Maintaining peace of mind and confidence in financial reporting processes is critical as banks meet the challenge of the biggest accounting change in a generation. IFRS is intended to give investors and other stakeholders access to high-quality financial information that, for the first time, is comparable across borders. The clear message from those that have already made the change is: “Don’t underestimate what is involved.”
Key differences between IFRS and GAAP
Canadian financial institutions will have a head start on the adoption of IFRS that was not afforded their European counterparts because existing Canadian GAAP and IFRS are both principles-based. For example, by the 2011 transition date, Canadian financial institutions will have already adopted IFRS-like rules for accounting for financial instruments. However, differences in accounting between the two standards still remain.
Differences that will require consideration:
- Financial instruments — recognition and measurement, disclosures
- Loan loss provisioning
- Stock-based compensation
- De-recognition of financial assets and liabilities which may impact securitizations and other structured transactions
- New emerging rules on accounting for certain insurance contracts can have an impact on banks with significant insurance activities
The financial statements of a Canadian bank will look different under IFRS than they currently do under Canadian GAAP. Senior executives need to be prepared to discuss these differences with board members, shareholders, regulators and the investment community at large.
How PwC can help
For a more in depth analysis of the industry-specific issues:
Contact one of our IFRS professionals to today to see how we can help your bank or financial institution begin the conversion process.
