Transitioning to International Financial Reporting Standards (IFRS) was costly for Canadian businesses, but research showed nearly half found the cost of preparing and auditing financial statements under IFRS in line with costs under Canadian GAAP.
Forty-seven per cent of respondents polled online by the research arm of Financial Executives International Canada reported comparable costs under IFRS and Canadian GAAP. Thirty-eight per cent reported higher costs under IFRS, and 15% said their companies experienced savings under IFRS, according to the survey report. Public companies in Canada formally adopted IFRS on January 1st 2011.
Based on the survey, which involved 105 Canadian businesses, and data from a round table of 14 financial statement preparers, transition costs ranged from about $10,000 at the smallest participating business, a municipal organisation with about $6 million in revenue, to $25.5 million at the largest participating business, a financial services company with about $30 billion in revenue.
Most respondents found transition costs were significant but manageable, and were broadly in line with what they had planned for. In addition, the survey found that:
- A majority (62%) of companies’ transition budgets were under $500,000.
- Nearly all respondents (96%) said transition required little or no change in their contracts, so renegotiation costs were minimal.
- Three-fourths of respondents said they did not have to make significant changes to their IT infrastructure because systems were more flexible than they had thought.
- Staff time was the largest transition expense item for all companies, regardless of size.
Medium-size companies were the most likely (36%) to report more trouble resolving differences between the two sets of accounting standards than anticipated. Thirty per cent of small companies and 14% of large companies reported more difficulty than expected resolving differences.
“One of the key things that stood out in the study was the varied experiences Canadian companies had when it came to the transition,” FEI Canada President and Chief Executive Michael Conway said in a news release. “Smaller companies saw the transition to IFRS as generally straightforward, with larger organisations managing the transition through early planning and devoting considerable resources to the task.”
Related CGMA Magazine content:
“IFRS Foundation Report Says US SEC’s Concerns Can Be Overcome”: A report released by the IFRS Foundation staff examines the concerns expressed by the US Securities and Exchange Commission (SEC) staff about IFRS adoption in a report in July.
“SEC Official: ‘Change Fatigue’ a Barrier to IFRS in US”: The first questioner SEC Chief Accountant Paul Beswick faced said the Egyptians built the pyramids more quickly than the SEC has decided on IFRS.
“Survey Helps CFOs Compare and Assess Their Finance Functions”: As a CFO, would you like to know how your peers feel about IFRS or what parts of the finance and accounting functions they outsource? The research report Benchmarking the Finance Function 2012 has some answers.