June 23, 2010

IFRS – CEO/CFO Certifications

As the IFRS adoption date draws closer, senior executives should be mindful of the transition-related issues that affect them directly.

The transition to International Financial Reporting Standards (IFRSs) may affect CEO/CFO certifications.  It is important that senior executives give due consideration to a variety of issues including transition-related implications on internal control over financial reporting and disclosure controls and procedures.   

Internal controls over financial reporting (ICFR)

• Control over the transition: Do you have appropriate controls (and evidence of these controls) over the transition itself? The transition to IFRSs requires significant judgment to be made with respect to the interpretation and application of the new standards. Are existing controls regarding the identification and application of new or amended accounting standards being applied throughout the transition process? Do staff members have appropriate training and competence? Are the changes to accounting policies (or decisions not to change) subject to appropriate review and approval?
• Changes to processes and systems: Changes in accounting policies often require changes to accounting and other business processes, as well as related systems, including IT. Have the possible effects on the certification process been considered?
• Controls from the date of transition: First-time adoption of IFRSs requires adopters to “restate” the comparative period in their first year of IFRS reporting. What controls are in place to ensure the appropriate IFRS information is collected?

Disclosure controls and procedures (DC&P)

• The transition to IFRSs requires a significant amount of additional financial and non-financial disclosures leading up to and during the first year of IFRS financial statements. Disclosure committees need to be fully aware of the status of the changeover plan and the potential impact on financial statements. Confirm that DC&P include processes to communicate to senior management all information that might need to be reported as a result of the changeover.

The IFRS changeover plan plays an important role in ensuring ICFR and DC&P issues are addressed. It is important to ensure that controls are robust enough to support the IFRS transition and that transition activities and disclosures are subject to appropriate controls.

Here are some helpful resources on the issue:

• IFRS Ready…Or Not?– Free CICA webinar.
• IFRS Conversions – What CFOs Need to Know and Do – CICA publication (free download).
• Transition to IFRS and certification of disclosure – Deloitte publication (free download).
• IFRS Conversion: Implications for CEO and CFO Certifications – KPMG publication (free download).

Now you’re in the loop.