IFRS Part 3: First Quarter Financial Reports
Over the past couple of weeks, we have discussed some things investors should be aware of regarding the changeover to International Financial Reporting Standards (IFRS) in Canada.
In our previous two posts (Introduction to IFRS for investors and Changes in financial statement terminology), we said that IFRS would apply to most Canadian public companies for financial years beginning on or after January 1, 2011. You will see changes from the conversion to IFRS in first quarter financial reports of these companies.
You may have also seen discussion of expected changes in the management discussion and analysis (MD&A) of these companies over the past few years.
This first IFRS financial report will include an opening IFRS balance sheet as at the date of transition to IFRS. This date of transition, which is the first day of the comparative period, is the starting point for accounting under IFRS.
A company may use IFRS accounting policies that differ from those applied under old Canadian GAAP. Under old Canadian GAAP a company may have treated some expenditures as assets on the balance sheet. Now, under IFRS, they may include them as expenses on their income statement.
In its first IFRS financial report, a company must explain the effect of such changes by including reconciliations of its old Canadian GAAP equity and comprehensive income to its IFRS equity and comprehensive income.
A company’s first IFRS financial report should clearly communicate its significant accounting policies. Most companies will provide a complete list of policies; some may list only the changed policies and state they have not changed other policies as a result of adopting IFRS.
As we said in our last two posts, if you are someone who does not feel you have sufficient information or you do not understand the information in the financial statements, you have options:
- Ask your advisor to discuss your questions with you
- Ask another trusted professional (your accountant, for example) to discuss your questions with you
- Submit your question in writing to the company
- Ask your question(s) at the company’s annual general meeting
You can find more information about financial statements and MD&A in the informed investing section of our website.
Finally, the BCSC website has a page dedicated to IFRS. There are a number of resources available through the webpage.