Delays of three to six months in conversion timetables
TORONTO, Oct. 15 /CNW/ - A survey of energy companies-both public and private-indicated that 87% will be adopting IFRS in Canada by the Canadian Accounting Standards Board (AcSB) deadline of January 1, 2011. However, of those adopting IFRS, 83% believe they have not reached the half-way point in their conversion projects, according to Ready? Set? Go? Taking Part in the IFRS Race, a 2009 Canadian Energy Survey Q2 Update by PricewaterhouseCoopers (PwC) LLP and JuneWarren-Nickle's Energy Group. This is significant as 2010 - the first IFRS comparative year - is less than three months away.
Survey highlights on IFRS conversion/adoption include:
- The economic downturn that began last fall has also impacted some
project plans, with 50% of respondents noting delays of three to six
months in their conversion timetables.
- A majority of energy companies (63%) said they are satisfied with the
current state of their IFRS conversion.
- Fifty-four per cent of respondents began their diagnostics in 2008 and
29% plan to carry out initial diagnostics in the 2009 calendar year.
Seventeen per cent of companies have not started and do not anticipate
starting their diagnostics this year.
On January 1, 2010, many IFRS conversion projects will move to the next phase of the transition process. While IFRS standards don't officially take effect until 2011, companies will have to be prepared for the change one year earlier to provide comparable financial reports. For many organizations, this new phase will require cross-enterprise adoption of new processes, controls and information management systems. For the 29% of respondents who said their IT systems are not capable of running parallel records and the 20% who do know about their system capabilities, this will add to the time pressure of looming deadlines.
"Energy companies following the full-cost method of accounting are likely to experience significant changes to their business processes during the shift to IFRS-companies following the "successful effort" method of accounting will have changes but to a lesser extent," says John Williamson, partner and leader of PwC Canada's Energy Group. "By starting early, not only do these companies meet timelines; they also will have properly trained resources and implemented the changes into their IT and process environments. This will improve their ability to operate in the newly defined reporting environment."
Creating the right team
Survey respondents indicated IFRS conversion teams draw primarily from their finance and accounting departments, but members of companies' IT, tax and treasury departments are also required. The size of conversion teams remains small, with 31% of respondents saying the team consists of one or two full-time equivalents (FTEs) and 38% saying they do not have any dedicated IFRS FTEs.
As for plans to engage auditors or another third-party in the process: 60% of respondents have used or plan to employ their auditors, while 35% said they have engaged or plan to engage a third-party.
"Having qualified advisors with both industry and IFRS knowledge as a part of an IFRS project team will ease the complexity associated with accounting and all other business related decisions-it can also save huge amounts of time and money," says Ann-Marie Osinski, partner and leader of IFRS for the Oil and Gas industry at PwC. "Transition has traditionally been smoothest for organizations that have dedicated internal resources to work with an IFRS professional advisor."
Although a majority of respondents will run parallel IFRS and Canadian GAAP financial information, 60% said they are able to report on a qualitative assessment of IFRS impacts in their 2009 MD&A reports.
"Companies that have yet to complete their initial diagnostics should do so as soon as possible. This task should be performed as a quick 'litmus' test before focusing on preparing the deeper accounting policy analysis and quantification stage," says Osinski.
Getting the word out
In the survey, 86% of respondents said IFRS training of financial staff is under way, with 63% responding that training was in place for audit committees. But only 26% said their companies have begun IFRS training for boards of directors, and only 23% have started training for non-financial staff.
Survey results also indicated the level of communication to market analysts was very low, with only about 5% of respondents saying they have started dialogue. Moreover, 69% of respondents indicated their management teams are only generally or somewhat aware of the potential implications of IFRS adoption on investor relations (IR). A further 29% said management was not aware at all of potential IR implications.
"It is critical to start dialogue with internal stakeholders such as staff and members of the board, as well as with external stakeholders such as members of the banking community and analysts, to build awareness of the potential impacts of IFRS conversion," says Stephen Marsters, editorial director at JuneWarren-Nickle's Energy Group. "The impacts of IFRS are far-reaching within the industry."
Methodology and Demographics
Ready? Set? Go? Taking Part in the IFRS Race contains results from an online survey, conducted by PwC during the 22-day period from August 20 to September 11, 2009, to better understand the energy industry's preparedness for conversion to IFRS. This IFRS Energy Visions survey builds off an earlier national survey by the Canadian Financial Executives Research Foundation, the research institute of FEI Canada, that was sponsored by PwC. Conducted in May and June of this year, the cross-industry survey revealed that most companies - private and public - will be racing to IFRS conversion.
There were responses from 42 companies, with the majority of respondents (81%) filling senior-level finance roles. A minimal number of respondents indicated that they hold a technical role or are a member of IFRS project team.
CanOils(R) is the primary source for the financial data contained in the publication.
For more information, please visit www.pwc.com/ca/energyvisions.
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