The Adoption of IFRS – A Global Financial Reporting Standard
November 27th, 2008
Issuers listed on a North American stock exchange who are thinking of adopting International Financial Reporting Standards should read this update:
As of March 4, 2008, the SEC is allowing foreign private issuers filing on a Form 20-F to submit financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) that are issued by the International Accounting Standards Board (“IASB”) without a reconciliation to US GAAP. The amendments to Form 20-F and Regulation S-X apply to financial statements for fiscal years ending after November 15, 2007, and to interim periods within that fiscal year that are filed on or after March 4, 2008.
Canadian regulators (through the Canadian Securities Administrators, “CSA”) , jointly with the Accounting Standards Board, plan to implement IFRS by January 1, 2011, at which time IFRS will become mandatory in Canada for fiscal periods ending after January 1, 2011. This will benefit Canadian registrants required to file with the SEC by allowing them to prepare a single set of financial statements without incurring the costs of reconciling between US and Canadian GAAP. The CSA is considering amending National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency to reference IFRS as an alternative to Canadian GAAP in the CICA Handbook, the reference manual governing Canadian GAAP used by Canadian auditors.
The CSA has not yet determined whether to accept the use of IFRS by Canadian issuers filing in Canada before January 1, 2011.
Canadian registrants who are currently SEC registrants have the option of using US GAAP in their domestic filings in Canada, but are not currently permitted to file domestic filings using IFRS.
The CSA released a Concept Paper (CSA Concept Paper 52-402) on February 13, 2008 discussing a number of issues, including a weighing of the pros and cons of allowing early adoption of IFRS by Canadian registrants prior to January 1, 2011. In Brief, the CSA stated that on balance it believes early adoption is favourable and the benefits (reduced compliance costs for some registrants and increased knowledge of IFRS by investors, regulators, issuers, auditors, educators, etc.) outweigh any negative implications (reduced comparability of financial statements; confusion on the part of investors caused by adoption a third permissible financial reporting standard until January 1, 2011; and lack of expertise in Canada on the part of accountants, executive officers, directors, auditors and regulators respecting IFRS)
The CSA has requested public input on the proposed amendments concerning IFRS, including early adoption prior to the proposed mandatory date of implementation currently set for January 1, 2011. More information can be found at the following link:
http://www.csa-acvm.ca/html_CSA/news/08_06_comment_IFRS.htm
Tags: accounting standards, amendment, CSA, Form 20-F, IASB, IFRS, Regulation S-X, regulators, SEC
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