News from the profession

A summary of current CICA projects and initiatives

CICA helps ease the transition to international standards

With the transition to International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISAs) underway, the CA profession is launching a comprehensive package of services and support to help members and business get ready for the changeover.

Enterprises must start preparing now for what is clearly the biggest financial reporting challenge to confront Canadian businesses in decades. The move to IFRS will affect all aspects of business, including how publicly traded companies tell their financial story to the wider community. This changeover is slated for 2011 and will directly affect the preparers, auditors and users of financial statements for all publicly accountable enterprises — about 4,500 in Canada.

The changeover to ISAs is on a shorter timetable. Currently targeted for the end of 2008, this changeover will affect the audits of all enterprises regardless of size.

Both these moves will require the conversion of our existing Canadian GAAP and GAAS to international standards and CAs are now firmly on the front line in helping enterprises prepare for the changeover.

“The CICA is committed to doing all we can to ensure that the transition to IFRS and ISAs is as seamless as possible,” explains Ron Salole, CICA’s vice-president of Standards.

“The CICA is recognized nationally and internationally both as a leader in standard-setting and as a valued participant in the international standard-setting process. We intend to use our expertise in providing the resources to help Canadian business make the move to IFRS and ISAs.”

A task force is coordinating activities across the profession, and both the CICA and the provincial institutes/ordre are set to provide a full range of information and learning opportunities to support members and the broader financial community.

Resources include seminars, courses and other training tools. Just launched for this fall is a series of new courses that blends Web-based study with in-class training. Other services are also being developed, including the Transition to International Standards website that will be available through the CICA and the provincial institutes/ordre and will be the main resource centre for transition information, activities and support.

Preparing for the transition is the crucial first step and the CICA is committed to providing support and guidance on a timely basis throughout the transition period and beyond.

To minimize the challenges for those directly affected by the changeover to IFRS, the AcSB will adopt IFRS for publicly accountable enterprises over a four-year period. At this point, the anticipated date of changeover is January 1, 2011, for enterprises with calendar year-ends. The final decision on the transition date will be announced by March 31, 2008. This will follow a detailed progress review by the AcSB based on an assessment of new information and the degree of preparedness by Canada’s publicly accountable entities.

Standards overload is a real challenge today and small-cap companies with limited in-house financial resources may face challenges in mastering the new standards. The CICA is committed to helping these companies by providing the tools to understand the implications of the new standards and implement them. The four-year implementation plan has been designed to minimize disruption while allowing adequate time for education and training.

The CICA and the provincial institutes/ordre will provide similar resources to help members understand the implications of the changeover to ISAs on their current audits. Although these changes may not be as significant as IFRS, enterprises and their auditors need to inform themselves over the next year of the nature, timing and potential impact of the new standards.

These transitions to international standards raise the question of reporting for private companies — an issue the CICA is exploring through provincial information sessions. Information on the financial reporting strategy for private enterprises will also be found on the Transition to International Standards website.

The long-term benefits of these changes will far outweigh the short-term challenges. IFRS and ISAs will create a new language of international financial reporting. This language will bring greater clarity to financial reporting on a global basis by ensuring businesses around the world tell their financial stories in a consistent, directly comparable way.

This is an historic time in standard setting. CAs and Canadian public companies are strong links in the transition chain so start preparing now.

Better disclosure for income trusts
Despite the federal government’s decision last October to tax the cash distributions of income trusts, many investors and advisers still see income trusts as a viable investment option for Canadians — as long as the fundamentals are strong.

The problem has been that wide variances in the way income trusts report “distributable cash” — a key measure of their financial performance and investment potential — has made it difficult for investors to make that assessment.

The CICA has taken a leading role in resolving this issue and helping investors with new guidance on the reporting of distributable cash and other measures by income trusts. Standardized Distributable Cash in Income Trusts and Other Flow-Through Entities, published July 2007, incorporates comments by preparers and the investor community on draft guidance issued last November.

The focus of the guidance is to support income trusts in providing clear, consistent information to answer two specific questions: where did the cash come from that will fund distributions and has the entity’s productive capacity been maintained? The guidance, which was commended by Standard and Poor’s Canada, addresses the need for comparability and consistency in the reporting of distributable cash. It is important for all the retirees and other Canadians who will continue to own or acquire trust units over the coming years.