Cost Concerns Push Back IFRS Planning: Survey

Terri Goveia | June 29, 2009

Canadian companies have more pressing priorities than converting to IFRS standards, they reveal in a recent survey.

Though the January 2011 deadline for IFRS conversion isn’t too far away, few organizations are in the thick of a transition, and some haven’t even begun planning the switch, reveals the survey, a joint effort by the Canadian Financial Executives Research Foundation and PriceWaterhouseCoopers. Both private organizations (54%) and public companies (41%) acknowledge delays in getting IFRS on track, putting other, higher priorities first.

Public companies are well ahead of their private counterparts in the conversion process—80% says they are just shy of the 50% mark, while 51% of private companies acknowledge being stuck in the 0 to 20% range.

Though all 256 survey respondents said they would adopt IFRS, several said they weren’t tied to the 2011 deadline. Over 12% of the public companies and one in five private organizations said they haven’t made any IFRS diagnostic assessments yet.

What’s the holdup? Companies are trying to keep costs down, for the most part, and with little external conversion help, their workers must shoulder the conversion responsibilities along with their regular work, according to Diane Kazarian, PwC Canada’s National IFRS Leader. The survey reveals that many respondents had a conversion team of only two people.

While roughly 60% of both public and private respondents expressed concern over the conversion’s impact on asset valuation, many hadn’t considered the conversion’s wider implications: 55% of public companies said they hadn’t assessed the systems implications of the switch. Most public companies (82%) had begun training finance staffers on IFRS, though only 41% had started to educate their boards, evidence that “many organizations 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,” Ramona Dzinkowski, executive director of the Canadian Financial Executives’ Research Foundation, noted in a statement accompanying the findings.

But despite the lags and delays, the respondents remained confident that they would meet key milestones—for instance, 76% said they would run parallel IRFS and Canadian GAAP financial reporting systems in 2010, though the varied levels of preparedness begs the question: “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?” Kazarian said in the statement. “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,” she said.