IFRS comes to Canada.

• Author: Walsh, Mark
• Position: Financial reporting - International Financial Reporting Standards

Public companies and other publicly accountable enterprises in Canada must adopt International Financial Reporting Standards for 2011 reporting. For the same date, Canadian private enterprises must decide whether to adopt IFRS or the new accounting standards for private enterprises. While many subsidiaries of public companies are private companies, most will adopt IFRS because the parent will need IFRS numbers for consolidation purposes. (U.S. Securities and Exchange Commission filers may continue reporting using U.S. generally accepted accounting principles.) For calendar-year companies, this is only a few months away.

How is the transition to IFRS going and what should companies be focusing on?

The decision to adopt IFRS in Canada was initially made in 2006, so companies have had several years to get used to the idea and to plan for the change. While a very significant change for most companies, there is general acceptance that this is the right path for Canada to be taking. FEI Canada's Committee on Corporate Reporting has strongly supported the adoption of IFRS. A 2009 research report by the Canadian Financial Executives Research Foundation (CFERF) found that "(t)here is generally broad support from business and industry for the changeover."

Large- and medium-sized companies generally are far along in their conversions, although some smaller companies may be lagging as they have focused on staying alive during the economic downturn. Key elements of a conversion are determining the accounting policies to be followed and modifying systems and other accounting processes.

Though many companies are modifying major systems, more than two-thirds of companies surveyed in a 2010 CFERF research report intend to make greater use of end-user computing. All systems and other reporting changes will require review of the financial reporting controls and the control certification process.

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2011 Financial Statements

Financial statements for 2011 will include comparative numbers for 2010 prepared on an IFRS basis. With first quarter 2011 reports coming very shortly after the completion of 2010 annual reporting, many companies are restating their quarterly statements on an IFRS basis as they go through 2010.

The 2010 CFERF research report noted that 70 percent of surveyed companies expect to have an opening 2010 IFRS basis balance sheet completed by the end of the second quarter of their 2010 fiscal year.

In addition to restating...