Survey shows some companies have barely started
TORONTO, June 25 /CNW/ - With the January 1, 2011 deadline for Canadian
companies' transition to International Financial Reporting Standards (IFRS)
looming on the horizon a new survey by the Canadian Financial Executives
Research Foundation (CFERF), the research institute of FEI Canada, and
sponsored by PricewaterhouseCoopers (PwC) indicates that many companies will
have a race to the finish line.
Of the 256 respondents, 147 were publicly-accountable enterprises, 51
were private companies and 28 were Crown corporations. The remaining 30 were
not-for-profit, government or other types of organizations. All respondents
indicated that they would be adopting IFRS although not necessarily on January
1, 2011. Despite the fast-approaching conversion deadline, more than 12% of
the 147 public companies surveyed and one in five of private companies had not
yet taken the first step of starting their initial diagnostic assessments.
Several reasons for their delay were provided, with about 41% of public
companies and 54% of private companies stating they had other higher
priorities. About 80% of public companies remain short of the half way mark in
their overall conversion process. Private companies surveyed were lagging
behind public companies, with 51% between only 0 - 20% complete.
According to Diane Kazarian, PwC Canada's National IFRS Leader, "Our
survey shows that companies were more likely to put cost containment at the
top of the list of activities rather than IFRS. However we're not surprised by
the status of conversion projects across the board. While there are many
reasons a company might be waiting to begin the process, the fact remains that
to be ready for 2011 - a date recently reaffirmed by the Accounting Standards
Board - with comparable data from 2010 they should have started long ago -
especially for companies with multiple product lines, business units and
complex IT environments."
Further, with cost constraints on their minds, many companies have opted
to only hire very limited resources to help with the conversion putting more
and more pressure on existing staff to execute the conversion in addition to
their day-to-day responsibilities. Execution includes not only figuring out
the complex conversion issues for finance but the conversion team must broaden
to comprise IT, HR, investor relations, operations, internal audit, legal,
treasury and risk. All these stakeholders may be affected by the decisions
made. Indeed, the most commonly reported conversion team size was the
equivalent of only one to two full-time staff.
A wide range of financial accounting issues emerged in the survey, with
the most common concern being the impact of IFRS on asset values-nearly 60% of
public companies and just over 60% of private companies said that IFRS will
have a significant effect on their asset valuations.
"At a time when companies' are relying more heavily on asset backed
lending as a source of capital financing, any negative impact on asset values
may have financing implications for many companies," says Ramona Dzinkowski,
Executive Director, CFERF. "Certain standards, like mark-to market asset
valuations will put additional pressures on finance executives to make sure
they have adequate operating capital."
Adding to the accounting concerns is the fact that 55% of public
companies said they had not yet assessed the systems implications of the
changeover. However, this contrasts with the fact that by 2010, 76% of
respondents maintain that their company plans to run parallel IFRS and
Canadian GAAP financial reporting systems during this year. "The question is,
will they really be ready to run parallel financial reporting systems if they
haven't even begun assessing the wider impact of the system change-over,"
When it comes to IFRS awareness and training most companies reported they
had begun training their finance staff (82% of public companies). Board
education on IFRS was not as advanced, with only 41% of public companies
indicating that they had started educating their board. Dzinkowski notes,
"This may reflect the fact that many organisations across Canada are waiting
to provide concrete estimates of financial implications of moving to IFRS
before engaging the full board of directors as opposed to just the chair of
the audit committee."
Kazarian continues, "IFRS conversion is not just a corporate transition.
Employees participating in profit sharing arrangements, or those who are
expecting bonuses or commissions based on revenue, will be very interested in
the financial statements produced under IFRS. Investors and analyst may find
that IFRS will have a real impact on the way they perceive companies and
impact the investment decisions that they make. Converting to IFRS is not just
an internal company process that is only discussed in the boardroom. All
stakeholders need to be informed."
For more information please visit www.pwcifrs.ca or www.feicanada.org.
About PricewaterhouseCoopers LLP
PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 155,000 people in 153 countries
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(www.pwc.com/ca) and its related entities have more than 5,200 partners and
staff in offices across the country.
"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network,
each of which is a separate and independent legal entity.
About The Canadian Financial Executives Research Foundation (CFERF)
CFERF is the research institute of Financial Executives International
Canada (FEI Canada), the all-industry professional membership association for
senior financial executives that provides professional development, thought
leadership and advocacy services to its over 2,000 members. CFERF's primary
objective is to study emerging financial management issues in Canada with the
aim of increasing the competitive capabilities of Canadian companies across
the country. Further information can be found at www.feicanada.org.
For further information:
For further information: Carolyn Forest, (416) 814-5730,
email@example.com; Caroline Spivak, (416) 371-9740,