CANADA NEWS
Investment Tax Credits: Minister of Finance Extends Carry-Forward Period
On January 21 2008, Ontario Finance Minister Jim Flaherty proposed an extension to the carry-forward period on investment tax credits (ITCs) from the current 10 to 20 years. The extension is being proposed as an effort to aide the transition towards a single corporate tax administration system in Ontario that is set to begin in the 2009 taxation year.
To read the official news release, please click here.
Hot Topics from FEI Canada's Committee on Corporate Reporting (CCR)
CCR Responds to the IASB's "IFRS ED 9, Joint Arrangements"
On January 11th 2008, FEI Canada's CCR submitted a response to the International Accounting Standards Board's (IASB) Exposure draft on Joint Arrangements. The submission highlighted CCR's supportive stance on the IASB's re-examination of the accounting for joint arrangements and iterates that the Committee is in favour of a method that more appropriately focuses on rights and obligations, rather than on legal form. The Committee does critique the exposure draft in its attempt to cover a vast array of commercial arrangements, saying that "we feel that there will be some confusion in the practical application of the proposed standards and that additional clarity is needed." The submission outlines CCR's attempt to address these concerns. In addition, the submission supports the IASB's efforts to converge IFRS and U.S. GAAP, while remaining uncertain whether or not amendments to existing U.S. GAAP will be required in order to achieve full convergence in this area.
To review the Committee's submission in its entirety, please click here.
| From the News Desk of ROBERT HALF MANAGEMENT RESOURCES |
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Number Crunching Alone Insufficient for Today's Financial Professionals, Suggests Survey
Accounting is a technical field, but job candidates who also possess strong soft skills now have an edge over those who stick strictly to the numbers, a recent survey suggests. Sixty-five percent of chief financial officers (CFOs) said they would hire someone with fewer technical skills if the candidate had particularly strong soft skills, such as communication and interpersonal abilities.
The survey was developed by Robert Half Management Resources, the world's premier provider of senior-level accounting and finance professionals on a project and interim basis. It was conducted by an independent research firm and includes responses from 270 CFOs from a stratified random sample of Canadian companies with 20 or more employees.
CFOs were asked, "Would you be willing to hire someone with fewer technical skills if the candidate had stronger soft skills, such as communication and interpersonal abilities?" Their responses:
| Yes..... | 65% |
| No..... | 29% |
| Don't know/refused..... | 6% |
| 100% |
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From the News Desk of |
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IFRS: A Revolution in Accounting
‘Accounting" and "revolution" aren't words one would normally put together in the same sentence. But the inexorable march of international financial reporting standards (IFRS) across the globe is nothing short of an accounting revolution. First applied two years ago in the European Union, South Africa and Australia, the new standards are being used, accepted, or on the verge of being adopted by more than 100 countries – including Canada. By 2011, all publicly accountable companies in this country are slated to say goodbye to Canadian generally accepted accounting principles (GAAP) and hello to IFRS.
Last November, after much public debate, the U.S. Securities and Exchange Commission moved to allow foreign private issuers to file accounts under IFRS without reconciliation to U.S. GAAP. The SEC also convened two roundtables in December for more public debate on whether U.S. domestic issuers should have the same option.
According to Rafik Greiss, Ernst & Young's national IFRS leader, the pace of change in capital markets begs for bold action, given the rapidly accelerating integration of the world's capital markets. Look no further than the recent global mergers and acquisitions boom (the biggest in history) and the 1,700 global IPOs recorded in 2006 (the most since 2000) for proof.
These market realities underscore the need for a single set of high-quality global accounting standards. At its core, IFRS is intended to bring more clarity to financial reporting globally by ensuring that businesses around the world tell their financial stories in a consistent, directly comparable way. The theory is that common standards should make it easier for buyers, sellers and other stakeholders to compare companies across borders. This should encourage the free flow of capital, goods and labour across borders – something that would be especially beneficial for Canada's relatively small economy – and help bolster investor confidence.
But revolutions aren't easy, and this one is no different. There are obstacles along the road to a common global reporting language, and the first wave of European adopters is experiencing some growing pains. Many are struggling with the concept of uniformity, and so financial statements still have hints of local flavours. But improvements are continuing since the first wave of global acceptance in 2005.
Early difficulties should surprise no one. Creating a global accounting standard doesn't happen overnight, nor will common standards be the cure-all for what ails global markets. Where we are today in the accounting world is a reflection of the international efforts that started more than 25 years ago.
What can be neither understated nor overlooked, however, is the remarkable speed at which countries around the world have accepted and continue to accept IFRS. It is clearly filling a need. What's more, IFRS is having a tangible impact in some countries where capital market reporting didn't necessarily exist before. Today, countries representing more than 45 per cent of the world's capital markets have adopted IFRS.
By choosing to adopt IFRS, Canada, too, has decided to be part of the accounting revolution. And so companies here need to begin readying themselves for the shift. Luckily for Canadian businesses, IFRS and current Canadian standards share many features. Both are principles-based – thought to be more flexible than rules-based standards, allowing room for professional judgment – and similar in their conceptual frameworks, style, form and conclusions.
At a more detailed level, however, Canadian GAAP and IFRS have enough important differences that could make the changeover a painstaking and complex process for the unprepared. IFRS conversion could affect virtually every important decision a company makes – from information technology, performance evaluations and tax planning to bank agreements and long-term incentive plans for employees. Companies will need to train staff on the new standards and educate investors and analysts about the impact the new reporting system will have on financial statements.
To learn more about IFRS, please click here.
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IDC WHITE PAPER:
Solving the Application Resourcing Crunch – The Capacity Model
Canadian businesses are demanding more from their applications, but they are doing this without increasing budgets or reducing requirements for technology support and delivery. How can IT executives deliver on the promise of their application portfolio without comprising on performance, exceeding budgets, or missing schedules?
In this IDC study, IBM compares and contrasts a number of currently existing approaches to application management and development, including their respective benefits and drawbacks across a range of factors. These include internal provisioning, staff augmentation, application outsourcing and the Capacity Model. The study includes two practical examples of Canadian companies, Bombardier and the Bank of Montreal, that have applied Capacity Model solutions to their application issues.
Find out how Canadian business leaders are confronting these challenges in this IDC White Paper, sponsored by IBM. Visit http://www.ibm.com/vrm/fei1 to download this study.
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Audit Committee survey gives high marks to CFOs
To better understand the challenges and issues facing audit committees today, the Institute of Corporate Directors (ICD) and KPMG's Audit Committee Institute conduct annual surveys of Canadian audit committee members. In their 2007 survey, more than 200 Canadian audit committee members shared their views on audit committee priorities and practices. This survey, however, uncovered some significant—and sometimes worrisome—differences between larger and smaller entities. These differences relate to the directors' assessment of audit committee effectiveness as well as to differences in practices.
A few highlights from the survey include:
- Overall, 62 per cent of respondents rate their audit committee as being "very effective"
- Effectiveness ratings differed significantly by entity size – almost 80 per cent of respondents from entities with revenues over $1billion rated their committee "very effective" compared with only 43 per cent for entities with revenues less than $100 million
- Satisfaction with the interaction and support the audit committee receives from the CFO is less strongly positive than last year – 65 per cent note "very satisfied" compared to over 80 per cent in the 2006 survey
- Top priorities for the audit committee agenda included oversight of internal control, risk management, legislative compliance, and accounting judgements and estimates
- Priority ranking for oversight of accounting judgements and estimates varied significantly by entity size – 58 per cent of respondents from entities with revenues over $1 billion regarded this as a priority, compared with about 20 per cent of smaller entities.
As some audit committees strengthen their performance, the bar is raised for all. Therefore, audit committees are encouraged, as well as the executives, boards and professionals supporting them, to consider these survey findings as they examine their own oversight processes and continue their progress towards greater audit committee effectiveness.
The survey report is available from the KPMG Audit Committee Institute's Web site at http://www.kpmg.ca/auditcommittee/survey.html. Please share this report with your audit committees and directors.
INTERNATIONAL NEWS
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From the News Desk of |
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Paying Taxes 2008 - Comparison of tax systems in 178 countries
PricewaterhouseCoopers, in conjunction with the World Bank has produced Paying Taxes 2008, a unique annual study which facilitates the direct comparison of tax systems in 178 countries worldwide, and ranks each country according to the relative ease of paying taxes.
Paying Taxes 2008 shows how businesses are affected not only by tax rates, but also by the procedural burden of compliance. To determine the overall ease of paying taxes, the report focuses on:
- the total tax rate;
- the time it takes to comply; and
- the number of tax payments made.
Overall, Canada fairs moderately well in ease of paying taxes at 25th out of 178 as compared to 76th for the United States and 12th for the United Kingdom. Canada ranks 99th out of 178 for the total tax rate portion of the rating indicating there is room for improvement in Canada's corporate taxation system. In terms of time to comply, Canada is 28th and 15th for number of tax payments. These results are reflective of the relative overall efficiency of the Canadian tax system, which features a globally competitive Revenue Agency and incorporates technology such as the internet and electronic banking to increase the ease of remitting tax payments and complying with Federal and provincial tax legislation.
Of interest, the top ranking countries with the lowest total tax rate are Vanuatu, the Maldives and the United Arab Emirates. The highest are Sierra Leone, Burundi and Gambia. The ease of paying taxes can range from filing a single online form in Sweden to making 124 payments a year in Belarus.
The Paying Taxes 2008 report concludes that a win-win situation for governments and industry can be achieved by simplifying tax systems and easing the compliance burden on business, in addition to reducing tax rates. From a corporate perspective, the report advocates further transparency around the total tax contribution made by businesses, to help governments understand corporation's real economic footprint and how tax systems affect business.
For additional information on Paying Taxes 2008, to access an electronic copy of the report, or to order a hard copy, please click here.
XBRL: Transforming Financial Disclosure
On December 21, 2007 the U.S Securities and Exchange Commission Chairman Christopher Cox launched "The Executive Compensation Reader" - the first-ever online tool enabling investors to instantly compare executive compensation rates at 500 of the largest American companies. The tool works by tagging executive compensation figures in XBRL.
The new database highlights the power of interactive data to transform financial disclosure.
The Executive Compensation Reader builds on the Commission's new requirements that went into effect earlier this year to radically enhance clarity and completeness of executive compensation disclosure.
To read the press release in its entirety, please click here.
IFRS in the U.S. and around the Globe: SEC Roundtables
In December 2007, the U.S. Securities and Exchange Commission held a series of Roundtables focused on IFRS implementation. On December 13, the Roundtable entitled "IFRS in the U.S. Markets" focused on issues concerning U.S. investors dealing with two accounting systems; allowance of foreign companies to choose their preferred method of filing, and the effect on U.S. issuers; and the experience of and effect on foreign capital markets with multiple accounting standards.
The second roundtable in the series held on December 17 and titled "SEC Roundtable on Practical Issues Surrounding the Use of IFRS in the U.S. in Recent Years, and Its Potential Expanded Use in Future Years," focused on financial statement users' adaptation to IFRS financial reporting; using the experience of the EU, including their challenges and lessons learned, to ready U.S. preparers use of IFRS; as well as personnel and timing issues related to IFRS implementation.
To see the webcasts and transcripts of these roundtables, please click here.
IASB Request for Comments
The IASB released an Exposure Draft on Group Cash-settled Share-based Payment Transactions: Exposure Draft, issued December 2007.
This exposure draft includes proposals to amend IFRS 2 Share-based Payment and IFRIC 11 IFRS 2—Group and Treasury Share Transactions.
The purpose of the proposed amendments is to specify the accounting, in the financial statements of an entity that receives goods or services from its suppliers (including employees), for similar arrangements that are share-based and cash-settled.
Comments are to be received by March 17, 2008.
Members interested in commenting, please contact Lindsay Collins: lcollins@feicanada.org.
To review the full exposure draft, please click here.