| August 2009 |
Bridging the GAAP: Is your company properly staffed to handle IFRS?
A perspective from Naveed Manzoor, CA, CIRP
SVP & CFO, Lannick Group of Companies
By now you’re probably aware that, beginning in 2011, all publicly accountable enterprises will be required to use International Financial Reporting Standards (IFRS). In order to prepare for the transition from Generally Accepted Accounting Principles (GAAP), there are a number of changes you may want to consider making in 2010, especially when it comes to having the expertise in place to succeed.
Some experts have suggested that the conversion to IFRS is the most complex, most extensive change ever to Canadian financial reporting; others say that there will be few implementation issues and that conversion costs will be minimal. Still others caution that the conversion will have implications not just for accounting but also for technology systems, internal controls, compensation planning, treasury, budgeting, MD&A reporting, and more. Complicating the situation is the fact that IFRS is new to North America and familiarity with the conversion ranges from slim to none.
Based on our experience in assisting companies through the last major accounting change in Canada — Sarbanes-Oxley — we expect that the impact will be somewhere in between. However, our experience also suggests that many companies will leave the conversion or even the assessment of the conversion impact to the last minute and will underestimate the time and resources required to convert. So what can you do to ensure you have the expertise in place to prepare for IFRS conversion? Here are the key skills to look for in conversion candidates:
Technical skills. There is no denying that IFRS can be complex. The standards are new and Canadian expertise and familiarity are limited. Applying new standards will call for interpretation and judgment. Individuals assigned to your IFRS project should have IFRS-specific technical training and if they have foreign training and experience to go along with it (IFRS has already been implemented in more than 100 countries outside North America), all the better. Sources of training include but are not limited to those available through private educators and contract professionals, CA firms, and national or provincial accounting institutes, including the Canadian Institute of Chartered Accounts (CICA) and CMA Canada. The CICA offers a free e-learning course called Introduction to IFRS – Implications for Canadian Business that is available to anyone through their online Learning Portal. And their dedicated IFRS web site offers multiple resources, including access to a self-study program available in conjunction with the Institute of Chartered Accountants of England and Wales (ICAEW). CMA Canada also offers a wealth of information through their online IFRA resource centre. Another viable option is to enlist your key internal accounting and audit staff to conduct or arrange appropriate training for members of your IFRS project team.
Experience with accounting policy. The skills required to assist with an IFRS conversion are very different from those required for other recent changes, such as Sarbanes-Oxley. Given that IFRS requires so much judgment and interpretation, an IFRS conversion is better suited to individuals who have experience in developing and implementing accounting policy.
A thorough understanding of back-office and general-ledger systems. A key learning from IFRS conversion in other parts of the world has been that IFRS changes were often not fully embedded in back offices and general ledger systems. As a result, stand-alone manual workarounds were created. Securing individuals who have a good understanding of systems will minimize the pain of your IFRS conversion and reduce the need for manual workarounds.
Experience with project management and execution. Strong project management and execution skills are extremely important for IFRS conversion. No matter how smoothly or how well planned your IFRS conversion project is, there are likely to be hiccups or “crunch times” where experience with project management and execution are crucial. It’s essential to have someone on board who knows how to identify key risks and can map controls or initiatives to mitigate them.
A strategic mindset. As noted earlier, experts suggest that IFRS could affect areas other than just accounting policy. As such, maintaining a “helicopter view” of your organization will help you see the wider impact of IFRS conversion and make adjustments in other areas of your business if needed.
Finally, as with any large and complex project, IFRS conversion is likely to require a disproportionate amount of management attention and put a strain on existing internal resources, both senior and junior. Remember not to lose focus on your existing business and operations, and ensure that you have sufficient human resources in place to continue conducting your business effectively while the conversion takes place. Like most challenges, the key to success will lie in being prepared and ensuring you have the right resources in place to help. Good luck!
Are you ready for IFRS? We can help! For a professional perspective on the options available, including a
direct line to talent with foreign IFRS experience, contact your senior Lannick associate or
.