Canadian CFA charter holders want more understanding of International Financial Reporting Standards: PwC Survey

More than 47% of Canadians surveyed who hold the CFA designation want clarification on IFRS standards and how they will impact investors.

October 22, 2009 — With the January 2011 transition date for International Financial Reporting Standards (IFRS) looming on the horizon for all publicly accountable enterprises in Canada, a large proportion of Canadians who hold the Chartered Financial Analyst® (CFA®) designation indicate they favour the transition to IFRS (48%), but also say there is much room to improve their understanding of how IFRS will impact Canadian public companies. These and other survey findings were released today from PricewaterhouseCoopers (PwC) in conjunction with the Canadian Advocacy Council for Canadian CFA Institute Societies (CAC).

• More than 47% of CFA charter holders are not very confident that they have a full understanding of what the impact of IFRS will be on the companies they invest in or follow; almost 20% are not at all confident.
• More than 74% of respondents have a fair to poor understanding of the differences between IFRS and Canadian GAAP and 57% think IFRS only has some differences from Canadian GAAP.
• Sixty-six percent are interested in IFRS training sessions to learn more and 51% say their company has not invested any budget towards training; accordingly, almost 75% of respondents have not registered or allocated any time for training.

"Preparedness and communication to stakeholders to make sure they are aware of conversion plans and the results of IFRS both financially and organizationally is critical," says Diane Kazarian, IFRS National Practice Leader and partner at PwC. "There are significant accounting differences between IFRS and Canadian GAAP, which often reside in the details, causing recognition, measurement and/or presentation differences. Careful planning of the transition to IFRS should include a robust training and communication plan for various users both within the organization and key external stakeholders such as analysts and investors."

While there seems to be a lack of understanding of the impact IFRS will have on companies (with just over 50% of respondents saying there will be 'some' impact on the companies they invest in or follow), understanding of IFRS affects should improve as companies continue to communicate their plans for conversions as well as the quantifiable impacts expected this year. More than 60% of respondents indicated that they feel that the management of the companies they invest in or follow has some awareness of IFRS. There is a willingness among respondents to reduce the learning curve; indeed 66% of respondents are interested in IFRS training sessions to learn more.

"Many of Canada's analysts are CFA charter holders and Canadian companies should take advantage of promoting training programs that are available to our members so that they will be current on IFRS and able to accurately and effectively understand the results," says Ross E. Hallett, CFA, chair, CAC. "The CFA Program trains members to be flexible and learn quickly so that they may take advantage of ongoing learning opportunities and analysts will get up to speed quickly as the companies they follow transition to IFRS."

Respondents were somewhat split on their knowledge of whether there are industry-specific issues, with 41% saying "yes" versus over 38% saying "no". Those who indicated which industries would have specific issues cited Energy (23.2%), Financials (21.8%) and Real Estate (10%).

"Many companies who implement IFRS underestimate the time and resources needed for realigning systems and processes to address new data requirements, be it for disclosure or measurement purposes, resulting from implementing IFRS standards. For instance, IFRS is not compatible with full-cost accounting, a method used by a significant portion of Canada's oil and gas companies", says Kazarian. "For a smooth conversion process, companies need to come to address the full implications of IFRS, including training and communications, and can't afford to underestimate the time they will need to implement the change."

Meanwhile, since this survey was conducted, the Canadian Accounting Standards Board released an Exposure Draft on Generally Accepted Accounting Principles (GAAP) for Private Enterprises. These proposed new standards provide a choice for private enterprises to adopt a simpler, less time consuming, cost effective accounting approach, without compromising the quality of financial information. "This will likely change the number of respondents who are aware of the work being done for private companies or what differences there will be. Private companies are going to have to examine their options and choose a solution that best serves their purposes," comments Kazarian.

For more information, please visit: http://www.pwcifrs.ca.