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In part I of this blog series, I discussed the financial reporting impact of transitioning to IFRS for your company. In part II, I will discuss some additional impacts of converting your company’s financial statements to IFRS.
Now that the financial reporting changes have been addressed, is there anything else to worry about?
Yes! The financial information given to users is going to change, so you need to make sure that your financial reporting system is capable of capturing this information. This can involve minor changes and upgrades or a full overhaul of the financial reporting system. You need to keep in mind that the move to IFRS will likely impact all your employees in some way; therefore, their involvement is crucial.
Similarly, it is critical for your management team to understand and assess the areas that are impacted by financial information, in order to anticipate any potential issues. Some areas of your business that may depend on your financial information are: compensation plans for employees and executives, ratios and bank covenants, existing contracts, investor relations and communications to capital markets, and management reporting.
As you can see, there are many areas that will be affected by the change to IFRS – it doesn’t just end at financial reporting! The extent of the impact will be different for each company. It is up to you to determine the overall impact on your company and the areas to focus on.
Does the transition to IFRS expose my company to more risk?
As with any significant change, there is an increased risk to a company while it becomes familiar with the changes and addresses areas of weakness. Due to the potentially significant number of changes required when you transition from Canadian GAAP to IFRS and the complexities of IFRS, the potential for errors and misstatements increases. This is why it is so vital for your company to thoroughly assess the impacts of the change in accounting standards BEFORE they are in place and have a detailed plan of action.
A good foundation to this process is to implement a rigorous system of internal controls that will uphold reporting integrity and mitigate potential errors and misstatements
The move from current Canadian GAAP to IFRS will have a significant impact on your company, both from a financial and non-financial impact. Thoroughly planning for the transition, and spending the time and resources now will save you a lot of time and possible strain when it actually comes to implementing IFRS for the first time.
So let’s get to it!
For more information about adopting IFRS, please feel free to contact myself or your local MNP advisor.
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