Diane Kazarian, IFRS national practice leader at PricewaterhouseCoopers in Toronto, says survey results show many companies are not putting sufficient resources into transitioning to the new system.

As the deadline looms for Canada to convert to international financial reporting standards (IFRS), there are signs that some companies have fallen behind and some chartered financial analysts (CFAs) may not be ready.

Separate surveys conducted recently reveal that many public and private energy companies across the country are lagging in their IFRS conversion projects, and that many CFAs don’t fully understand the implications of the new system.

The results are significant as most companies will have to begin running parallel IFRS and Canadian GAAP systems in 2010 so they can provide comparable financial reports in 2011.

One of the surveys, done by PricewaterhouseCoopers and JuneWarren-Nickle’s Energy Group, indicates that 83 per cent of the public and private energy sector firms in Canada that will be adopting IFRS have not reached the halfway point in their conversion projects.

The survey — called Ready? Set? Go? Taking Part in the IFRS Race — indicates the economic downturn has impacted many transition plans, with 50 per cent of respondents noting timetable delays of three to six months.

Ann-Marie Osinski, partner and leader of IFRS for the oil and gas industry at PwC in Calgary, says energy firms were quick out of the gate on conversion but had to put their plans on the backburner to deal with more pressing business issues when the recession took hold.

“Although a lot of them had started early and had really full-on project plans going they had to slow down,” she said. “A lot of them had planned to be pretty well done by the end of this year, but when the big downturn came, oil and gas companies were quite significantly affected by the prices, and therefore they had a lot of other business issues to cope with.

“I think what’s happening is that companies are still generally on track” but will not be “completely done and be up and ready by the end of this year.”

On the positive side, 86 per cent of survey respondents said IFRS training of financial staff was underway, with 63 per cent indicating that training was in place for audit committees. On the downside, however, only 26 per cent said their companies have begun IFRS training for boards of directors, and only 23 per cent have started training for non-financial staff.

Survey results also indicate the level of communication to market analysts was very low, with only about five per cent of the respondents saying they have started a dialogue.

Moreover, 69 per cent of respondents indicated their management teams are only generally or somewhat aware of the potential implications of IFRS adoption on investor relations (IR). A further 29 per cent said that management was not aware at all of potential IR implications.

Osinski said companies must get moving on their IFRS conversion plans before it’s too late. “People realize that time is running out and that they’re a bit behind in their project plans, and they’re starting to accelerate those. I don’t think it’s too late for most companies, but obviously if you don’t do anything for several months it will be. Time is running out and people need to really start pushing forward to meet the deadlines.”

Another survey, done by PwC in conjunction the Canadian Advocacy Council for Canadian CFA Institute Societies, also found that more than 47 per cent of CFA charterholders aren’t very confident they have a full understanding of what the impact of IFRS will be on the companies they invest in, or follow, and that almost 20 per cent are not at all confident of their knowledge.

Further, more than 74 per cent of the CFA respondents indicated they had a fair to poor understanding of the differences between IFRS and Canadian GAAP.

Meanwhile, 51 per cent of the CFA charterholders reported that their company has not invested any budget towards training, and almost 75 per cent of respondents had not registered or allocated any time for training.

Diane Kazarian, IFRS national practice leader and partner at PwC in Toronto, said the results show that many companies just aren’t putting enough resources into the transition to IFRS.

“Many companies who implement IFRS underestimate the time and resources needed for realigning systems and processes to address new data requirements. For a smooth conversion process, companies need to come to address the full implications of IFRS, including training and communications, and can’t afford to underestimate the time they will need.”

Kazarian said companies first began to focus on the IFRS transition in late 2008 after the Accounting Standards Board announced a definitive timeline for publicly accountable companies in Canada to convert to IFRS, but activity didn’t really pick up until the summer of 2009.

She said companies that plan and prepare and embrace IFRS as a “change initiative” and not just an accounting exercise will be the most successful at the transition.

“It all comes down to a well-executed plan, the appropriate and proper resources dedicated to the conversion exercise, that the tone from the top of the organization is robust, the board is involved, and that this communication plan is taken rather seriously,” she said.

“The best practice out there would be early preparation, robust planning, knowing what resources you’re going to use within your organization and potential external resources. If one believes there will be a bulge of activity in 2010, some of those resources may run out.”

Doug Steele, a Vancouver-based partner and regional IFRS leader with Grant Thornton, said publicly-accountable companies could be in for a rude awakening if they haven’t put their conversion plans into place because it means an overhaul of existing financial IT systems.

“Public companies in Canada are aware of what IFRS means for their accounting obligations, but when it comes to making necessary changes to IT systems used for financial data, some will get caught off guard about how quickly it’s coming up.”

For example, said Steele, companies that plan to simultaneously run IFRS and GAAP accounting systems in the 2010 fiscal year will have to make sure their IT systems can handle parallel processing of data.

“A public company that isn’t sure of the answers to these questions could be in for an unpleasant surprise after January,” he cautioned.

Steele explained that IT systems must be able to accommodate the fact that under Canadian GAAP assets such as property, buildings and equipment are booked and carried at historical cost and depreciated over time, but under IFRS a myriad of fair value options are available, representing a new data stream that has to be tracked and stored by the company.

Meanwhile, he added, older data might not be required for IFRS, but it will still be necessary for management of the company.