With a fiscal year-end of September 30, McCain has a longer time frame than most public companies for its self-imposed IFRS changeover. But even with the extra time, the work can be difficult as the company has to keep tabs on the ever-changing standards while also figuring out how to apply the rules across its more than 120 worldwide subsidiaries. Indeed, as Canadians are in the thick of an IFRS switch, the U.S. and international rulemakers are in the middle of the meatiest part of their efforts to meld their standards, which is leading to overhauls of significant rules. "IFRS is going through a higher-than-usual number of changes, and that's an extra challenge," says Burton, who estimates he has spent at least 25% of his time on the switch.
Looming Deadline
As 2010 begins to wind down, Canadian regulators are worried about some companies' ability to meet the IFRS adoption deadline. In a recent review of Canadian companies' disclosures about their conversion progress in their 2009 annual filings, the Canadian Securities Administrators found that nearly all of the 196 calendar year-end companies it reviewed had some sort of changeover plan. However, the regulator warned in a July document that for the 5% that didn't have one, "we are concerned that issuers...may be at greater risk of not meeting their future filing obligations."
Indeed, companies are at varying stages with their adoption efforts. "We've seen many companies who are well under way and have their financial statements mocked up in draft form, and we have seen other organizations that are in crunch time and will be from now to December and January," says Diane Kazarian, national IFRS leader for PricewaterhouseCoopers in Canada.
In general, larger Canadian companies are more ready for the January 1 deadline since they have more internal resources and, because of their complexity, were more likely to begin the switchover project early, says Kazarian. According to a survey earlier this year by FEI Canada and PwC, all companies with annual revenues above $20 billion had more than halfway completed their conversions, whereas only 41% of companies with revenues between $50 million and $249 million were at least 60% of the way toward completion.
CFOs acknowledge the tendency to procrastinate, but warn U.S. finance chiefs not to wait if the SEC moves forward with IFRS. "When you read the accounting standards, they don't seem drastically different, but when you get into the detailed work you realize it's a huge amount of work," says Sarah Davis, CFO of Loblaw, a food distributor. "We were caught off-guard a bit by how much work it was to implement."
Earlier this year, the SEC said it would decide in 2011 whether to move forward with a time line for requiring U.S. publicly traded companies to apply IFRS to their financial statements beginning in 2015. Unlike Canadian businesses, the United States would likely phase in companies to its three-year plan, based on size.
For now, the SEC is asking for further feedback on the issue. Giving the public until mid-October to respond, the commission wants to know about investors' readiness for understanding IFRS and how they can get up to speed on the global rules. The commission also wants to know how an IFRS switch will affect business contracts and corporate-governance requirements.
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