Maria Alano Laset July 2010 Session 2 of 6 Webinar IFRS. Amendments to Form 1

Transcription

1 Maria Alano Laset July 2010 Session 2 of 6 Webinar IFRS Amendments to Form 1

2 This session Session 2 will be on the opening IFRS balance sheet. Session # Overview of the changes to Form 1 Planning for the changeover Opening IFRS balance sheet Prescribed IFRS departures and prescribed accounting treatments Changes to Statement A balance sheet Changes to Statement E income statement Changes to Statement F equity Other Coverage 2

3 A word of caution For the purpose of regulatory accounting and reporting Focus on the opening IFRS balance sheet that is to be filed with IIROC New Statement G one-time transitional requirement Reconciliation of the equity UDP/CFO certification X Not to be confused with the generalpurpose statutory opening balance sheet X No comparatives required for first audited Form 1 under IFRS 3

4 Retroactive application of IFRS vis-à-vis optional exemptions and mandatory exceptions Because retroactive application can be onerous, relief is offered in selected areas. Relief offered by the authoritative accounting bodies 15* optional exemptions Choice to apply retroactively or prospectively Body of IFRS standards General rule: Apply retroactively as if since the beginning of time 5* mandatory exceptions Must apply prospectively All other IFRS standards Must apply retroactively *As at July

5 15 optional exemptions vis-à-vis regulatory accounting applicability 6 of the 15 optional exemptions would generally apply to Dealer Members. # Area of optional exemption Regulatory accounting applicability Yes No 1 Business combination 2 Fair value or revaluation as deemed cost 3 Employee benefits 4 Cumulative transitional differences 5 Compound financial instruments 6 Assets and liabilities of subsidiaries, associates and joint ventures 7 Designation of previously recognized financial instruments 8 Share-based payment transactions 9 Insurance contracts 10 Decommissioning liabilities included in the cost of property, plant and equipment 11 Leases 12 Fair value measurement of financial assets or financial liabilities at initial recognition 13 A financial asset or an intangible asset accounted for in accordance with IFRIC 12, Service concession arrangements 14 Borrowing costs 5 15 Investment in subsidiaries, jointly controlled entities and associates

6 5 mandatory exceptions In 3 of the 5 areas, IIROC has specific regulatory requirements and expectations. # Area of mandatory exception IIROC has regulatory expectations 1 2 De-recognition of financial assets and financial liabilities Hedge accounting 3 Accounting for non-controlling interests 4 5 Full-cost oil and gas assets Determining whether an arrangement contains a lease Not applicable 6

7 Other steps You need to take other steps in order to come up with your opening IFRS balance sheet. Broad step Go over your balance sheet items. Go over your business practices. Go over your existing contracts. Coordinate with your parent company. Detailed steps If they do not meet the definition (of an asset, a liability or an equity), write them off to retained earnings. You may need to reclassify. You may need to recognize a liability resulting from a constructive obligation You may need to recognize a liability resulting from an onerous contract. You may need to recognize other balance sheet items in certain circumstances. 7

8 Finance leases vis-à-vis regulatory implication Any lease-related asset will be capital neutral. Current operating leases may have to be reclassified as finance (capital) leases. With the revision of Form 1, IIROC will not treat the capitalized lease asset as a non-allowable asset. Any lease-related asset will be capital neutral. 8

9 9 6 prescribed IFRS departures 5 of the 6 prescribed departures will result in no change to the current approach Dealer Members use in preparing Form 1.

10 Prescribed IFRS departure: Valuation of securities To permit a Dealer Member to assign no value when the value of the security cannot be reliably measured under the 3-level fair value hierarchy IFRS 3-level fair value hierarchy IIROC 5-level market value hierarchy Inventory Client positions Level 1 - Use of quoted prices in an active market Level 2 - Use of valuation techniques with observable data inputs IFRS: Same IIROC: Unchanged IFRS: Same IIROC: New IFRS: Same IIROC: Unchanged IFRS: Same IIROC: New Level 3 - Use of valuation techniques with unobservable inputs and assumptions Cost - If level 3 is not viable, use cost. IFRS: Same IIROC: New IFRS: Same IIROC: Unchanged IFRS: Same IIROC: New IFRS: Same IIROC: Unchanged IFRS: Departure If the value of a security cannot be reliably measured, show no value with a disclosure on the client statement. IIROC: Unchanged 10

11 11 3 prescribed accounting treatments The prescribed accounting treatments, when alternatives are available, will result in no change to the current approach Dealer Members use in preparing Form 1.

12 12 Statement G Opening balance sheet You will need to reconcile the opening retained earnings under IFRS and the closing retained earnings under CGAAP.

13 13 Statement G reconciliation Explanations are required for material adjustments.

14 Timeline for regulatory reporting Example: A Dealer Member with a December fiscal year-end R E G U L A T O R Y R E P O R T S Jan 1, 2011 IFRS Conversion Date Opening Balance Sheet Dec 31, 2010 Last Audited Form 1 based on CGAAP Dec 31, 2010 Last MFR based on CGAAP Jan 31, 2011 First MFR based on IFRS Feb 2011 MFR Mar 2011 MFR Dec 31, 2011 First Audited Form 1 based on IFRS Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 D U E D A T E S June 2010 Jan 31, 2011 Apr 29, 2011 Due date for Due date for December 2012 December 2010 MFR March 2011 MFR Regular 20 business days Regular 20 business days after month-end after month-end Feb 22, 2011 Due date for Audited Form Dec 31/10 Regular 7 weeks after fiscal year-end Apr 4, 2011 Due date for February 2011 MFR Regular 20 business days after month-end + extra 5 business days Mar 15, 2011 Due date for: Opening IFRS balance sheet 10 weeks after fiscal year-end January 2011 MFR Regular 20 business days + extra 10 business days Feb 22, 2012 Due date for Audited Form Dec 31/11 Regular 7 weeks after fiscal year-end Note: Filing due dates may be subject to change. 14

15 15 Certificate of UDP and CFO for Statement G UDP and CFO will certify that they have planed and executed the changeover to IFRS in accordance with IFRS 1 and prescribed regulatory accounting.

16 Word of caution From a regulatory accounting and reporting perspective Dealer Members should consult their external auditors (or other professional accounting advisors) on: any significant accounting issues identified and the IFRS conversion plan in advance of the changeover. 16

17 Next session Session 3 will be on Statement A - the balance sheet. Session # Overview of the changes to Form 1 Planning for the changeover Opening IFRS balance sheet Prescribed IFRS departures and prescribed accounting treatments Changes to Statement A balance sheet Changes to Statement E income statement Changes to Statement F equity Other Coverage 17