Impacts of IFRSLunch and Learn
June 28, 2011June 28, 2011
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Project Update
IFRS decisions: All decisions have been made:
• 10 disclosure choices
• 14 policy choices OAG audit of the opening balance sheet complete Since April 1, 2011, IFRS has been adopted as the basis of
accounting for the Corporation
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IFRS Decision Summary
Choices Decisions
Total Prior Today Deferred
Applicable to CBC/ Radio-Canada 24
Disclosure choices (10) 10
Policy choices 14 14
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Policy Decisions
Standard Date Description Decision Made
IFRS 1 16-Sep-09 PP&E: Deemed Cost Election Deemed cost election on real estate land and buildings True IFRS cost on all other assets
IFRS 1 16-Sep-09 Decommissioning costs election Estimate the obligation at the transition date
IFRS 1 16-Sep-09 Borrowing costs election Apply IAS 23 from the transition date
IFRS 1 16-Sep-09 Application of IFRIC 4 Apply from the transition date (with assessment of pre-2005 leases)
IFRS 1 16-Sep-09 Business combinations Apply from the transition date
IFRS 1 12-Nov-09 Election for different transition date subsidiaries
Adopt CBC's transition date
IFRS 1 10-Mar-10 Financial instruments – designation No changes in designation from current Canadian GAAP
IFRS 1 10-Nov-10 Employee benefits - transition approach Fresh start approach
IAS 2 12-Nov-09 Inventory valuation methodology Value at average cost
IAS 16 16-Sep-09 PP&E post transition valuation methodology All asset classes on the cost basis
IAS 19 10-Nov-10 Accounting for actuarial gains and losses Use the Other Comprehensive Income (OCI) Approach
IAS 39 10-Mar-10 Financial instruments: Available-for-sale designation
No changes in designation from current Canadian GAAP
IAS 39 10-Mar-10 Financial instruments: Fair Value designation No changes in designation from current Canadian GAAP
IAS 40 12-Nov-09 Investment property valuation Value using the cost basis
Approved by the Audit CommitteeApproved by the Audit Committee
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Disclosure Decisions
Disclosure Type Standard Date Decision Made
Cash flow statement IAS 7 12-Nov-09 Net cash flow from operating activities determined by adjusting net profit
Cash flow statement IAS 7 12-Nov-09 Interest and dividends received to be shown as an investing cash flow
Cash flow statement IAS 7 12-Nov-09 Interest paid to be shown as a financing cash flow
Note Disclosure IAS 12 12-Nov-09 Tax – Reconciliation between tax expense and the product of accounting profit multiplied by the applicable tax rate
Note disclosure IAS 20 12-Nov-09 Grant income – Deferred capital funding will be disclosed gross from the capital asset to which it was provided
Note disclosure IAS 20 12-Nov-09 Grant income – Income funding will be disclosed as a credit to the income statement
Note disclosure IAS 21 12-Nov-09 The financial report will be reported in Canadian Dollars
Note disclosure IAS 1 10-Mar-10 Expenses classified by function
Cash flow statement IAS 7 10-Mar-10 The Indirect method will be used
Income statement IAS 1 23-Feb-11 Single statement of comprehensive income
Approved by the Audit CommitteeApproved by the Audit Committee
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Financial Impacts
The implementation of IFRS had financial impacts on the opening balance sheet in five areas:
1. Property and equipment
2. Pension plans and employee-related liabilities
3. Consolidation of the CBC Monetization Trust
4. Capitalization of Telesat satellite transponder lease
5. Allowance for doubtful accounts
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Property and Equipment
As a capital intensive organization, the implementation of IFRS had a significant impact on the accounting of our capital assets: Real-estate land and buildings were revalued to their fair
market value at transition resulting in an increase in our net book value of $162.4m
Real-estate buildings were parsed into five major components each with their own useful life for depreciation purposes
• Substructure 65 years• Shell 30 years• Interiors 20 years• Services 25 years• Building sitework 15 years
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Property and Equipment
Asset policy 2.3.02 updates: Componetization policy guidance added
Componentization methodology is based on ATSM Uniformat II Classification for Building Elements (E1557-97) major groups were noted before. More granular details also provided to assist in classification.
Derecognition guidance added Derecognition is only applicable for disposals of assets or
components > $100K (threshold) With componentization it can be difficult to determine the
original cost & A/D amounts to derecognize so a “proxy method” has been developed based on a current replacement value model. (Estimate original cost based on current value)
An Excel based tool has been developed to assist in calculation
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Property and Equipment
Asset policy 2.3.02 updates: Amortization assumptions must be be reviewed annually New processes implemented since April 1, 2010 with Capital
Process team Derecognition of assets Componentization for real-estate buildings Annual review of amortization rates* Annual review for impairment indicators*
* Process will be updated to perform tasks quarterly, where necessary
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Pension and Employee-Related Liabilities
The CBC/Radio-Canada Pension Plan is one of the most significant plans of any Canadian Crown Corporation
With the transition to IFRS, the actuarial valuation for accounting purposes was restated to reflect the new standard
Under IFRS, our actuarial liability decreased by $82.8m as of April 1, 2010.
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Monetization Trust
IFRS required the consolidation of the CBC Monetization Trust with CBC/Radio-Canada
From an IFRS reporting standpoint, the assets monetized in the Trust and removed from our financial statements were reinstated and the gains made on the transaction eliminated for consolidated reporting purposes
The resulting entry impacted various asset and liability accounts with an adjustment to reduce retained earnings by $5.5m
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Telesat Satellite Transponder Lease
Under IFRS, the criteria for the capitalization of a lease differ from that of Canadian GAAP.
Each significant lease was analyzed for classification as an operating lease or finance lease under IFRS. All classifications previously made remained unchanged with the
exception of our lease of seven satellite transponders from Telesat At April 1, 2010 the lease of the transponders was capitalized as
though it had always been accounted accordingly under IFRS: Capitalization of finance lease $ 119.9m Accumulated amortization (64.3m) Obligations under finance lease (73.0m) Opening retained earnings 17.4m
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IFRS finance leases
Terminology: IFRS uses the term “Finance Lease” not “Capital Lease”
IFRS does not evaluate leases based on the CGAAP “bright lines” (75% of life, 90% of fair value)
IFRS is subjective (“major” portion of the economic life, “substantially all” of the fair value)…no quantitative thresholds Lease analysis tool was developed to help with the
assessment Asset policy 2.3.02 has been updated. Capital lease policy
2.3.03 will likely be eliminated. IFRIC 4 / EIC-150 “Determining whether an Arrangement
contains a Lease” are aligned…no process change
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Allowance for Doubtful Accounts (AFDA)
AFDA provision is based on impairment guidance in IAS 39 – Financial Instruments
IFRS requires first doing an assessment to find evidence of impairment then determining impairment to recognize (allowance)
More detailed guidance has been added to Credit & Collection Policy 2.3.07 as to how assess (assessment of uncollectability) and then measure the AFDA to recognize (likelihood of uncollectability).
Process has already been used and policy change vetted by SSC.
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Training
Leases IFRIC 4 Ad-hoc as required/requested
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