Over the years, those who have counseled caution in having companies in their countries move to international financial reporting standards have suggested that costs of transition could be large and burdensome.

Now, in research unveiled in mid-July, costs to Canadian companies of such a shift – executed in one fell, well prepared national swoop in 2011 – are generally shown to not be an extraordinary factor with which corporations could not cope.

“Overall, the costs of implementing [IFRS] in Canada were broadly in line with those planned for and expected,” according to a report titled “The Cost of IFRS Transition in Canada,” which sums up research by the Canadian Financial Executives Research Foundation. “Costs were significant but manageable.”  

Experiences differed by size of company, but the survey-based findings of CFERF, an arm of Financial Executives International Canada, included the notion that solid, early preparation for a migration to IFRS generally stemmed the growth in transition costs.

That is not to say that the move to IFRS was not a challenge, as Bloomberg BNA reported in a lengthy article in June 2011.

“It hasn’t been easy,” Tricia O’Malley, former chairwoman of Canada’s Accounting Standards Board, said at the time. O’Malley, also a former member of the International Accounting Standards Board, added that for her friends in the accounting firms, “it’s been hellishly busy.”

She offered an overall assessment of Canada’s shift to IFRS. “It’s kind of like a giant non-event in some respects,” she told BBNA two years ago.

A Driver of Cost: Level of Prep.

It’s worth noting – and maybe something of a caveat is in order for the fact - that the CFERF research was sponsored by Canada’s Accounting Standards Oversight Council and the IFRS Foundation, parent group of IASB, the writers of international accounting standards.

In any case, CFERF described in the report what it labeled “key drivers of cost.” Among those factors, the level of preparation for the IFRS shift stands at the head of the line.

“Although many financial executives found the IFRS transition process to be challenging, those who had started planning well in advance reported that they were in better position to control costs by employing a variety of strategies,” according to the report. CFERF cited the example of a company that “had the foresight to hire a finance employee well-versed in IFRS” and thus was less dependent on third-party consultants.

U.S. GAAP Reconciliation No Longer in Picture.

Canada’s biggest corporations realized cost savings by no longer having to carry out a reconciliation to U.S. generally accepted accounting principles, CFERF noted. The firms also cut the number of different accounting frameworks on which financial statements had to be built, the group suggested.

On the information technology front, the FEI Canada subsidiary found that three-quarters of survey respondents did not have to make major changes to their IT infrastructure. “Many discovered that their systems were more flexible than had been thought,” according to the report.

In London, IASB’s spirits appeared to be buoyed by the Canadian research group’s findings. The IFRS Foundation issued a news release July 16 describing its welcoming the results of the research.

Late last year, Sir David Tweedie, the charter and former chairman of IASB, suggested in an interview with Bloomberg BNA that costs of transition to IFRS have actually proven to be lower than expected in many cases.

Such costs of change appear to be one factor – particularly among companies -- in the current work toward considering further a shift to IFRS in the United States and in such countries as Japan. Japanese companies, rulemakers and regulators are further along in that process than States-side.

On this side of the Pacific, the process toward approving such a course has taken on the character of slouching slowly – or pretty much indiscernibly – toward IFRS.

• Steve Burkholder, Bloomberg BNA staff correspondent

A copy of the CFERF report is available at http://www.feicanada.org/page/research/cferf-research-reports.