Publications by IFRS Practice LLP partners

• What IFRS means for executives by Mark O'Connor, CMA and Jack Silverstone, BCL, LLB, Financial Post, January 12, 2010

Our retreats, seminars and workshops are tailored to small and proactive groups of senior executives and corporate lawyers who share similar professional interests. IFRS retreats are conducted at various cities, usually in partnership with the leading industrial and government associations. We also consider individual requests of corporations and government organizations to conduct such retreates for their executive teams. The group rates might apply.

To request the schedule of our forthcoming retreats or to organize a workshop at your company, fill the Registration Form.

International Financial Reporting Standards (IFRS) are coming to Canada for all 'publicly accountable enterprises' (Starting in FY2010 and in full swing from FY2011). In the US, numerous multinationals, publicly listed and private corporations are in the process of its adoption.

IFRS introduction represents a significant change in the accountability and responsibilities of all C-level executives and the increase in corporate financial transparency. Some experts believe that certain IFRS regulatory requirements might even be more demanding than that of the high impact Sarbanes-Oxley Act in the United States. Others stress that under IFRS, legal liability might shift from accountants to the CEO and other corporate non-financial executives. Almost all agree that with the IFRS takeover from Generally Accepted Accounting Principles (GAAP), many a senior executive might be facing unexpected and unpleasant surprises.

Already operational in the EU and Australia, IFRS increases the volume and complexity of financial disclosures compared to old GAAP, demanding the use of intricate risk estimation models and more accurate forecasts. It would likely affect the ways corporate stakeholders perceive how C-level executives discharge their responsibilities.

Under IFRS, top corporate executives and board members become liable for inadequate disclosure, misrepresentations contained in disclosure documents and failure to disclose material changes in a timely fashion. Overall, IFRS introduction means both better protection of stakeholder rights but also increased corporate reporting and legal hurdles.

IFRS Practice LLP/ARRAY Development have jointly developed The Executive Retreat on the Effect of IFRS on Personal Accountability of Non-Financial Executives (NFEs) in response to the requests from our executive clients concerned with their ongoing preparedness in addressing the soon-to-be-in-effect IFRS requirements. Our IFRS Executive Retreat provides meaningful guidance to the CEOs, other C-level executives, board directors and counsel of affected organizations (i.e., publicly listed companies, corporations that plan to raise funds in the capital markets or that are actively looking for investors outside of the North America, venture capital firms, government business enterprises and Crown corporations, financial institutions, pension plans and brokers holding assets in the fiduciary capacity for broad group of outsiders) on the critical issues concerning them as a result of IFRS introduction.

Executive Retreat participants will examine directors' and NFEs' business challenges and their new accountability/legal liability obligations that are being triggered by the introduction of IFRS. Our review will also help to identify action areas that can have an immediate impact on your corporate effectiveness.

This is a unique chance to participate in the only IFRS seminar that is not targeted to accounting professionals but that deals exclusively with the ongoing challenges, obligations, responsibilities and liabilities of corporate directors, CEOs, and NFEs. Delivered by leading accounting, legal, IT business re-engineering and performance reporting consultants, it is expressed in clear language, free of specialized jargon. Additionally, seminar participants will have an opportunity to engage in further discussions with the presenters and other participants, raising and clarifying issues and corporate concerns.

Although it is branded as a 'financial' reporting framework, IFRS demands extra management reviews, professional judgments and formal signing of input statements by CEOs and other NFEs. Under IFRS, it is the enterprise management rather than the CFO that has the primary responsibility for presenting financial statements. In Crown Corporations, top corporate executives (esp. CEO and board members) are responsible for IFRS introduction.

It is especially critical for the CEO and other corporate Non-Financial Executives that IFRS stipulates much greater detail and volume of financial statement disclosures than does GAAP, making extensive use of cost/asset and revenue details, estimates, valuations, probabilities and assumptions. Other applicable regulations are in effect enhanced by IFRS. In addition to financial indicators, changes in the financial statement's line items are also likely to affect cash flow, dividend policies, incentive arrangements, executive compensation, remuneration, bonuses and profit sharing.

IFRS impacts NFEs' responsibilities far beyond the conventional financial statements framework. From an operational and strategic perspective, CEOs and other top executives are expected under IFRS to articulate corporate plans, tactics, expected performance and risk threats. Boards of directors are required to approve IFRS-defined business programs, while providing strategic input and guidance to executive management before the IFRS tasks have been completed.

What could at first glance seem like a small accounting difference when converting from GAAP to IFRS might have significant impact on the company's bottom line. IFRS might impose the renegotiation of critical contracts (loan agreements, credit line arrangements, executive compensation) and dedication of significant effort to investor/external stakeholder relations.

IFRS obliges corporate executives and boards to regularly review and certify, without reservations, financial input information for all substantive financial and risk data (such as compensation of key management), not just the output financial statements as in the past.

With its stress on 'granular accountability' and better informed shareholders, IFRS requires an increase in the attention of top corporate executives and corporate counsel, management boards and external stakeholders to critical corporate governance steps. Better informed investors demand much higher accountability from directors and executives, opening doors to the new challenges and disputes. Under the pressure of their stakeholders, top corporate executives and board members might find to their surprise (and sometimes years later), that they are personally accountable for certain past financial statement certification.

Members of the board of directors, facing the heightened expectations of corporate stakeholders, might more forcefully insist on radical improvement in the effectiveness of corporate management and accounting information systems. Gaps discovered in collecting and certifying of IFRS information could trigger the need for corporate investment in reengineering business processes in order to improve performance and reduce risk. New more reliable process controls should be defined and implemented.

Alongside IFRS, many countries are instituting the electronic tagging of statements using XBRL (eXtensible Business Reporting Language) and placing financial statements on the Internet. XBRL greatly simplifies computer processing of previously obscure details in financial and performance statements stipulated by the regulatory bodies such as the SEC. It allows a much more precise indexing and retrieval of particular disclosures even if the wording is ambiguous.

Unlike GAAP, IFRS encourages presentation of additional information relevant to understanding of financial performance. Such non-GAAP/IFRS disclosures might also affect the legal liability of directors and auditors. Due to IFRS's volatile financial reporting principles, the boards might question the adequacy of liability insurance for the directors, corporate officers and internal auditors.

As public sector IFRS regulations are mainly derived from the private sector standards, their exact applicability and enforceability is at present more uncertain. Still, it is to be expected that such uncertainty would not likely absolve Crown corporation's top executives and board members from their own responsibilities imposed by the new regulatory framework. If anything, it might oblige them to err on the side of the caution -- by proactively following at least the intent of the standards.

Canadian public sector organizations covered by the IFRS might have to pay more attention to policy development, performance-based compensation, documentation management and external relations. They will also be more likely to approach government and parliament to redefine relevant legislation and regulatory environments, to better manage the ongoing relationships with their key stakeholders.

If you need help with convincing your top Non-Financial Executives in the strategic importance of IFRS conversion and the value of your own IFRS effort, suggest to them participation at our seminar.

Better still, come together with them. Financial executives are most welcomed -- and are likely to learn about some new and critical business and legal issues at our education sessions.

IFRS Practice LLP is a strategic consultancy focused on business sustainability and executive accountability. IFRS Practice LLP, ARRAY Development and their Canadian, US and global affiliates have excellent track records in helping leading financial institutions and government agencies to conceptualize, prototype and develop highly interactive and intelligent business solutions. Our objective is to support you in making your accounting, business, legal, policy and IT processes highly efficient, cost-effective and secure. Our partnership focuses on the four key areas of personal importance to our clients - business targets and sustainability, accountability and liability, policy/compliance and executive compensation.

Our workshop presenters and review leaders have a proven track record as the leading accounting, legal, IT and business re-engineering educators, consultants and agents for change. We are well familiar with the senior executives' business, professional and individual challenges. The Executive Retreat on the Effect of IFRS on Personal Accountability of Non-Financial Executives (NFEs) is built on the individualized collaborative approach that successfully addresses complex accountability issues and optimizes results. Our service model is simple -- combine practical experience and tier one capability; leverage robust industry knowledge, and provide high value advice and tangible results to busy corporate or government executives that are directly affected by the extensive change triggered by the ground-breaking introduction of the IFRS Framework.

• Chief Executive Officer
• Chief Legal Officer and legal advisors
• Members of the Board of Directors
• Corporate audit committees
• Chief Investment Officer
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• Chief Operating Officer, operation directors and business unit managers
• Chief Information Officer
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• Chief Auditor and internal auditors
• Human Resource directors

Our consultants have worked for a number of large and small financial institutions, as well as with government and high-tech organizations:

• Bank of Canada
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• Bank of Montreal
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• Caisse depot et placement du Quebec
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• IBM
• National Bank of Canada
• ScotiaBank
• University Bank
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• Alterna Savings
• Nortel Networks
• Bell Canada
• Treasury Board of Canada
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• Canada Post Corporation
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