The Canadian retail landscape has become increasingly crowded as a relatively strong pace of consumer spending is attracting foreign retailers. Some of the world's largest are now focused on further expansion in the country. Coinciding with this major shift in the key players, the Canadian retail and consumer industry is being affected by the introduction of International Financial Reporting Standards (IFRS), which will become mandatory for all public companies in Canada beginning January 1, 2011.
Our experience in Europe has shown that the devil is in the details: it's not the easily identifiable differences which will cause the headache for the Canadian retail and consumer industry, but rather ensuring compliance with a whole new set of financial reporting standards including all the detail which accompanies them. Additionally, it’s essential to implement a systematic process early to catalogue possible differences for Canadian public entities, in order to identify changes to systems and procedures.
Key differences between IFRS and Canadian GAAP
- Initial adoption: Probably one of the most important aspects is preparing for initial adoption. In addition to understanding and making appropriate elections (e.g. initial fair value elections), there will be a considerable number of new disclosure requirements which will require compilation.
- Inventory: Reconsideration of the existing retail method will cause major issues for many Canadian retailers. Many of these issues will be accelerated for Canadian retailers as they adopt new CIRCA 3031 Inventories.
- Loyalty programs: Specific accounting guidance has been issued under IFRS 13 for loyalty programs. While major differences to existing practice are not expected, it is new and only now being implemented in Europe.
- Property, plant and equipment: In Europe many retailers took the opportunity to revalue properties. These can also be considered investment properties and, carried at fair market value, require annual valuations. However, we don’t expect that this option will be widely used in Canada.
- Land and buildings: If not already separately disclosed, then this is now required. This may also become especially complex as property leases would need to be analyzed to determine whether they are considered operating or financing; if financing, then the building element will need to be capitalized, though the land portion is always considered an operating lease.
How PwC can Help
Don't re-invent the wheel - We have a sound methodology to help you which draws on our global knowledge and experience supplemented with specific local experience assisting Canadian retail and consumer companies adopt IFRS.
Contact one of our IFRS professionals today to see how we can help your company make the transition.
