Spring 2010 issue of Horizons

Raise Your Expectations CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

Under the proposed timeline, accelerated filers will be required to report comparative financial statements under IFRS for years ending December 15, 2015 (note that the date for adoption for large accelerated filers will be December 15, 2014, and for non-accelerated filers will be December 15, 2016):

When planning for IFRS, companies should consider how IFRS will affect their people, processes, and technology.

People The impact on people will be at different levels. Management and the board of directors must gain a level of understanding of IFRS to effectively oversee the operations of the organization and understand the financial reports and data presented. Employees in the financial and reporting area will need to learn the new standards and use them to account for the organization’s business transactions. Operational management will need to understand how IFRS impacts key performance indicators, management reports and compensation structure, if based on financial performance. To understand IFRS and how it differs from U.S. GAAP, employees must attend training to learn how the new standards must be applied in their organization. External training providers can cost between $1,000 and $1,500 per employee per day. In addition to training employees on IFRS, a project management team and a steering committee should be formed to design a plan for implementing IFRS and oversee the implementation. The project management team must be educated in IFRS, have a strong understanding of the underlying processes and internal controls, and understand the technology and applications supporting those processes. Processes Business processes will be substantially affected by the switch to IFRS. While convergence between IFRS and U.S.-based GAAP continues, multiple accounting policies will still need to be changed to conform to IFRS. These policies include: classifications between equity and liabilities, recognition of contingencies, fixed asset depreciation, goodwill impairment, and recognition of revenue, to name only a few. Procedures and processes may need to be re-engineered to ensure they provide the correct data.

2008

2010

2011

2015

11/08 PROPOSED ROADMAP

EVALUATION AND ASSESSMENT OF MILESTONES

RULEMAKING & ADOPTION DECISION

MANDATORY ADOPTION

In order to meet the 2015 deadline, companies in the accelerated filer group will need to develop a plan for IFRS conversion next year and ramp up the efforts for transition in 2011 and 2012:

2010

2011 & 2012

2013

2015

TRANSITION PERIOD

OPENING IFRS BALANCE SHEET

MANDATORY ADOPTION

PLANNING

Once IFRS is adopted, the SEC also will require comparative financial statements to be presented for the two proceeding years. As a result, some companies may have to maintain two sets of accounting books: one based on IFRS principles and one based on U.S. GAAP. For accelerated filers, to begin recording these transactions in 2013, the company’s IFRS-based accounting system must be implemented, tested and deemed effective by the end of 2012. Companies must start planning now to accomplish these goals.

10 u spring 2010 issue