PricewaterhouseCoopers has been helping European, Australian, South African and other public companies adopt International Financial Reporting Standards (IFRS) since the first major wave of adoption in 2005 and we have learned valuable lessons that will help Canadian companies with their own conversion process.
Here are some examples of feedback given by European companies related to the transition process to IFRS:
- Project structure. Break the project into manageable stages, make sure that personnel have clear roles and responsibilities, monitor and be strict with deadlines
- Staffing and training. Early training is vital, including for those outside of the financial function. Senior management needs training on how to interact with analysts, media and investors
- Anticipate behavioural change. It is important to identify the ways in which company behaviour will be affected, especially in key areas such as financial instruments policy and processes, M&A activity, share-based remuneration and intangible asset management
- Processes, systems and controls. Having a consistent methodology across the organization is vital. Training will help avoid reporting errors caused by a lack of technical understanding, especially in potentially difficult areas such as income recognition, asset registers and hedge accounting
- Embed IFRS into internal reporting. European clients have stressed that the sooner that IFRS becomes the day-to-day method of reporting, the better for the organization. Conversion is only the beginning of a process, and is not an end in itself
- Involve advisors and auditors early. They can bring their knowledge of industry-specific technical accounting issues from other projects
- Make an early decision about whether to push IFRS down to subsidiaries or associates. The UK had issues around distributable reserves and taxation, leading to a lower adoption rate among UK group subsidiaries. Canadian firms should determine whether similar issues might apply here
- Details are crucial. Similarities between Canadian GAAP and IFRS should not lead companies to overlook critical areas. Examples include component accounting, the definition of a derivative, and successful efforts versus full cost accounting
- Timing is essential. It can be difficult to estimate how much time the process will take, which is another reason to bring in advisors and auditors at the earliest stage
How PwC can help
Our experience in helping these businesses make the transition to IFRS can help you manage the conversion process with fewer headaches. Contact one of our professionals today to discuss how we can help you get your IFRS conversion started on the right track.
