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  • International Financial Reporting Standards, or IFRS as they are commonly referred to , are a single set of globally accepted high-quality accounting standards. They are issued by the International Accounting Standards Board (IASB) in London, United Kingdom. The Board consists of 14 members from around the world, including one Canadian representative – Patricia O’Malley. Each member has one vote and the activities of the IASB are overseen by the trustees of the International Accounting Standards Committee Foundation (IASCF). The standards themselves are a comprehensive set of principle-based standards; there are few bright lines contained within IFRS. More accounting policy choices exist within IFRS, and their application requires greater use of professional judgement than Canadian GAAP.
  • Two convergence approaches Adoption of IFRS Convergence of national standard with IFRS The world is moving to IFRS at different speeds: Countries having already adopted / converged to IFRS Fixed deadlines for IFRS adoption (EU 2005, AUS, NZL, etc.) Other Convergence plans – Japan, China US-GAAP world (US) – complex convergence No adoption of IFRS (Saudi Arabia) After Europe and Australia adopted IFRS in 2005, there are over 90 countries around the world that use IFRS.
  • Known as the “Norwalk Agreement”. Signed in September 2002.
  • Statements made by the former Chief Accountant, Don Nicolaisen, titled “A Securities Regulator Looks At Convergence” were published in the Northwestern University Journal of International Law and Business in April 2005. Recently there has been expanded use of IFRS resulting from decisions made by the European Parliament and the Council of the European Union that all listed European Union companies (including banks and insurance companies) must prepare their consolidated financial statements in accordance with IFRS, generally from 2005 onward. The expanded use of IFRS creates the ability for a convergence of IFRS and US GAAP. The former Chief Accountant believes that IFRS and US GAAP should be closely aligned. One of the goals of the SEC is to encourage and promote informed investing decisions, which requires investors to have accurate, adequate and timely public access to disclosure materials that are useful, and can be easily understood and analyzed across companies and industries. Consistent with this goal, it is important to the US capital markets that comparable reporting be available to investors. The financial statements of one company should be prepared in a manor that allows comparison those of another company. Thus, financial statements prepared under IFRS and US GAAP requirements and disclosures should be closely aligned. SEC/EC “Roadmap” Roadmap initially “agreed” April 2005: Commitment to eliminate need for reconciliation between IFRS and US GAAP by 2009 at the latest Reaffirmed by SEC Chairman Cox and EC Commissioner McGreevy in February 2006 Achieving goal depends on several factors, including Evidence of effective implementation of IFRS in practice Particular degree of convergence not needed as prerequisite, but effective process for convergence to be in place, demonstrated by measurable progress in addressing priority issues Need for new degree of exchange and cooperation among regulators on IFRS application SEC involvement with IFRS on an ongoing basis SEC comment letters May request references and ask questions about IFRS Companies to be reviewed every 3 years Converged standards same as or similar to the equivalent U.S. GAAP literature GAAP differences can be difficult to support IFRS may be impacted by U.S. interpretations?
  • Lets review the Canadian AcBS’s Implementation Plan. Canadian GAAP will cease to exist for public companies as of a date still to be determined by the Board. The target date is 2011. However, the AcSB has committed to undertake a progress review of its implementation plan in 2008 at which time it will confirm the transition date to IFRS. In the interim, the AcSB has published a suggested timeline to assist companies in managing the changeover to IFRS. In their roadmap document that have stated: In 2008, entities should assess their accounting policies with reference to IFRS and develop a convergence plan In an entity’s 2008 year-end reports they should include qualitative disclosures surrounding their convergence plans In an entity’s 2009 year-end reports they should include quantitative disclosures surrounding the impact of their transition to IFRS Also in 2008 the US Securities and Exchange Commission (SEC) is expected to announce whether it will drop the requirement to reconcile primary financial statements to US GAAP for foreign private issuers preparing their financial statements under IFRS. For these companies, finance professionals and their Board of Directors must decide whether to adopt IFRS or US GAAP as their primary basis of accounting (assuming Canadian Securities Regulators continue to allow this option).
  • Early in 2006, the AcSB announced a plan to adopt International Financial Reporting Standards (IFRS) by 2011, a date which it stated is to be confirmed in 2008. The result of this announcement is that Canadian GAAP will cease to exist as of that time for public companies in Canada and these companies will begin to report under IFRS. Canadian SEC registrants will have the option of reporting in U.S. GAAP (assuming that Canadian Securities Regulators continue to allow that option). Although not defined, the plan is meant to include all public companies in Canada and some other enterprises that have relatively large or diverse classes of financial statement users. Unlike some recent regulations affecting public companies, there will be no size test, which means all public companies – large and small, will be required to change their basis of accounting to IFRS. What about private companies and not-for-profit organizations? Currently the move to IFRS will affect only public companies in Canada. The Board is currently conducting research into the needs of financial statement users of these organizations. Options for private company reporting in Canada could include: IFRS, IFRS for small and medium-sized entities (currently under development at the IASB), and Canadian GAAP. The AcSB has made no commitment to develop a separate GAAP for private companies and at this stage the results of the respective research projects have not been finalized. Accordingly, finance professionals at these organizations are encouraged to monitor the Board’s research project to assess what actions are necessary, if any.
  • IFRSs also provide some accounting requirements for insurance contract liabilities. IFRS 4 focuses on types of contracts rather than types of entities. This differs from Canadian GAAP which focuses on types of insurance entities. IFRS 4 generally permits entities to continue to follow their existing accounting policies for insurance contracts under their prior national GAAP. The IASB currently has a project on insurance contracts underway. Phase I of the project produced IFRS 4. Phase II of the project will make further additions and amendments to IFRS 4.
  • IFRSs also provide some accounting requirements for insurance contract liabilities. IFRS 4 focuses on types of contracts rather than types of entities. This differs from Canadian GAAP which focuses on types of insurance entities. IFRS 4 generally permits entities to continue to follow their existing accounting policies for insurance contracts under their prior national GAAP. The IASB currently has a project on insurance contracts underway. Phase I of the project produced IFRS 4. Phase II of the project will make further additions and amendments to IFRS 4.
  • IFRSs also provide some accounting requirements for insurance contract liabilities. IFRS 4 focuses on types of contracts rather than types of entities. This differs from Canadian GAAP which focuses on types of insurance entities. IFRS 4 generally permits entities to continue to follow their existing accounting policies for insurance contracts under their prior national GAAP. The IASB currently has a project on insurance contracts underway. Phase I of the project produced IFRS 4. Phase II of the project will make further additions and amendments to IFRS 4.
  • Canadian companies are in the fortunate position of being in the ‘second wave’ of the move to IFRS. As a result we can learn from those countries in Europe and Australia who have already made the move to IFRS in 2005. Generally, European companies found that the IFRS conversion was not simply a quick “technical exercise”, however it did provid executives with opportunities to challenge their processes and how they were viewed and evaluated by investors and other key stakeholders. When CFO’s were asked to share their experiences with adoption of IFRS – “smoothly” was not a term that surfaced. Here is what many European based companies found what the transition to IFRS meant, with particular emphasis on those who looked at the IFRS conversion project as being for far wider purposes than the narrow one of adopting new accounting standards: Training finance and accounting staff worldwide - not only on IFRS, but in other areas where skill enhancement was necessary Upgrading their IT systems and many adjustments to their internal management reporting systems Updating of policies and procedures manuals to ensure consistency in application of the standards Renegotiating contracts (need to review and rewrite debt agreements, compensation, and other agreements) – need lots of lead time to get it done. Lastly, while CFO’s in the end felt that they did has much as they could in their own organizations, they had trepidations about the markets reaction to IFRS. They needed to manage market expectations. Canadian companies will likely be required to reconcile their IFRS results to their previously reported results – gaining an early understanding of these differences, how these differences effect valuation models used by analysts and investors would enable Canadian companies to anticipate questions and to discuss issues with analysts and other user groups. The challenge for companies will be to manage information complexity, as IFRS f/s can be voluminous, and in understanding what accounting policy choices are permitted under IFRS that may mitigate reported volatility of earnings. Overall, in terms of getting to 2005, companies tended to wait too long to get started and there was not enough support from senior management in the early stages of the project. As a result companies did not: Spend enough time in the planning phase Develop a structured methodology for identifying and evaluating GAAP differences Create a formal process for issue identification and resolution Consequently, in some cases companies were overly dependent on external advisors and changes in reporting requirements were not embedded in primary systems causing work to extend past the 2005 reporting deadline.
  • While we can learn from these European experiences, the transition to IFRS in Canada will differ from the European experience in 3 key ways: A Phased Transition to IFRS Unlike European companies moving to IFRS, Canadian companies may need to adopt pieces of IFRS prior to 2011 by nature of the Board’s phased approach. For instance, the AcSB will continue to set standards for public companies throughout the transition plan, which will lessen the impact at conversion – but it will mean preparers and auditors will not be getting a period of rest, prior to 2011. Generally these new standards will be a result of either the AcSB’s improvement project or a global convergence project. Examples of these include new requirements in accounting for inventories and business combinations. In either case it is expected that the resulting standard will be substantially converged with IFRS requirements in that area. Consequently, companies may be required to embed certain changes in their systems to comply with IFRS earlier than 2011. As well, unlike some European countries, in many areas our Canadian accounting standards are well on their way to being consistent with IFRS already. Earlier Communications to the Marketplace As part of the AcSB’s transition plan, it will require companies to disclose their transition plans and the anticipated impact of the adoption of IFRS in its 2008 annual financial statements. Similar disclosures were recommended one year later in the transition period for European companies. This will not only force companies to develop adoption plans earlier than they may choose to do, absent such requirements, it will also force analysts and investors to begin their learning curve on IFRS adoption. Certifications of Internal Controls PRIOR to Adoption of IFRS CEOs and CFOs of Canadian public companies will be required to certify the operational effectiveness of their system of internal controls for fiscal years ending on or after December 31, 2007. Many companies currently are undertaking a project to evaluate their financial reporting systems and some companies may change their internal processes and policies and implementing upgrades to their financial reporting systems to comply with these requirements. If you want to avoid undertaking a comprehensive review of your financial reporting system twice in a short period of time as a result of transitioning to IFRS you may want to integrate the two projects to some extent to minimize the risk of multiple changes and disruptions to the financial reporting systems.
  • Although 2011 sounds like a date in the distant future, companies need to start thinking now about the change to IFRS and its potential affects to its accounting and financial reporting, business, systems and processes and people. If companies are to realize the benefits (and manage the risks) of IFRS, they must plan ahead. Management’s overall objective is to assess the potential impact of IFRS and to determine a path forward that is cost effective and that minimizes the disruption to the business. We will briefly discuss some of the points and actions that finance professionals should be considering throughout the transition to IFRS.
  • Anticipating change (now until mid 2008) Begin by gaining an understanding of IFRS – the CICA has a high level of comparison of Canadian GAAP to IFRS, as well as information in the roadmap document. Make a detailed assessment the major differences between Canadian GAAP and IFRS for the organization, including disclosure requirements? Make an assessment of how the new information requirements may affect management information systems - Are the organization’s financial reporting systems flexible enough to capture the data currently required by IFRS? What quick fixes are available and what major system modifications are necessary to enable IFRS reporting on a sustainable basis. Also consider the impact of the business and its key processes If not – are system upgrades planned in the near term for which the information requirements of IFRS should be considered to avoid multiple system changes? What is the potential impact of the planned transition methodology to management’s internal control certifications? What other impacts may the transition to IFRS have on the organization? Consider earnings per share, forecasted earnings, dividend policy, financing arrangements and related debt covenants, employee incentive schemes, internal performance management systems, tax planning, and reporting to stakeholders – analysts, shareholders, Audit Committees Once the team has made an assessment of where the company is now and where it needs to go, it can begin to develop a conversion plan.
  • Design the plan (by end of 2008) Who should be involved in the project team? Consider creating a dedicated, cross-functional team to address issues inside and outside of finance. What will be the methodology used to identify and evaluate GAAP differences throughout process? A phased transition necessitates a continual mechanism for monitoring differences. What is the process for identify and resolving issues throughout the transition period? What are the organization’s training requirements? Companies should develop a training plan during this time period. How will the organization communicate with its internal and external stakeholders? A public company will need to be in a position to disclose its particular plans for the transition and the broad impact on its financial reporting and other communications by the end of 2008. What resources will be required and when? Companies should identify, quantify and secure required resources during this time period. During the design phase organizations should obtain approval, commitment and support for their implementation strategies and budgets from their BOD and Audit Committee.
  • Implement the plan (2009) – in this phase plans are put into action! Execute training plans and system changes Monitor GAAP differences Renegotiate agreements and modify internal structure, where necessary Quantify reporting differences Update or build accounting manuals and policies, where necessary
  • Test the conversion (2010) Since the process of producing IFRS financial statements is unlikely to work perfectly the first time, the team should carry out dry runs of the procedures to enable weakness to be identified and eliminated before the organization “goes live” with IFRS. Parallel run of systems is also necessary to generate the required comparative figures for 2010 Draft required reconciliations to Canadian GAAP financial statements Remember that throughout all phases of the IFRS plan, there is a need to have ongoing communications with analysts, investors and stakeholders to educate them on IFRS and the impact it will have on your business. This continuous communication and education phase is essential to a successful conversion process. Management should plan to hold special meetings or conference calls to educate analysts about how various accounting treatments could change under IFRS and potentially effect reported earnings and asset bases and consequently the outcomes of valuation measures analysts commonly use. Such efforts could make an important difference in analyst’s and investors’ understanding of the company and ultimately, how they value it.
  • Adoption of IFRS will represent the single biggest financial reporting change ever in Canada. Likely ever one in the audience will be effected in some way by the adoption of IFRS– academics who are charged with educating the best and the brightest students to prepare them for this profession, preparers of financial statements for public companies, as well as their subsidiaries, equity investee’s and joint venturers. Analysts and investors who will need to understand IFRS in order to make educated investment decisions and those in public accounting who will audit their public company clients and will assist many companies in the adoption of IFRS. Remember – how a company manages its IFRS conversion will affect its business and potentially, market confidence in its reported information and its share price. Companies need to begin the conversion process even when the standards and the CICA’s conversion plans themselves are continue to evolve. Your efforts to adopt IFRS should begin in the upcoming year – don’t underestimate what is involved!. While adoption of IFRS is likely to increase earnings volatility and complexity of financial statements and their disclosures – it is important to remember the greater good, that the use of IFRS will also Enhance transparency by requiring companies to disclose new and different aspects of their business Enable companies to be compared more easily with their peers Promote efficient cross-border investment and access to capital So the challenge for the IASB is to continue to write standards that are responsive to needs of the market and capable of practical implementation. While convergence of IFRS with US GAAP may be desirable, it will lead to an increasingly crowded agenda for the IASB. We certainly hope that the IASB spends the necessary time addressing issues relating to the current standards. We would like to thank you for coming this morning and for giving us the opportunity to speak about Canada’s adoption of IFRS

Neil Parkinson Neil Parkinson Presentation Transcript

  • PD-16 Developments on International Accounting Standards from a P&C and Life Perspective Canadian Institute of Actuaries Annual Meeting June 28, 2007 Neil Parkinson National Director, Insurance Industry Practice
    • What is IFRS? How and when do we get there?
    • Current Insurance IFRS Standards
    • IFRS for Insurance Contracts (May 2007 Discussion Paper)
    • Getting Ready for Adoption
    Agenda
  • What is IFRS?
      • Single set of globally accepted high-quality accounting standards
      • Currently in use by over 90 countries around the world
      • Issued by the International Accounting Standards Board
        • Based in London, UK
        • 14 members – one Canadian representative – Patricia O’Malley
    IFRS are principles-based standards
  • IFRS – Moving Towards a Global Standard Fixed deadlines for IFRS implementation Convergence plans US-GAAP - Convergence intended No intent to converge with IFRS
  • Why International Financial Reporting Standards?
    • IFRS is becoming the basis of GAAP in most major jurisdictions outside Canada and the U.S.
    • IFRS are principles-based standards, as opposed to rules-based standards (eg. US GAAP)
    • In 2005, the Canadian Accounting Standards Board announced a directional change, from converging with US GAAP, to converging with IFRS
    • IFRS concepts are beginning to permeate Canadian GAAP as new standards are issued
    • Many Canadian companies, including insurers, already report upstream on this basis
  • International convergence – direction of Canadian GAAP IFRS Cdn. GAAP U.S. GAAP 2006 2011 Direction – US GAAP to converge with IFRS – but how and how fast? 2005 How big a “bang”?
  • International convergence – US FASB
    • Memorandum of Understanding
      • FASB and IASB pledged to use their best efforts to:
        • make existing financial reporting standards fully compatible as soon as is practicable; and
        • coordinate future work programs to ensure that compatibility is maintained .
  • International Convergence Project – US SEC
    • Statement by SEC Staff: A Securities Regulator Looks at Convergence
      • Single set of globally accepted accounting standards
      • Propose to eliminate the requirement to reconcile to US GAAP
      • May accelerate adoption of IFRS for US domestic SEC registrants if SEC eliminates the IFRS-US reconciliation requirement
  • The Canadian AcSB’s Implementation Plan
    • THE UNKNOWNS….
    • Confirmed transition date
    • Outcome of the SEC’s review of the application of IFRS
    IFRS go-live Spring 2006 2009 2010 2011 2008 Calendar year periods AcSB’s progress review Qualitative disclosures of differences (‘08 annual report) Quantify effects of changeover to IFRS (‘09 annual report) Prepare comparative figures under IFRS
  • The New Financial Reporting Landscape in Canada The shift to IFRS will affect all publicly accountable enterprises in Canada (This means you!)
  • Current Insurance IFRS Standards
  • Insurance accounting under current IFRS
    • IFRS – account for insurance contracts , whatever the type of enterprise that issues them
      • (Current Canadian GAAP – defines accounting frameworks for insurance enterprises , separately for life and P&C)
    Agreement on how to measure insurance contracts was not reached in time for the comprehensive introduction of IFRS in 2005. Existing “national GAAP” approaches continue until Phase II standards on measurement are agreed (Discussion Paper issued May 4, 2007) Insurance project Phase II (future) Disclosures required for insurance contracts and related risks IFRS 7 (in force) Defines insurance contracts IFRS 4 (in force)
  • Current insurance IFRS – IFRS 4
    • IFRS 4 defines insurance contracts:
      • “ contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affect the policyholder”
    • Difference from current Canadian GAAP
      • Life insurer savings products (e.g. deferred annuities, term certain annuities) would normally be considered deposit contracts rather than insurance
      • Implementation in Europe – lots of effort in distinguishing between insurance contracts and deposit contracts
  • Current insurance IFRS – IFRS 4, cont’d
    • IFRS 4:
      • Defines reinsurance contracts too, but does not require quantitative testing of risk transfer as in US FAS 113 (as a result, IFRS allows a wider range of reinsurance contracts to be given reinsurance accounting than is the case under US GAAP, or OSFI Guideline D-9)
      • Deposit components may need to be unbundled from an insurance contract
      • Did not address how to measure insurance contract liabilities, but requires a “liability adequacy test”
  • Current insurance IFRS – IFRS 4 and 7
    • Requires a wide range of disclosures on insurance contracts:
      • Risk selection and risk concentrations
      • Sensitivity analysis
    • Requirements similar in principle to Canadian GAAP, but appear to require more detailed disclosures
  • IFRS for Insurance Contracts (May 2007 Discussion Paper)
  • Insurance Contracts Project Phase II Timetable
    • Phase II restarted Mid 2004
    • First meeting of IWG Sep 2004
    • IASB Board meetings – Feb 2006 -
    • Discussion Paper May 2007
    • Exposure Draft + 18 months
    • Final Standard + 12 months
  • Features of IASB’s proposed measurement model
    • Single measurement model :
    • Life insurance and non-life insurance
    • Prospective valuation:
    • Value of insurance contract = PV (all future cash flows)
    • Current exit value :
    • The amount the insurer would expect to pay to another entity if it transferred all its remaining contractual rights and obligations immediately
  • Preliminary views of the IASB discussion paper Recognise future premiums only if certain tests are met Policyholder behaviour Risk margins determined on portfolio basis Unit of account Included in the liability measurement Own credit risk Par component is a liability if a legal or constructive obligation exists Participating contracts Unbundle deposit and service components unless interdependent Unbundling Acquisition costs are expensed as incurred Acquisition costs All changes in estimates recognised immediately Subsequent measurement Day one profits may be recognised Initial measurement Observable market rates for similar cash flows Discount rate Current exit value - single approach for all insurance types Measurement attribute IASB preliminary view Issue
  • Features of IASB’s proposed measurement model
    • An insurer should use the following inputs to measure its insurance liabilities
      • Current unbiased probability-weighted estimates of future cash flows (ie an expected value approach)
      • Current market discount rates that adjust the estimated future cash flows for the time value of money
      • An explicit unbiased estimate of the margin that market participants require for
        • Bearing risk (a risk margin); and
        • Providing other services (a service margin)
  • Calibration of risk margins – IASB model
    • A small majority of IASB members believe that a net gain may be recognised on inception if there is a difference between the price charged to policyholders and the price that would be paid to another insurer to accept the risk
    • A small minority of IASB members believe that the margin should be “calibrated” to the observed price for the transaction with a policyholder, with no net gain on inception.
    • The IASB do not intend to attempt to define how margins should be determined but will suggest criteria an insurer should consider in selecting an approach to risk margins
  • Future premiums and policyholder behaviour
    • Cash flows used in measuring insurance liabilities should include future premiums (and the additional benefits that result from those premiums) only if one of the following conditions are satisfied:
      • The present value of future premiums is less than the present value of the resulting additional benefit payments
      • The insurer has an unconditional contractual right to enforce payment of premiums
      • The policyholder must pay the premiums to retain a right to guaranteed insurability (a right that permits continued coverage without reconfirmation of the policyholders’ risk profile at a price that is contractually constrained)
  • Acquisition costs
    • Acquisition costs should be expensed when incurred
    • To the extent that the premium paid includes an amount for the reimbursement of acquisition costs incurred, that amount should be recognised as premium on the inception of a contract
  • Discretionary policyholder participation rights
      • Liability or equity?
        • Policyholder participation rights create a liability only when the insurer has a legal or constructive obligation to pay dividends to policyholders
        • In assessing whether an insurer has a constructive obligation the Board will rely on definitions in its current literature
  • Comparison of IFRS proposals to Canadian GAAP
    • Consistent with Cdn GAAP (a possible change for lifecos reporting upstream in US GAAP, with its “locked in” assumptions)
    Changes in estimates reflected in liability valuation immediately
    • Not done now, at least not directly
    • Possible some may default to “calibration”, to avoid day one profits
    Liability valuation to include explicit risk and service margins
    • Most Canadian insurers apply time value of money, but using their own expected portfolio returns
    • Use of market discount rates could lead to greater accounting mis-matches in reported income, particularly for lifecos
    Liabilities discounted using market rates
      • Canadian GAAP
      • IFRS Phase II
  • Comparison of IFRS proposals to Canadian GAAP, cont’d
    • Not a conceptual change for lifecos
    • Canadian P&C insurers defer and amortize over policy term; the “current exit value” liability should resemble (but not necessarily equal) the net amount of UPR less DAC
    Acquisition costs expensed as incurred (no deferral, or “DAC”)
    • Not a conceptual change for lifecos
    • Implementing this aligns the P&C model more with the life approach; UPR replaced with a liability for estimated cash future flows
    Unearned premiums (UPR) to be replaced with the “current exit value” measure
      • Canadian GAAP
      • IFRS Phase II
  • Comparison of IFRS proposals to Canadian GAAP, cont’d
    • Not a P&C issue, but life insurer revenues would exclude a lot of annuity deposits currently shown as premiums
    Classification of insurance vs. deposit contracts
    • Not a change for P&C insurers
    • A change for life insurers however
    Reinsurance to be portrayed on a gross basis
      • Canadian GAAP
      • IFRS Phase II
  • IFRS Phase II – many questions remain…
    • The Phase II Discussion Paper expresses the preliminary conclusions of the IASB, but poses numerous detailed questions, on both a conceptual level and “how to”
    • Other open questions on scope, eg.:
      • Will credit insurance be treated as insurance, or as a financial guarantee?
      • Workers compensation schemes covered?
  • Getting ready for adoption
  • Lessons Learned in Europe
      • European companies found that transition meant:
        • Training finance and accounting staff worldwide
        • Upgrading their IT systems and adjustments to management reporting systems
        • Development of policy and procedures manuals
        • Renegotiating contracts (bank and compensation agreements)
        • Managing market expectations
      • Overall, European companies generally:
        • Waited too long to get started
        • Suffered from poor project management
      • The result -> Relied heavily on external expertise to get the job done
  • How will it be different in Canada? A Phased Transition to IFRS Earlier Communications to the Marketplace Certifications of Internal Controls PRIOR to Adoption of IFRS
  • THE TIME TO GET STARTED IS NOW! IFRS go-live Anticipating change and Assess phase Design phase Implementation phase Pilot phase (comparatives under IFRS) Calendar year periods AcSB’s progress review SEC registrants may choose to adopt IFRS in advance of 2011 Fall 2006 2009 2010 2011 2008
  • Anticipate the Change Anticipating change and assess phase
    • GAP analysis
    • Systems and training needs assessments
    • Assess other impacts of transition
    • Impact of transition to internal control certifications
    • Plan conversion path
    Fall 2006 2009 2010 2011 2008
  • Design the Plan
    • Mobilize project team and the business
    • Develop training plan
    • Develop communications plan
    • Identify, quantify and secure required resources
    Design phase Fall 2006 2009 2010 2011 2008
  • Implement the Plan
    • Execute training plans and system changes
    • Convert budgeted results
    • Renegotiate agreements and modify internal structure
    • Quantify reporting differences
    • Build or update tools (manuals, policies, reporting packages, F/S)
    Implementation phase Fall 2006 2009 2010 2011 2008
  • Test the Conversion
    • Test the conversion and dry run
    • Generate required comparative figures
    • Prioritize issues from conversion and rectify
    • Manage business on an IFRS basis
    • Draft required reconciliations to Canadian GAAP financial statements
    Pilot phase (comparatives under IFRS) Fall 2006 2009 2010 2011 2008
  • Wrap Up
    • Single biggest change ever to financial reporting
      • Don’t underestimate the scale of the undertaking
      • Affects educators, preparers, auditors and investment community
    • Represents another huge and positive step forward in global financial reporting
      • Possibility of more consistent regulatory approaches across jurisdictions
      • Greater transparency, more comparability and potential for better investment decisions
    • “ While it is now well known that the AcSB has opted to adopt IFRS, the AcSB is recommending that, in the short-term, boards of directors of public companies ensure that a member of management, or advisor, is responsible for reporting on a regular basis on the implications of IFRS conversion for their particular enterprise.”
    • ( Julie Dickson, Deputy Superintendent, OSFI, CIAA Conference, September 25, 2006)
  • The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Neil Parkinson KPMG LLP (416) 777-3906 [email_address] www.kpmg.ca © 2007 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. All rights reserved. Printed in Canada on recycled paper.