2008-05-09 Disclosure of Expected Changes in Accounting Policies Related to Adopting IFRS as Canadian GAAP

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This newsletter announces guidance from Canadian Securities Administrators relating to disclosure of expected changes in accounting policies relating to an issuer's changeover to International Financial Reporting Standards as the basis to preparing its finanacial statements.

Disclosing Expected Impact of Adopting IFRS

 The Canadian Securities Administrators ("CSA") have issued a notice providing guidance on disclosures that an issuer should be making, in its interim and annual management discussion and analysis for 2008, 2009, and 2010, relating to expected changes in accounting policies as a result of the changeover to International Financial Reporting Standards ("IFRS") as the basis of preparation for interim and annual financial statements.

In particular, MD&A requirements in National Instrument 51-102, Continuous Disclosure Obligations, require an issuer to discuss and analyze any changes in the issuer’s accounting policies that the issuer has adopted or expects to adopt subsequent to the end of its most recently completed financial year, including changes due to a new accounting standard that the issuer does not have to adopt until a future date. Changes in an issuer’s accounting policies that an issuer expects to make on changeover to IFRS are changes due to new accounting standards and, therefore, fall within the scope of these MD&A requirements.

CSA Staff Notice 52-320 outlines the level of disclosures expected in interim and annual MD&A for 2008, 2009 and 2010. For example, if at the time of preparing its MD&A, an issuer has developed an IFRS changeover plan, the interim/annual MD&A for 2008 should discuss the status of key elements and timing of the plan, which might include the impact of IFRS on:
  • accounting policies, including choices among policies permitted under IFRS, and implementation decisions such as whether certain changes will be applied on a retrospective or a prospective basis,
  • information technology and data systems,
  • internal control over financial reporting,
  • disclosure controls and procedures, including investor relations and external communications plans,
  • financial reporting expertise, including training requirements, and
  • business activities, such as foreign currency and hedging activities, as well as matters that may be influenced by GAAP measures such as debt covenants, capital requirements and compensation arrangements.

As outlined in the Staff Notice, the disclosure requirements become more detailed as the date of changeover approaches and conversion plans progress.
CSA Staff Notice 52-320

A copy of CSA Staff Notice can be obtained from the OSC website.