IFRS Transition Advisory Services

Conversion Planning & Support

The impact in adopting International Financial Reporting Standards (IFRSs) goes beyond the choice of a uniform accounting language, designed to bring greater clarity to financial reporting, as well as, comparability and consistency on a global scale.

Required changes in transaction measurement and account disclosure means transitioning to IFRS will have an impact on your IT infrastructure service capabilities, the relevant financial reporting applications and the underlying business processes that support financial reporting. Moreover, the impact of IFRS on systems and processes will be as a result of information requirements not being easily accessible from existing systems without significant modifications being required; changes to accounting estimates and non-routine calculations, accounting structures changing because of new accounting policy adoption, and management reporting needs being impacted for consolidation and reporting disclosure changes.

To-date, organizations have relied on Sunera professionals to assist them in improving the design and operational effectiveness of their internal controls over financial reporting. Similarly, we view the transition to IFRS as an opportunity to make improvements along a number of related fronts:

• Financial accounting and reporting systems will evolve to where both internal (ie. senior and operational management) and external (Board of Directors and Investors) stakeholder information requirements can, and will, be met sufficiently;
• Training requirements for staff and management will need to be redefined, upon appreciating the skills and knowledge bases needed to generate and report new accounting information;
• Accounting policy choices will be made with a clearer understanding of the impact on key performance measurements and indicators, while ensuring alignment with industry peers and;
• Improved communication to relevant stakeholders should promote greater accountability and transparency

Our goal is simple – to enable your organization to adopt and communicate, with confidence and authority, all relevant changes and enhancements to systems, controls, processes and staff by way of a smooth transition to the new accounting standards.

Sunera professionals are available to assist management in a number of ways, including, but not limited to, the following:

1. Applying an initial diagnostic in order to identify Canadian/IFRS accounting differences, and thereby communicating key issues (via gap analysis) to management
2. Preparing new policies and procedures in order to satisfy a need for upgrading and achieving new skills at all levels
3. Preparing note disclosures prior to conversion, as well as, first time interim and annual financial statements
4. Assessing, measuring and communicating impacts to the business’s performance, by virtue of adoption of new standards, and the allowable choices within each
5. Prescribing business process, control and system changes as necessary in order to successfully transition to new operating practices
6. Identifying corporate governance changes resulting from IFRS adoption

IFRS Conversion Timelines in Canada

2008 -	Organizations should disclose their plans, by end of fiscal 2008, for convergence and what anticipated effects will arise with the change to IFRS, on its financial statements
2009 -	Organizations will be required to disclose a more detailed convergence plan, including quantification of anticipated effects, by end of fiscal 2009, effectively marking the beginning of transition date to IFRS
	Financial statements to be prepared under current, local GAAP
2010 -	Organizations are required to prepare 2010 comparative financial statements, compliant with IFRS, both quarterly, as well as for their annual report, in conjunction with 2011 financial information, filed in 2011
2011 -	Change over date effective January 1, 2011 for all publicly accountable enterprises
	IFRS compliant statements need to be prepared for Quarter 1, 2011, including comparatives for 2010

Assessing IFRS Impact - Beyond Financial Accounting & Reporting

IFRS will pose some unique challenges, as illustrated below, to key internal stakeholders, notably – Strategic Management, Finance & Accounting, Treasury, Human Resources and Information Technology.

Strategic Management – acquisition analyses requires IFRS-based data to drive asset based or earnings based due diligence modeling assumptions;

Finance & Accounting – accounting structures and account classifications will change, as will therefore, budgeting, forecasting, and key performance indicators; process and control documentation will require updates for SOx and ICOFR Certification;

Treasury – financing decisions can be impacted directly by IFRS choices on debt covenants and hedge accounting;

Human Resources – requiring resources over an 18-24 month period, in the face of competing priorities, will undeniably challenge staffing models; training plans will be required to identify all user groups whose needs vary wildly – from Finance staff impacted at the transaction and process level to senior management who need to understand and explore the “new” numbers; choice of IFRS will produce earnings volatility which impact performance bonus plans, while employee incentive plans could be impacted by changes to share-based payments

Special Consideration – Impact on IT Control Environment

IFRS transition will mean an impact on your current internal control over financial reporting and process documentation. Necessarily, control activities and risks of ‘what could go wrong’, may change, as a result of accounting and systems changes.

Consequently, there are key considerations surrounding choices over information technologies, and quality standards for data accessibility, availability and integrity. Questions to ask yourself:

• Does your current IT infrastructure permit ease of access to IFRS information?
• Can data be obtained by reconfiguring systems appropriately, and at what cost? Over what time frame?
• Can your systems generate, store, and report two sets of financial data, one for IFRS and one for current Canadian GAAP, as required one year prior to cut-over dates?
• How capable are your systems in producing error-free financial statements, under both reporting standards, and what are the implications on your IT environments that support application systems, enabling critical computer operations to satisfy relevant controls in support of significant accounts impacted by IFRS?

Timing and scale of impact as a result of IFRS means reviewing your IT strategy over the near term, identifying constraints in the form of competing strategic initiatives as it relates to existing IT systems projects, consideration given to planning of system changes, and making upgrades in light of the timing proposed by IFRS timelines.