Impact of IFRSs on the Mining Industry. James Saloman, PricewaterhouseCoopers LLP Mike Moretto, BC Securities Commission

Transcription

1 Impact of IFRSs on the Mining Industry James Saloman, PricewaterhouseCoopers LLP Mike Moretto, BC Securities Commission

2 IFRS for The Mining Industry Objective Provide a high-level awareness of general and key issues Focus on junior and mid-size entities This isn t a substitute for reading the standards 2

3 IFRS for The Mining Industry Myths and Realities Transition will be easy! Transition will be difficult! This isn t as challenging as it is for some sectors, e.g. banking, insurance, oil and gas IFRS resources are scarce and everyone needs them Everyone should have an outside advisor The IASB s Extractive Activities project will affect transition 3

4 IFRS for The Mining Industry IFRS 1, First-time Adoption of IFRS First reporting is in Q with a need for comparative information Date of transition is January 1, 2010 for a calendar year company General principle is that standards effective at December 31, 2011 have to be applied for all periods presented and retroactively (continued) 4

5 IFRS for The Mining Industry IFRS 1, First-time Adoption of IFRS (continued) There is lots of relief from the general principle, e.g. can elect to use fair value as deemed cost at date of transition The deemed cost election can mitigate issues related to component accounting and impairment Reconciliations are required from Canadian GAAP to IFRS 5

6 IFRS for The Mining Industry IFRS 6, Exploration and Evaluation Activities These activities were outside the scope of other standards IASB concluded that your existing policy is OK, e.g. expense or capitalize Pre-exploration and evaluation activities should be expensed Development expenditures are generally capitalized Impairment is considered in IFRS 6 but reversal may be required 6

7 IFRS for The Mining Industry Impairment under IAS 36 Unlike Canadian GAAP, recoverability is assessed based on discounted cash flows therefore more impairments! Recoverable amount is higher of value in use and fair value less costs to sell Impairment reversals must be recognized 7

8 IFRS for The Mining Industry IAS 16 and Accounting for Components Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately This is similar to Canadian GAAP Most companies shouldn t have a transition issue 8

9 IFRS for The Mining Industry IAS 37 and Asset Retirement Obligations Under Canadian GAAP we record ARO s at fair value and don t remeasure Under IAS 37 it s not clear whether using fair value is acceptable but it s not being done ARO s are remeasured for changes in interest rates IAS 37 is being revised and more guidance may be available shortly 9

10 IFRS for The Mining Industry Final Thoughts Expense exploration and evaluation costs and you may be done Using fair value as deemed cost may be appealing Good luck! 10

11 And now the views of the regulator.. 11

12 Regulatory Update on IFRS Issues IFRS adoption timing issues MD&A disclosure of expected changes Interim financial statements in the year of IFRS adoption 1 st annual IFRS financial statements Old Canadian GAAP and IFRS different principles for different periods? Changes to securities rules and policies Early adoption? 12

13 IFRS adoption timing issues The train has left the station - CSA fully supports Canada s move to IFRS, including the January 1, 2011 transition date Change is coming - CSA rules and policies are being revised to reflect the transition to IFRS An ounce of prevention - Issuers should plan for filing challenges during the first half of

14 IFRS adoption timing issues Filing challenges during the first half of annual filings old Canadian GAAP MD&A disclosure re IFRS changes First interims in 2011 IFRS transition date balance sheet restated comparatives extensive disclosure certification implications 14

15 MD&A disclosure of expected changes MD&A requires discussion and analysis of any change in accounting policy, including description of the new accounting standard methods of adoption expected effects on the issuer s F/S potential effects on the issuer s business 15

16 MD&A disclosure of expected changes Incremental approach for disclosure in years prior to changeover Staff Notice Disclosure of expected changes in accounting policies relating to changeover to IFRS published May 9, 2008 Other useful guidance published by Canadian Performance Reporting Board (CPRB) of the CICA (2008) 16

17 MD&A disclosure of expected changes Two years before changeover (2009) IFRS changeover plan key elements and timing MD&A 2009 MD&A discuss progress regarding Accounting policies, choices, decisions IT and data systems Internal control over financial reporting Disclosure controls & procedures Financial reporting expertise Business activities affected by accounting metrics 17

18 MD&A disclosure of expected changes Two years before changeover (2009) cont d Major identified differences between the issuer s current accounting policies and those under IFRS May be narrative description only Consider IFRS as at the MD&A date; may also consider IASB projects in-process 18

19 MD&A disclosure of expected changes One year before changeover (2010) Update on preparations for changeover More detail on key decisions and changes, including decisions on choices available under IFRS 1 that are relevant to the issuer If available, quantified information about the impact of IFRS on the key line items in the issuer s F/S 19

20 Interim financial statements in the year of IFRS adoption Disclose compliance with IAS 34 Interim Financial Reporting Comparatives for 2010 First interim f/s Q1 extended filing deadline (proposed) include a balance sheet as at the transition date (e.g. Jan 1, 2010) No audit requirement when presented in interim f/s Consider impact on auditor s review of interim f/s 20

21 Interim financial statements in the year of IFRS adoption Q2 and Q3 interim f/s in year of adoption Disclose balance sheet as at the beginning of earliest comparative period if any retrospective restatement or reclassification IAS 1 requirement and proposed CSA requirement 21

22 1 st annual IFRS financial statements Two proposed options for referring to accounting principles in f/s and auditor s reports Refer only to IFRS Refer to both IFRS and Canadian GAAP Proposed requirements in NI Prepare f/s in accordance with Canadian GAAP Disclose compliance with IFRS 22

23 1 st annual IFRS financial statements Transition date balance sheet and related reconciliation information IFRS 1 MD&A discussion of changes in accounting policies Certification implications 23

24 Old Canadian GAAP and IFRS different principles for different periods? Existing requirement for all periods presented in f/s to be prepared in accordance with the same accounting principles Proposed relief for earliest of three years (subject to specified conditions) A document may include f/s for pre 2011 periods in old Canadian GAAP and f/s for 2011 in IFRS 24

25 Changes to securities rules and policies - IFRS Changes to NI Acceptable Accounting Principles, Auditing Standards and Reporting Currency IFRS terminology and transition issues transition to International Standards of Auditing (ISA) Changes to other national rules and policies for terminology and transition issues Continuous disclosure Prospectus Non-GAAP measures Registrants Investment funds 25

26 Early adoption? Domestic issuers may apply for exemptive relief to use IFRS before 2011 see CSA Staff Notice Exemptive relief required for periods beginning before January 1, 2011 even once IFRS is incorporated into the Handbook IFRS interim f/s required in year of adoption 26

27 Early adoption? Early adopters should consider Readiness of staff, directors, audit committee, auditors, & investors Impact on obligations under securities legislation including those relating to: Certifications Business acquisition reports Offering documents Forward-looking information 27

28 Resources All instruments and notices referred to in this presentation are available on the BCSC website at Other commissions Ontario Securities Commission Alberta Securities Commission Autorité des marchés financiers CICA IFRS Transition Resources at CICA IFRS Education and Training at IASB webpage 28

29 Contact information James Saloman, CA, CPA, FCA Partner, PricewaterhouseCoopers LLP ( ) Mike Moretto, CA, CPA (Illinois) Manager, Corporate Finance British Columbia Securities Commission ( ) 29

30 Questions Questions and Answers 30