IFRS: ARE YOU THERE YET? - DICO · 2011-05-20 · IFRS Impacts to Date 107 institutions reporting Adjjqustment required - 62 NO adjustments required - 45 Total Adjustments required

IFRS ARE YOU THERE YET?IFRS: ARE YOU THERE YET?PRESENTED BY DELOITTEPRESENTED BY DELOITTE

PRESENTER:

LORAINE MCINTOSHLORAINE MCINTOSHCREDIT UNION SECTOR LEADER

FACILITATED BY DICOTHURSDAY, MAY 19, 2011

Introduction

IFRS Impacts to Date- DICO

22

IFRS Impacts to Date

107 institutions reporting

Adjustment required - 62j q

NO adjustments required - 45

Total Adjustments required - $60 million

Total Impact on Capital – 0 25% Total Impact on Capital – 0.25%

33

IFRS Impacts

Loan Allowances:

Minimal change reportedg p

Employee Benefits: Largest Impact

Number of institutions - 32

Total Impact on Capital - 0.18%Total Impact on Capital 0.18%

Adjustments required - $42 million

44

IFRS: Are You There Yet?

DICO / SOAD WebinarDICO / SOAD WebinarMay 19, 2011

Today’s Gameplan

1) Quick Refresher Key Requirements Challenges and Support Available Key Requirements, Challenges and Support Available

2) Project Health Check Q ti Y B d Sh ld b A ki Questions Your Board Should be Asking

3) Lessons Learned Preparing for the Next Wave

6 IFRS: Are You There Yet? DICO / SOAD Webinar May 19, 2011

Objectives

To provide:

• A quick refresher on “the Basics”A quick refresher on the Basics

• A perspective on where you should be with respect to your IFRS journey and the obstacles / challenges you are likely to facethe obstacles / challenges you are likely to face

• Food for thought with respect to steps required to “live in an IFRS world”

• A reminder with respect to tools and reference materials available to help you along the way

• Thoughts on what you should be doing to prepare for “the next wave”

• A forum for discussion lots of time for questions


Q i k R f hQuick Refresher


The Road to IFRS ……

Next Wave(s) Coming …

Systems / Process Changes

gLiving IFRS

Jan 1/11

Opening B/S

Process Changes2010/11 Quarter

Conversionp g

Mock F/SJan 1/10

Planning

Choices

DiagnosticPlanning

Where are you on this journey?9 IFRS: Are You There Yet? DICO / SOAD Webinar May 19, 2011

What is Required The Basics

• Jan 1, 2011 = IFRS is now the language of financial reporting!Off calendar year-end credit unions have a bit more time

• Jan 1, 2010 = Transition date or Opening balance sheet dateRequired to recast all balances on an IFRS basisCertain limited grandfathering electionsg gBalancing entry goes to Retained Earnings (for the most part)

• 2010 Activity / Transactions must be accounted for on both a CGAAP and2010 Activity / Transactions must be accounted for on both a CGAAP and IFRS basis

• Transition disclosures are extensiveDetailed reconciliations from CGAAP to IFRS required with explanations for all key adjustmentsall key adjustments• B/S – Jan 1, 2010; Dec 31, 2010; 2010 Interims• I/S – 2010 annual; 2010 interims (period and year-to-date)


Regulatory Guidance has been Issued

• Transition adjustments to Retained Earnings will impact regulatory capital in most casesmost cases

Pre March 31, 2010 CMHC Program transactions grandfatheredOwn-use property FV gains / losses are excludedApplications to phase in impact to be considered on a case b case basisApplications to phase-in impact to be considered on a case-by-case basis

• Opening Retained Earnings reconciliation required to be filed with DICO

• 2011 monthly reporting required to be on an IFRS basis

• Securitizing credit unions given ability to early adopt amendments to IFRS 1Allows choice as to whether or not to grandfather pre-transition transactions


Key Hot SpotsImpact Implementation

Effort

Loan Loss Provisioning Securitization Securitization Central Share Investments Member Share Classification / Patronage Allocations Property – own use

-- investment Business Combinations Hedging Employee Benefits Financial Statements & Note Disclosures

Significant Moderate Limited


The National IFRS Readiness Toolkit

K l d b ildi di ti d i l t ti t l t t k• Knowledge building, diagnostic and implementation tools to take you from start to finish (www.cucentral.ca)

Implementation Planning Tools

Diagnostic Toolkit:

• User Guide

• Toolkit• Workshop

Knowledge ToolsFinancial

• Workbook

• Rationale for Impact

• Awareness / Technical Webinars

• Board Package• Communiqués

Statements & Disclosures

• Disclosure Toolkits

• Standard Summary

Technical Hot Spot Tools

• 7 Toolkits

• Communiqués• FAQ Database

Toolkits

7 Toolkits• Webinars

13 IFRS Implementation Planning Workshop

P j H l h Ch kProject Health Check


General Observations

• Extent of impact varies widely from one credit union to anotherTransition adjustments concentrated in a few areas and are dependent on choices madeFor most, impact has been relatively minor

• Moving from diagnostic to implementation has been a challenge for manyGetting to the numbers takes longer than expectedGetting the documentation in place to support “no entry required” takes time

• Effort required to prepare financial statement disclosures, particularly those relating to transition, are significant

Opportunities to work together?Oppo tu t es to o toget e

• Activities to date have tended to be Finance centric (“bolt on” solutions)

• Few looking for / capitalizing on opportunities

• Lots of information available trick is not to get “lost in the forest”• Lots of information available trick is not to get lost in the forest


Areas Where the Board Should be Asking Questions

1) Project Status Are we where we should be?

2) Have we made the right Decisions / Choices?2) Have we made the right Decisions / Choices?

3) Do we understand the Impact of transition?

4) Sustainability Are we ready and able to “Live” in an IFRS World?

5) H d l t d l ith th N t W f h ?5) How do we plan to deal with the Next Wave of changes?


Project Status

• Have we completed our opening B/S and filed required reconciliation with DICO?

• Have we completed the conversion of our Dec 2010 B/S? Can’t prepare 2011 monthly F/S without thisDefines starting regulatory capital position for 2011Defines starting regulatory capital position for 2011

• Have our auditors reviewed and signed-off on O r diagnostic concl sions?Our diagnostic conclusions?Our opening B/S entries?

• Have we completed / when will we completeConversion of our 2010 I/S activity?Changes to our financial statements and notes?


Decisions / Choices Made

• What choices did we make on transition?Are our choices consistent with our peers?Did we assess pros / cons of each choice available?Did we assess pros / cons of each choice available?What decision criteria did we use in choosing?

• What is / will be the impact of the choices we made?• What is / will be the impact of the choices we made?On transitionOngoing (volatility, income, effort)

• Where will the impact of these choices “show up” in our financial results?


Most Common Elections / Policy Choices Made

Transition OngoingProperty (move to FV) – own use

-- investment

Very Few

Some

Cost

Cost

Financial instrument re-designation Very Few --

Employee Benefits reset actuarial gains / Most Corridor orEmployee Benefits – reset actuarial gains / losses to zero

Most Corridor or OCI

Business Combinations All --Business Combinations All

Leases (EIC 150) All --

Key decision criteria for most Minimize changeKey decision criteria for most Minimize change


Much More than “Just Accounting”

A ti

Accounting / Financial

Systems &Controls

Compensation

Accounting Resources/Capabilities

Statement Impact

CompensationPlans / other agreements

Treasury and financial risk

management

IFRSConversion

-

Regulatory Capital Impact

IFRSConversion

-

MD&A and performance

metrics -

Budgets and Forecasts

-

Mergers & Acquisitions

ForecastsBoard & Member

Communication

Deferred Taxes & Current Tax

Provision


Understanding the Impact (Large or Small)

• Is there any impact on our regulatory capital position?Should we be requesting a “phase-in”?Do we expect increased volatility risk?Do we expect increased volatility risk?How will we remedy any adverse impact?

• Do we understand where the impact will “show up” in our financial results?• Do we understand where the impact will show up in our financial results?Can we easily isolate the impact?

H d t d Pl d F t t fl t IFRS h ?• Have we updated our Plan and Forecast to reflect IFRS changes?

• Have we assessed whether any of our key performance metrics will be impacted?

Will we be able to distinguish conversion impacts from performance changes?

• Have we reviewed our agreements to identify any formula / metrics that might be impacted?

Bonus plans


Sustainability

• Do our systems generate and capture all information required for IFRS accounting and disclosure purposes?

If not, is there any easy system fix or will we manage outside the system?If not, is there any easy system fix or will we manage outside the system?Do we have appropriate controls over our spreadsheet solutions?

• Do our people (both within and outside finance) understand what they need to• Do our people (both within and outside finance) understand what they need to do differently in the new world?

Have we updated our policies / procedures documentationHave we updated models / templates where required?Have we updated models / templates where required?Have we provided necessary training?

D h i l t id tif t ti / d t t th t• Do we have a process in place to identify new transactions / product types that required analysis for IFRS differences?

D d i f ti f t l i li t i f d?• Do we need information from external specialists going forward?Actuary (employee benefit plans)Valuations


P i f h NPreparing for the Next WaveWave


Preparing for the Next Wave

• IASB has a number of significant amendment projects underwayTarget implementation 2013 for many of them

• Expect impact of these amendments to be much greater than the first wave

• Questions to Ask• Questions to AskDo we have someone responsible for monitoring developments with respect to the changes in IFRS requirements?

Expect National Project to start tracking soonExpect National Project to start tracking soonDo we know which of the amendment projects are likely to have the greatest impact for us?

When will we develop our project plan for the next wave?

What did we learn from the first wave conversion project?What did we learn from the first wave conversion project?Any changes required to project resources (number, skill sets, functional involvement)?Did we get the timing right?Did we get the timing right?Anything we would do differently in terms of approach?


The Road Ahead Significant Changes on the way for IFRS

Standard Final Q2 2011

H2 2011

Later Est.Effective

Date

Financial Instruments - Classification Issued 2013

Financial Instruments – Impairment IFRS 2013?

Hedging IFRS 2013?

Consolidation Issued 2013

FV Measurement 2013

Derecognition - DEFERRED Issued ?? ??

Financial Instruments with ?? ??Financial Instruments with characteristics of equity - DEFERRED

?? ??

Significant changes on the horizon for Financial Instruments


The Road Ahead Significant Changes on the way for IFRS

Standard Final Q2 2011

H2 2011

Later Est.Effective

Date

Leases IFRS ??

Revenue Recognition IFRS ??

Post employment benefits IFRS 2013

Joint Ventures Issued 2013

Financial Statement Presentation IFRS ??

Income Taxes – DEFERRED ?? ??

Liabilities DEFERRED ?? ??Liabilities - DEFERRED ?? ??

Need to continue monitoring these projects, including ED relating to Transition Datesto Transition Dates


Closing Comments What Have We Learned?

• It inevitably takes longer than expected to work through a change of this magnitude

Understanding / diagnostic effort is only 20% of the battle

• Effort is required to prove “no change is required”

• It is human nature to procrastinateCan get away with it as long as changes are minor

• Bolt on solutions work, but they can potentially lead to …Longer term inefficienciesIncreased risk of errorIncreased risk of error

• It is easy to get “lost in the details”E l l i / t h l f ff t h t ttEarly planning / engagement can help focus your efforts on what matters


QuestionsQuestionsLoraine McIntosh (416) 601-6233Deloitte [email protected]

Documents

IFRS: ARE YOU THERE YET? - DICO · 2011-05-20 · IFRS Impacts to Date 107 institutions reporting Adjjqustment required - 62 NO adjustments required - 45 Total Adjustments required