The latest implementation of International Financial Reporting Standards (IFRS) rules is expected to be more challenging for firms than Canada’s initial implementation of IFRS rules in 2011, says a new report by KPMG.
Firms need to start preparing now to implement standards due within the next five years, says the report, which outlines the biggest impacts of changes made by the International Accounting Standards Board, the group that regulates global accounting standards.
“Regardless of resources, it’s going to be a long journey for companies to get where they need to be so everybody should be thinking about this now,” Kristy Carscallen, managing partner with KPMG in Canada, says in a statement.
Read: How new accounting rules will affect company valuations
The report analyzes new measures such as:
- IFRS 9 – Financial Instruments (banking, mining, transportation, oil and gas), which will impact the banking industry with adjustments to the classification of financial instruments.
- IFRS 15 – Revenue from Contracts with Customers (technology and telecommunications), which will affect company revenues, particularly telecommunications firms and any company party to long-term contracts with customers. The change “requires a different way of thinking about revenue that could impact both the amount and timing of revenue recognition,” KPMG says.
- IFRS 16 – Leases (retail, power and utilities, banks, telecommunications and transportation), which will ensure companies recognize operating leases on balance sheets. This is a major change to a “calculation-heavy standard,” KPMG says, and may require robust IT systems to ensure effective implementation.
- IFRS 17 – Insurance Contracts, which, planned for 2021, will mark a wholesale change for insurance companies. The rule will change their financial statements (how profit is recognized, key financial metrics and disclosures), data management, IT systems, processes, level of analysis and projections, KPMG says.
Also read: