This week I had a conversation with a representative of a firm that provides consultants for SOX and IFRS projects. She explained that her firm had co-sponsored a survey in conjunction with the Canadian Institute of Chartered Accountants. What they found was disturbing. It seems that many Canadian publicly accountable companies have not yet begun to prepare for the January 1, 2011 deadline to change over to IFRS.
In conversations with individual accountants, I am discovering an initial reluctance to accept the change from rules-based GAAP to IFRS, which relies more on the accountant’s judgment. IFRS requires that financial statements be prepared using four basic principles: clarity, relevance, reliability, and comparability.
The principle of clarity requires that financial statements be easy to read and easy to understand. IFRS guidelines allow substantial discretion in deciding what information will be included and how it will be presented in the financial statements. The final decision rests with the accountant. IFRS simply requires that the result be a “true and fair” presentation of the company's financial position, its financial performance, and its cash flow. But this is not as easy as it sounds.
To achieve clarity accountants should choose simplicity over complexity. You have to remember that the readers of these financial statements might not necessarily have an accounting background. The financial position of the company should be clear to anyone reading the statements. This is the real challenge of IFRS.
If you would like to learn more about IFRS and what these new standards will mean for Canadian companies, sign up for one of
Mike Morley
’s classes. Mention that you were referred from TheGAAP.net. Visit our accounting events page to see what offers are available for Mike Morley seminars.
Mike Morley can be reached at www.mikemorley.com or phone: 416-275-1278 or email: mike@mikemorley.com or connect with Mike on LinkedIn.
About the author: Mike Morley is a Certified Public Accountant who holds the top credit designations in the U.S., Canada, and the U.K. Mike is the author of several books including “Sarbanes-Oxley Simplified,” which is an easy-to-read explanation of the requirements of the U.S. legislation that makes CEO's & CFO's personally responsible for the accuracy of their company's financial statements.
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