Ready? Or Not. The next phase of the International Financial Reporting Standards.
Unprecedented levels of change to have a major impact on virtually all industries; banking, telecommunications, construction and insurance companies among those affected the most.
Within the next five years, most Canadian companies across all sectors will be required to comply with the biggest accounting changes in almost a decade. Management teams, boards and audit committees will be held responsible for ensuring compliance with these unprecedented changes.
A new report, Ready? Or Not. The next phase of the International Financial Reporting Standards, outlines the major impacts of the changes made by the International Accounting Standards Board, an independent not-for-profit organization that regulates global accounting standards. While the long project timelines of the new International Financial Reporting Standards (IFRS) have caused many companies to postpone implementation deadlines, the current phase of IFRS implementation may be more challenging than the initial Canadian IFRS implementation in 2011. For this reason, it is critical for companies to start preparing now as they may be required to implement all four standards over a relatively short period of time.
“The current phase of IFRS implementation introduces an unprecedented level of change,” says Kristy Carscallen, Canadian Managing Partner, Audit, KPMG in Canada. “Each of these four standards will need to have a significant lead time in terms of implementation because they’re so complex and the changes required are fundamental. Regardless of resources, it’s going to be a long journey for companies to get where they need to be so everybody should be thinking about this now.”
New IFRS standards to have dramatically different implications and requirements across industries
The complexity of the four new standards means there is no way to truly know the impact on results without some form of analysis:
IFRS’ organizational impacts go well beyond financial reporting to form overall solution
While the impact on financial reporting as a result of the new standards is the most obvious of the relevant impacts, the report showcases five areas beyond financial reporting that should not be overlooked, including information technology, tax, HR and compensation, covenant renegotiation and investor relations.
Management, boards, audit committees ultimately responsible for overseeing and facilitating implementation and compliance as well as minimizing shareholder risk
To help executive management, boards and audit committees prepare for these significant implementations, the report provides a list of key questions that addresses everything from transition planning and resource allocation to key risk identification and ensuring the right people are at the project table to achieve success in this phase of implementation.
“The audit committee has a role to play in IFRS, starting with fully understanding the standards and asking hard questions of management about their impact. Do we have the right resources? How does the timeframe look? What are some of our peers doing?” says Todd Buchanan, National Leader, Accounting Advisory Services, KPMG in Canada. “The board needs to be on top of the process as well, as they will wear some of the pain if there’s a restatement after the fact. Start asking questions to management now; simply saying ‘this doesn’t apply to us’ isn’t sufficient.”
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative (“KPMG International”). KPMG member firms around the world have 189,000 professionals, in 152 countries.
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National Manager, Communications
KPMG in Canada