The Investment Industry Regulatory Organization of Canada intends to require all of its firms to adopt International Financial Reporting Standards.
An IIROC notice issued Monday sets out the results of a survey of the IIROC membership conducted earlier this year. Based on that survey, IIROC staff are recommending that all dealers adopt IFRS for regulatory financial reporting, with a few exemptions from certain requirements where the regulatory value is likely outweighed by the cost of compliance.
The regulator notes that while all dealers are private companies, most of them will be required to adopt IFRS because they are “publicly accountable enterprises”. However, some firms, particularly introducing brokers, would not be required to make change. These firms do not meet the definition of a PAE because of their business models and the design of their back-office arrangements, which mean they are not custodians of customer monies or securities.
To assess the impact on the adoption of IFRS for all dealers, IIROC conducted a survey to solicit feedback from its members. The objective of the survey was to specifically identify changes due to IFRS that would require significant cost and effort.
As a result, IIROC staff recommend that all dealers adopt IFRS, but with exemptions in specific areas, which will be prescribed by the regulator. Exemptions are recommended in three areas: the requirement for detailed financial statement note disclosures; the requirement to produce comparative financial data for the first IFRS financial statements; and, from the requirement to value receivables and payables. In each case, it suggests that these disclosure requirements would provide minimal regulatory value, but impose significant compliance costs.
IIROC is seeking comments on the survey results and staff recommendations by September 14.
IE