part of a iteratioal accoutig firm or a firm with a iteratioal affiliatio, gaiig a uderstadig of IFRS may be To best serve our cliets, valuators must gai a techical ad practical uderstadig of IFRS ad implicatios for fair value determiatio. Richard Taylor, charted busiess valuator more difficult, particularly from a practical perspective. However, there is a sigificat amout of excellet techical IFRS material publicly available. The Caadia Istitute of Chartered Accoutats (CICA) has developed material to assist its members i gaiig a uderstadig of IFRS. The CICA provides iformatio i the form of guides, refereces, texts ad implemetatio tools. The CICA also offers a olie program ( that provides professioals with a basic itroductio to IFRS ad the implicatios for Caadia busiess. The CICA has also prepared teachig supplemets to support Caadia academics as IFRS materials are fully itegrated ito all accoutig textbooks. I additio to the material refereced by the CICA, the text etitled igaap 2008 IFRS for Caada is particularly useful. The CICBV has developed ad will cotiue to develop educatio material ad traiig programs that will assist busiess valuators i gaiig a uderstadig of IFRS ad the implicatios for the valuatio professio. Oe of the courses i the istitute s Programme of Studies i Busiess ad Securities Valuatio is Itroductio to Valuatio for Fiacial Reportig. This course provides the istitute s registered studets, ad members who eroll for cotiuig educatio, a itroductio to the accoutig stadards related to valuatio for fiacial reportig. I additio, the CICBV website ( cotais copies of presetatios from the CICBV Natioal Coferece i Quebec City last fall, icludig a umber that dealt with Iteratioal Fiacial Reportig Stadards as they relate to performig valuatio egagemets for fiacial reportig purposes. The CICBV also is a sposor of the Iteratioal Valuatio Stadards Coucil (IVSC) ad is actively ivolved with the IVSC i a project to develop iteratioal valuatio stadards pertaiig to the valuatio of itagible assets for IFRS reportig purposes. Iteratioal accoutig firms orgaize presetatios ad webcasts for their cliets ad other professioals that are ofte available to a wider audiece. Chartered busiess valuators, with ad without iteratioal affiliatio, may fid these presetatios iformative. Impact o busiess valuators The implemetatio of IFRS represets a sigificat opportuity for busiess valuators. To best serve our cliets, valuators must gai a techical ad practical uderstadig of IFRS ad implicatios for fair value determiatio. To best assist their cliets with IFRS issues, valuators will have to build strog relatioships with those who have a deep techical uderstadig of IFRS as there will be areas where IFRS rules require adjustmet or modificatio to stadard valuatio approaches. I additio, the areas of IFRS impact are sufficietly diverse that valuators will likely have to develop areas of specializatio. Richard Taylor, CA, CBV, leads Deloitte & Touche LLP s valuatio practice i Toroto. He lectures across Caada o the topic of busiess valuatio, is a past member of the board of directors of the CICBV ad is a member of Deloitte s atioal IFRS steerig committee. He ca be reached at rictaylor@deloitte.ca.