With the Jan. 1, 2011 deadline for Canadian companies’ transition to International Financial Reporting Standards (IFRS) looming on the horizon a new survey indicates that many companies will have a race to the finish line.

The survey was conducted by the Canadian Financial Executives Research Foundation (CFERF), the research institute of FEI Canada, and sponsored by PricewaterhouseCoopers (PwC).

Of the 256 respondents, 147 were publicly accountable enterprises, 51 were private companies and 28 were Crown corporations. The remaining 30 were not-for-profit, government or other types of organizations.

All respondents indicated that they would be adopting IFRS although not necessarily on January 1, 2011. Despite the fast-approaching conversion deadline, more than 12% of the 147 public companies surveyed and one in five of private companies had not yet taken the first step of starting their initial diagnostic assessments.

Several reasons for their delay were provided, with about 41% of public companies and 54% of private companies stating they had other higher priorities. About 80% of public companies remain short of the half way mark in their overall conversion process. Private companies surveyed were lagging behind public companies, with 51% between only 0 to 20% complete.

“Our survey shows that companies were more likely to put cost containment at the top of the list of activities rather than IFRS. However we’re not surprised by the status of conversion projects across the board,” says Diane Kazarian, PwC Canada’s national IFRS leader.

Further, with cost constraints on their minds, many companies have opted to only hire very limited resources to help with the conversion, the survey finds.

A wide range of financial accounting issues emerged in the survey, with the most common concern being the impact of IFRS on asset values — nearly 60% of public companies and just over 60% of private companies said that IFRS will have a significant affect on their asset valuations.

“At a time when companies’ are relying more heavily on asset backed lending as a source of capital financing, any negative impact on asset values may have financing implications for many companies,” says Ramona Dzinkowski, executive director, CFERF. “Certain standards, like mark-to market asset valuations will put additional pressures on finance executives to make sure they have adequate operating capital.”

Adding to the accounting concerns is the fact that 55% of public companies said they had not yet assessed the systems implications of the changeover. However, this contrasts with the fact that by 2010, 76% of respondents maintain that their company plans to run parallel IFRS and Canadian GAAP financial reporting systems during this year. “The question is, will they really be ready to run parallel financial reporting systems if they haven’t even begun assessing the wider impact of the system change-over,” comments Kazarian.

When it comes to IFRS awareness and training most companies reported they had begun training their finance staff (82% of public companies). Board education on IFRS was not as advanced, with only 41% of public companies indicating that they had started educating their board. Dzinkowski notes, “This may reflect the fact that many organizations across Canada are waiting to provide concrete estimates of financial implications of moving to IFRS before engaging the full board of directors as opposed to just the chair of the audit committee.”

Kazarian continues, “IFRS conversion is not just a corporate transition. Employees participating in profit sharing arrangements, or those who are expecting bonuses or commissions based on revenue, will be very interested in the financial statements produced under IFRS. Investors and analyst may find that IFRS will have a real impact on the way they perceive companies and impact the investment decisions that they make. Converting to IFRS is not just an internal company process that is only discussed in the boardroom. All stakeholders need to be informed.”

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