Law Times

PAGE 14 FOCUS AUGUST 11-18, 2008 / LAW TIMES Clock ticking on accounting change for public companies A BY IAN HARVEY For Law Times global economy calls for globally accepted stan- dards, and publicly trad- ed companies should be prepar- ing now for a fundamental shift in accounting practices. As of Jan. 1, 2011, public companies will be required to comply with accounting rules under the International Finan- cial Reporting Standards, and, while that date seems a comfort- able future horizon, the reality is that preparing for that change should have already started. "It's a huge change from the ac- countants' point of view," says An- drew Fleming, a senior partner in Olgilvy Renault LLP, adding there will be some legal ramifications but much of that is being worked out, since it varies from sector to sector. However, he says, the agencies which set the rules have already started the process of issuing advi- sories about the upcoming changes and what's going to be expected. Fleming says the rules of dis- closure may be affected, and dif- ferent industries — insurance and financials, for example — will have to deal with the impact in different ways. Directors of companies should also check with their counsel on their own liabilities flowing from signing off on company statements. Ron Salole, vice president of standards for the Canadian Insti- tute of Chartered Accountants, says the change shouldn't be that much of an upheaval. He says Australia and Europe have already switched over, and the learning from those transition shows it's not as prob- lematic as some might fear. "It's more really about a pro- cess and a mindset," he says, "though there are some choices a company has to make at the be- ginning as to how they are going to handle certain things and that changes from company to com- pany and sector to sector." The current Canadian standard — Generally Accepted Accounting Principles — has the benefit of be- ing a fairly robust and workable set of standards, and there isn't a huge leap to comply with IFRS. "And the fundamentals of ac- counting don't change," he says. "One and one still make two." The change is beneficial, he says, because it sets a standard of accounting globally. "It's a global economy," Salole says, noting what's accepted in one country or region as an ac- counting practice may be unac- ceptable somewhere else. Switching to IFRS will also give better access to Europe for Canadian companies, he says. The Canadian Securities Ad- ministrators is developing guid- ance for public companies and those with fiduciary responsibili- ties, like insurance companies, securities companies, mutual funds, banks, credit unions, secu- rities, and Crown corporations. In a notice last May the CSA provided some initial direction, noting the transition could have a business impact and that regular and clear public disclo- sure would be advisable. How- ever, this is in line with current reporting requirements. Like all disclosures, the ve- racity of the information and the way it is presented are cru- cial, since regulators and stock exchanges could take any range of actions against a company if it fails to provide such disclosures and it becomes clear at a later time tion budget needs to be in place and consideration given to where those resources will come from, action plans need to be in place, a point person to lead the transition appoint- ed, timelines drawn out, and consideration given to hiring experts either on staff or as consultants. IT systems may need updating or reconfigur- ing, existing contracts and fu- ture contract working should be reviewed to ensure compli- ance after transition. It's also these fine details which may need to be disclosed if there are unforeseen issues which could affect the company's performance. 'It's a huge change from the accoun- tants' point of view,' says Andrew Fleming. that the officers and directors of a company had prior knowledge they did not reveal publicly. But as Ogilvy Renault notes in its communications with cli- ents: "Boilerplate disclosure will not be sufficient." "Companies really should have already started the process already," says Salole, noting there are a myriad of details and costs planning involved. Ogilvy Renault has been ad- vising clients to consider several things as they prepare for the transition. For one, a transi- by Ogilvy Renault are: "What impact will the transition have on business activities, e.g., con- tractual obligations affected by financial measures including debt covenants, compensation plans, hedging activities and capital requirements? What is the plan for dealing with, and who is responsible for such matters?" The answers to the questions may be simple, but the process must be invoked to ensure there are no hidden surprises. Salole says the requirement Among the questions raised doesn't apply to private compa- nies, though those enterprises hoping to go public at some point in the future would be well advised to start the process earlier to be compliant when the opportunity to issue an IPO materializes. LT Canadian Competition Law Don Affleck and Wayne McCracken This professional resource is designed to keep you fully informed of current legislation and to give you interpretation and analysis from Canadian specialists in competition law. It covers all aspects of the law pertaining to foreign companies doing business in Canada. Presented in a convenient looseleaf format, it offers complete coverage of all areas of business conduct governed by the Competition Act, including: · An Overview of the Competition Act · Price Discrimination and Advertising Allowances · Telemarketing and Pyramid Selling · Misleading Representations - Criminal and Civil · Price Maintenance · Agreements in Restraint of Trade. ORDER # 8203349-09528 $725 2 volume looseleaf supplemented book annual subscription service 0-88820-334-9 Canadian Franchise Guide Frank Zaid This text provides straightforward commentary, checklists, and statutory requirements that you need to advise and assist your client. It also contains a complete set of forms and precedents, including franchise applications, disclosure and prospectus documents, franchise agreements, and master franchise agreements and trademark documents for franchise financing. ORDER # 8201397-09528 $665 3 volume looseleaf supplemented book annual subscription service 0-88820-139-7 Business Corporations in Canada - Legal and Practical Aspects Paul Martel Authored by Paul Martel, one of Canada's leading corporate law experts, this text offers a comprehensive yet pragmatic analysis of the legal principles involved in all aspects of corporate law, as well as the judicial interpretation and application of these principles. Adapted from Martel's seminal work, La compagnie au Québec – Les aspects juridiques, and expanded to cover the common law, this groundbreaking new publication offers a gold mine of valuable corporate case law emanating from Quebec courts, hitherto poorly publicized outside of that province. With its thorough references to Ontario's corporate statutes, including the Business Corporations Act, the Business Names Act, the Corporations Information Actand the Extra Provincial Corporations Act, this unique publication not only imparts an excellent understanding of Quebec corporate law, it also provides in-depth information on business corporations in other Canadian jurisdictions, in addition to a comparative view of U.S. principles. ORDER # 9240978-09528 $215 1 volume looseleaf supplemented book 4 supplements per year Supplements invoiced separately 0-459-24097-8 Call 1-800-387-5164, (in Toronto, 416-609-3800) or visit us online at www.carswell.com ORDER TODAY! Canadian Trade Law: Practice and Procedure Lawrence L. Herman Based on the author's years of experience as a senior trade lawyer in Canada, this milestone publication brings together in a single collection, the trade laws, regulations, rules, practice, and jurisprudence of the Canadian International Trade Tribunal (CITT) under the Special Import Measures Act. Not only an unequalled collection of priceless primary materials, this publication highlights and provides overviews, for the practitioner and academic alike, of the key Tribunal decisions since the 1980s in the realm of dumping, subsidies and safeguards, and the main trade remedies permitted in Canada under the World Trade Organization agreements. ORDER # 981422-09528 $250 2 volume looseleaf supplemented book Annual subscription service 978-0-7798-1422-0 Carswell's Form and Precedent Collection - Corporate Precedents Gilles Thibault This text is a comprehensive collection of corporate precedents covering the main aspects of a corporation, from inception to dissolution. Encompassing both federal and provincial jurisdictions, precedents in the collection include, articles of incorporation, by-laws, resolutions, governance issues, amalgamations/ mergers, liquidation/dissolution, shareholder agreements, partnership agreements, and various business-related transactional agreements, including share purchase agreements. ORDER # 981371-09528 $550 3 volume looseleaf supplemented book + CD-ROM 4 supplements per year Supplements invoiced separately 978-0-7798-1371-1 AUTHORITATIVE.INNOVATIVE.TRUSTED. Carswell_LT_Aug11_08.indd 1 www.lawtimesnews.com 8/5/08 3:29:52 PM 11891-09528 MM4 07/08

• Cover