What You Need To Know About International Financial Reporting Standards (IFRS)

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Canadian accounting professionals and students are preparing for what some industry leaders say is the largest change to face the accounting world in over 50 years: the conversion in accounting standards from Canadian-based Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS).

On February 1, 2008, the Canadian Accounting Standards Board (AcSB) concluded that all publicly accountable enterprises (those who provide financial statements to a securities commission or the public, with a few exceptions) are obliged to report in accordance with IFRS beginning in fiscal 2011.

Attention all CPEs: IRFS is here!

The choice to convert to international over American standards signalled a convergence between international markets as well as the need to generate more efficient global business transactions. IFRS promises to foster better decision-making in addition to increased comparability and cross-border consistency, and quality financial statements.

Canada is not the first nation to embark on this journey, as countries from the European Union, Australia and New Zealand are just a few of over 100 countries who have adopted this system.  At a first glance, the effects of the transition on Canadian companies appear to be minor; but a deeper analysis indicates that the change from rules-based to principles-based accounting will be accompanied by many challenges. And failing to abide by the mandate to convert could result in a de-listing from Canadian stock exchanges.

Strategic preparation is the key to success implementation

To prepare for the changeover, companies have assembled IFRS teams to analyze their specific situation, created company checklists to ensure proper training is administered to effected employees, and made alterations to their information technology and data collection systems. However, professionals cannot be confident about the change since the IFRS handbook continues to be revised and edited daily.

Many firms are still dealing with the repercussions of the 2008 credit crunch and last year’s recession, and as a result have yet to acknowledge these costly changes. Furthermore, IFRS has yet to be fully integrated into business schools and accounting designation study plans. This begs the question: if the individuals leading the transition are not confident of the impact this change will have on their firm, how can disseminators of the information – such as investors, stakeholders, analysts and business journalists – understand the shift?

Want to know more?

How IFRS will impact reported business performance, communication in the marketplace and key business drivers is currently unknown. Canadian accounting associations and major accounting firms have assembled a comprehensive list of resources for any professional or student in which they can refer. Here are some of my favourites:

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About the author

Christina Pellegrini has recently completed her BBA in marketing and organizational behaviour at the Schulich School of Business. She is studying for her Master's of Journalism at Ryerson University and looks forward to a career in business journalism. Follow her on Twitter at @chris_pelle.