The Office of the Superintendent of Financial Institutions (OSFI) has issued a notice concerning the adoption of International Financial Reporting Standards (IFRS) by federally regulated financial firms, noting that firms won’t be allowed to adopt the standards early, and that it will demand more disclosure on the issue.

OSFI notes that the Canadian Accounting Standards Board has confirmed the mandatory transition date to IFRS for publicly accountable enterprises for fiscal years beginning on or after Jan. 1, 2011. Also, the Canadian Securities Administrators issued a concept paper outlining the possibility of permitting early adoption of IFRS for financial years beginning on or after Jan. 1, 2009.

In a letter to its firms, OSFI says that all federally regulated financial institutions (FRFIs) are considered publicly accountable enterprises and must adopt IFRS as required by the AcSB’s plan.

However, it notes that FRFIs will not be allowed to adopt the standards early. OSFI says it recognizes that some FRFIs may already prepare financial statements in accordance with IFRS because they are subsidiaries or branches of entities based in a foreign jurisdiction that requires compliance with IFRS. However, OSFI says it could not allow any FRFIs to adopt IFRS before January 1, 2011 because of significant impacts to various areas of its organization.

“We assess risks to financial institutions both individually and collectively. If early adoption were allowed, we would not have a comparable basis for our industry-wide risk assessment over the next three years prior to the adoption of IFRS by all FRFIs,” it explains. “In addition, OSFI has just begun to study the impact of IFRS adoption on our policies and systems and any changes that have to be made will require some time.”

Additionally, OSFI expects all FRFIs to submit a progress review semi-annually commencing with the 2008 fiscal year-end. The progress review will include a discussion on the institution’s assessment of its readiness to adopt IFRS in 2011, any challenges it envisions and steps it plans to take on resolving these issues.

OSFI also notes that, in addition to its concept paper, the CSA is expected to issue disclosure requirements relating to the adoption of IFRS for filings leading up to the changeover date. It says that it also plans to issue a letter of its own after the CSA’s publication on disclosures, requiring all FRFIs who are not subject to the CSA disclosure requirements to make the same disclosures directly to OSFI.

“While the CSA requirements only apply to FRFIs subject to securities regulation, OSFI expects all FRFIs to apply the CSA disclosure requirements in their financial statements that are provided to OSFI,” it says. “We believe these disclosures are important information that all FRFIs need to provide to OSFI. In addition, upon review of the CSA disclosure requirements, OSFI may ask for additional disclosures for regulatory reporting purposes.”