Tackle IFRS before the ball drops on New Year's Eve: Ernst & Young
Five key areas must be addressed now
"Publicly accountable enterprises that follow the calendar year need to get ready to provide IFRS comparables as of
In particular, Ernst & Young suggests Canadian reporting issuers use the last weeks of 2009 to take a serious look at the areas below:
1. Designated hedging relationships: First-time adopters must measure all derivatives at fair value on the transition date. To continue to qualify for hedge accounting, hedging relationships must be designated, and their effectiveness documented (all in accordance with IFRS) on or before the IFRS transition date. But beware: certain hedge strategies don't qualify for hedge accounting under IFRS. 2. Designation of financial instruments: Entities can change the classification of financial instruments under IFRS. But the change must be made upon transition, otherwise it could appear to be influenced by hindsight. 3. New fair value and other estimates required under IFRS: Under IFRS, some entities may need to prepare fair value or other estimates not currently required. These new estimates should be developed at or near the transition date to avoid the use of hindsight. At a minimum, companies should collect all the inputs needed for valuation models as at December 31, 2009. This makes it easier to show the opening fair values are current as of January 1, 2010. 4. Actuarial valuation reports prepared as at the transition date: A full actuarial valuation is usually required at or around the date of transition to IFRS, depending on the facts and circumstances. Businesses should review the options to determine what type of actuarial assistance will be required, and as of which dates. Combining these transition tasks with the actuary's routine reporting under Canadian GAAP can achieve worthwhile efficiencies. 5. Impairment testing: Under IFRS, goodwill must be tested for impairment at the transition date based upon its fair value at that date. This process can be complex, requiring considerable time and effort. Advance planning can make the process more efficient by co- ordinating the assessment at the transition date with annual review for goodwill impairment.
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For further information: To learn more about these or other aspects of IFRS, please contact: Amanda Olliver, [email protected], (416) 943-7121; Brooke McLachlan, [email protected], (604) 899-3597; Marie-Ève Graniero, [email protected], (514) 874-4313
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