International Financial Reporting StandardsPresentation to Cassels BrockBy Kenneth J.A. Vallillee, FCA

November 13 , 2008

Agenda

CPAB and its Mission

Why move to IFRS?

Business Impact of IFRS

Timeline for IFRS Adoption in Canada

CSA Developments/MD&A Disclosures

IFRS versus Canadian GAAP

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CPAB’s Mission

CPAB’s Mission is to contribute to public

confidence in the integrity of financial reporting

of public companies in Canada by promoting

high quality, independent auditing.

A major means to accomplish this is through the

inspection of audit files.

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CPAB Registrant Firms/RIs - June 30, 2008

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Why move to IFRS?

What are they? - Single set of globally-accepted, high quality accounting standards

- Used in 100+ countries

Rationale for Canada’s move to IFRS: - Improve access to global capital markets

- Improve comparability

- Move to principles-based standards and away from rule-based U.S. standards (costly / difficult to apply)

- More cost effective than maintaining Canadian GAAP

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What about the U.S.?

November 2007 – SEC announced proposal to allow foreign private issuers to file IFRS F/S without reconciliation to U.S. GAAP. This rule became effective March 4, 2008.

August 2008 – SEC issued proposed ‘roadmap’ for U.S. domestic filers to use IFRS beginning in 2014

Voluntary early adoption in 2009 for some large U.S. domestic registrants.

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Business Impact of IFRS

NOT just a technical accounting exercise

Areas impacted include:

- Financial accounting and reporting

- Key performance indicators/ Investor relations

- Legal

- Executive compensation

- Systems, policies, procedures and controls

- Treasury management

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IFRS Timeline

2006 2007 2008 2009 2010 2011

AcSB announces plan to replace Canadian GAAP with IFRS for publicly accountable entities (PAEs)

November 2007: The SEC agrees to allow foreign private issuers to file IFRS financial statements without US GAAP reconciliation

February 13, 2008: AcSB confirms IFRS changeover date as being January 1, 2011 for PAEs

January 1, 2010: First day of converted comparative balance sheet to comply with IFRS

January 1, 2011: Date of conversion for PAEs

AcSB to release new HB Q1 of 2009

June 27, 2008: CSA will consider allowing early adoption on case-by-case basis

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Publicly Accountable Enterprises (PAEs)

Defined as:

files, or is in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market; or

holds assets in a fiduciary capacity for a broad group of outsiders, such as a bank, insurance entity, securities broker/dealer, pension fund, mutual fund or investment banking entity.

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CSA Developments

June 2008 CSAs released Notice 52-321

RI may early adopt IFRS if they seek CSA approval

RI may continue to file U.S. GAAP F/S instead of Cdn GAAP subject to NI 52-107

Audit reports should state F/S have been prepared in accordance with IFRS-IASB

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CSA Developments: MD&A Disclosure of Changeover to IFRS

Incremental approach

Limited information three years and two years before the changeover date (2008 and 2009)

More detailed information in interim and annual periods of the year before changeover date (2010)

Meaningful quantified information to understand impact of IFRS on the financial statements

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CSA Developments: References

References

CSA Staff Notice 52-320, Disclosure of Expected Changes in Accounting Policies Relating to Changeover to International Financial Reporting Standards

CSA Staff Notice 52-321, Early adoption of International Financial Reporting Standards, use of US GAAP and reference to IFRS-IASB

CSA Concept Paper 52-402, Possible changes to securities rules relating to International Financial Reporting Standards

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IFRS versus Canadian GAAP Similarities

Comprehensive set of principles-based standards

Similar to Canadian GAAP in structure and form

Similar basic concepts and recognition/ measurement principles

Many standards in IFRS provide similar approach to Canadian GAAP

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IFRS versus Canadian GAAP Differences

Fewer bright lines and rules Some standards in IFRS differ considerably from

Canadian GAAP

Less interpretive guidance Applying IFRS requires more professional

judgement and results in greater volume of disclosures

Need to be careful- The devil is in the detail!

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IFRS versus Canadian GAAP- Areas with more significant differences

Impairment of assets

Components approach to depreciation

Securitizations

Consolidations, SPEs and JVs

Pension accounting

Accounting for tax uncertainties

Revenue recognition

(Note: The above is NOT a comprehensive list)

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IFRS - Specific Industries

Financial services

Insurance

Oil & Gas

Mining

Regulated industries

Real estate

Construction

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Questions

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