In 2006, the Canadian Accounting Standards Board (AcSB) published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian generally accepted accounting principles with IFRS over an expected five year transitional period. Our transition date for the conversion to IFRS is April 1, 2011 and will require the restatement for comparative purposes of amounts reported by us for the year ended March 31, 2011. We are continuing to assess the financial reporting impacts of the adoption of IFRS and are monitoring ongoing standards development as issued by the International Accounting Standards Board and the CICA Accounting Standards Board as well as regulatory developments as issued by the Canadian Securities Administrators, which may affect the timing, nature or disclosure relating to our adoption of IFRS.
The transition to IFRS may materially affect our reported financial position and results of operations. As our analysis is still underway and accounting policy choices, as well as exemptions under IFRS 1 First-Time Adoption of IFRS (IFRS 1), have not yet been selected, we are unable to quantify the impact of IFRS on the future financial position and results of operations.
We commenced our IFRS conversion project in 2007 and have established a formal project governance structure with regular reporting. We have also engaged a quality assurance advisor to assist in the project.
Our IFRS conversion project consists of three phases: scoping and diagnostic; analysis and development; and implementation and review. The first phase, which has been completed, involved project planning and resourcing, identification of differences between current Canadian GAAP and IFRS and priority setting. The areas identified to have the highest potential to significantly impact us are rate-regulated operations, property, plant and equipment, intangible assets and asset impairment, and initial adoption of IFRS under the provisions of IFRS 1.
The second phase, which involves detailed analysis and evaluation of options and alternative methodologies available under IFRS and the financial impact of these options, is currently in progress. The impacts on our information systems have been determined. The alternative system approaches were evaluated and the Chart of Accounts solution chosen. System changes are underway.
The following table includes elements of our IFRS transition plan and an assessment of progress towards achieving the key milestones. We are working through a detailed IFRS transition plan and certain project activities and milestones could change. Further, changes in regulation or timing of standard development throughout the project could result in changes to the transition plan. The following tables provide further insight into our IFRS project.
Financial statement preparation
Key activities
Identify differences in Canadian GAAP / IFRS accounting policies
Select ongoing IFRS policies
Select IFRS 1 elections
Develop financial statement format
Quantify effects of change at April 1, 2010 (for fiscal 2011 comparative financial statements)
Status
Scoping and diagnostic phase completed in fiscal 2009, with high-level review of the major differences between Canadian GAAP and IFRS
Highest areas of impact identified and review of IFRS prioritized
In-depth analysis of issues and accounting policy choices is underway
Preparation of illustrative financial statements with note disclosures is in progress.
Training, Education & Communication
Key activities
Determine required level of IFRS expertise within all areas of the company
Ensure appropriate training of key members within Finance
Provide appropriate education and communication to affected departments
Keep key stakeholders informed
Status
Core IFRS project team members completed initial training in fiscal 2009 and are currently enrolled in the “IFRS Award Program, Certificate Level” through the CICA
Interdepartmental workshops provided on specific topics, including property, plant and equipment; IFRS1; and the IFRS Framework
Training requirements identified and training plan determined as implementation plans progress
Ongoing communications with key stakeholders, including direct communication with the Commissioner, our Agent Bank, rating agencies, our Board of Directors, and with investors indirectly through our website
Information technology infrastructure
Key activities
Confirm system upgrades required for IFRS reporting
Review/revise data gathering processes
Review/revise budgeting and forecasting processes
Status
Detailed business requirements to accommodate IFRS reporting complete
Overall system approach selected
System configuration and testing complete
IFRS system implementation planned to be complete by March 31, 2010
Control environment
Key activities
Accounting policy determination, documentation and implementation
MD&A on going communications
Status
Analysis of control issues underway as part of the detailed implementation plan
Documentation of policies and procedures underway
Business policy assessment
Key activities
Financial covenants assessment
Compensation arrangements assessment
Customer and supplier contract evaluation
Status
All relevant GAAP-dependent covenants and contracts have been identified
Analysis to determine affects of IFRS on existing covenants and contracts underway
A summary of progress in the review of areas originally identified to have the highest potential to impact us is as follows:
Rate-regulated operations: On July 23, 2009, the International Accounting Standards Board (IASB) published Exposure Draft “Rate-regulated Activities" to define regulatory assets and regulatory liabilities, set out criteria for their recognition, specify how they should be measured and require disclosures about their financial effects. We reviewed this exposure draft and responded to the IASB requesting clarification of scope as defined in the exposure draft. Over 150 comment letters with significantly differing comments and views were received by the IASB. The IASB plans to begin discussing the comments received in the three months ended March 31, 2010.
Property, plant and equipment: The capitalization of inspections and major overhauls of our vessels is the largest change affecting us. We are currently working to:
define and identify inspection and major overhaul for each vessel;
quantify those inspections and major overhauls for reclassification of property, plant and equipment at transition date; and
determine the best solution for tracking and reporting of these costs.
As this review is in progress, the effect on our consolidated financial statements of the adoption of this guidance cannot be quantified at this time.
Intangible assets: There is substantially no change in IFRS from Section 3064, Goodwill and Intangible Assets, which we adopted April 1, 2009. The adoption of this guidance is not expected to have any significant effect on our consolidated financial statements.
Asset impairment: We are currently defining indications of impairment and determining a process to track any asset impairment and potential subsequent reversals. The adoption of this guidance is not expected to have any significant effect on our consolidated financial statements.
IFRS 1 First-Time Adoption of IFRS: The elections and exemptions under IFRS 1 are being reviewed, including proposed amendments relating to rate-regulated activities. Some decisions have been made while others are in progress. As this process is not complete, the effect on our consolidated financial statements of the adoption of IFRS 1 cannot be quantified at this time.
International Financial Reporting Standards