IFRS conversion still far off, say C-suite executives

The vast majority of Canada’s top financial executives don’t believe their staff is prepared for the 2011 conversion to International Financial Reporting Standards, according to a new survey co-developed by The Canadian Financial Executives Research Foundation and sponsor Ernst & Young. The survey, which is the second in a week to come to that conclusion (see “Few ready for IFRS changeover”,  notes that manufacturing, retail and distribution industries lag furthest behind in the conversion process.

Five hundred and ten financial executives across Canada responded to the survey across a range of business sectors, including mining, oil and gas, financial services and manufacturing. Utilities lead the charge in terms of industry preparedness; 90% said they had started assessing the impact of IFRS conversion. This is perhaps not surprising, since utilities will be one of the sectors most significantly affected by the transition to IFRS because of how utilities account for revenue.

While 2011 seems far away, according to the Accounting Standards Board, Canadian companies should be in a position to disclose their plans for convergence in 2008. “However,” says Ramona Dzinkowski, executive director of the Canadian Financial Executives Research Foundation, the research organization of FEI Canada, “our research shows that relatively few senior finance executives are aware of the differences between IFRS and Canadian GAAP, most have not briefed their audit committees, few have calculated the costs of conversion and a majority don’t yet know if their systems can handle the job.”

The report also noted large organizations are somewhat ahead of the curve in implementing IFRS conversion teams. But that might not be enough. "When you consider that Canadian public companies may need to disclose their plans for convergence in their financial reporting for 2008, it becomes clear that businesses need to start developing a sense of urgency about getting ready," says Rafik Greiss, partner and IFRS leader at Ernst & Young Canada. "Readiness will not happen in one fell swoop. Early planning will help companies better manage the pain and effort that will be involved in getting ready. The difference between success and failure will be a well-defined plan. An ad hoc approach won't cut it."

The conversion to IFRS by publicly accountable companies will have significant impacts not only on financial reporting, but broader business issues that extend across organizations and across industry sectors. CFERF’s report identifies best practices, current issues, and emerging challenges that companies of all sizes should be aware of in converting to IFRS.

“Two concerns remain dominant among senior financial executives; resource and time constraints, and the education and training required of staff who will be evaluating and implementing IFRS conversion,  says Michael Conway, chief executive and national president of FEI Canada.  “Financial executives do not know where to turn at the moment for training.”

Findings from the IFRS Readiness – Executive Research Report were released at the North American International Financial Reporting Standards Conference in Toronto last week. A copy of the full report can be found at http://www.feicanada.org/.