Download IFRS FAQs

IFRS FAQs
1. What is IFRS?
International Financial Reporting Standards (IFRS) are internationally accepted accounting standards that have
been designed by the International Accounting Standards Board (IASB).
2. Why is Canadian Tire changing its accounting from Canadian GAAP to IFRS?
The Canadian Accounting Standards Board has mandated that all publicly accountable companies in Canada
will adopt IFRS by January 1, 2011 in response to the IASB leading the global movement to have firms adopt a
single set of standards throughout the world.
3. When is Canadian Tire transitioning to IFRS?
January 1, 2011. The first quarter of reporting under new IFRS based standards (including IFRS-restated 2010
financial results) will be Q1 2011.
December 31, 2011 – Completion of first full annual reporting period in accordance with IFRS
4. When will Canadian Tire release its comparatives?
We expect to provide IFRS-restated 2010 financial results, which will be used for comparative purposes in 2011,
in early Q2 2011 (likely April 2011), before we release our Q1 2011 results under IFRS.
5. Is Canadian GAAP accounting being continued?
Not for publicly accountable companies in Canada that will adopt IFRS by January 1, 2011, however, privatelyheld companies are not currently required to use IFRS and will continue using Canadian GAAP.
6. What isn’t changing? What’s changing?
What won’t change:
 The assertions underlying the financial statements themselves will not change – existence, authorization,
valuation etc., continue to be valid for all elements of the financial statements under IFRS as they were
under Canadian GAAP. These assertions are implicit in management’s certification of the financial
statements.
 The concept of double entry bookkeeping will be maintained – debits balance credits in every recorded
transaction
 The fundamental Balance Sheet equation of “Assets = Liabilities + Equity” will not change
Key Changes:
 Certain elements of the conceptual framework Canada has relied on for years are either changing or being
subordinated
 The principle of inter-period matching of costs to revenues as well as the concept of conservatism (erring on
the side of the accounting treatment that produces a lower reported net income), for example, appear to
have less bearing on the determination of standards under IFRS
 Some changes to the definitions of assets, liabilities and equity
 Substantially greater use of fair value concepts (vs. historical cost)
 Slight changes to financial statement presentation (primarily to the income statement format)
 Substantially increased required disclosures (qualitative and quantitative) in the notes to the financial
statements
 Substantial changes to accounting recognition, valuation, presentation and disclosure for specific areas:
o Property, plant and equipment
o Investment properties
o Asset impairments
o
o
o
Consolidation of special purpose entities
De-recognition of assets
Provisions, contingent liabilities and contingent assets
7. What are the proposed benefits to moving to IFRS?
 Single set of high quality standards
o Some academics believe that new standards achieve a higher level of conceptual purity
 Enhanced comparability amongst firms
o In similar industries across borders
o Having a uniform set of standards globally should, in theory, allow investors to better assess
relative performance.
 More transparency in disclosure
o IFRS will require substantially more qualitative and quantitative discussion and analysis in the
notes to the financial statements, providing investors with much more information than previously
disclosed in the financial statements and, arguably, even the MD&A.
8. How has the switch from Canadian GAAP to IFRS affected the Company’s key performance indicators
(KPIs)?
Management is still assessing the full extent of the impact transitioning to IFRS will have on our KPIs and
additional information will be available in early April 2011. Management can confirm that there will not be an
impact on same store sales (one of the most prominent metrics used externally) as a result of IFRS.
9. How will IFRS improve levels of disclosure?
IFRS requires substantially more qualitative and quantitative discussion and analysis in the notes to the financial
statements, providing investors with much more information than previously disclosed in the financial
statements, and, arguably, the MD&A. Management will, however, also continue to be mindful of “information
overload” and be as succinct as possible in their disclosures.
10. How will IFRS impact Canadian Tire’s businesses?
The adoption of IFRS is expected to have minimal impact on the Company’s businesses and will not affect how
Canadian Tire’s businesses are run or operated.
11. How is Canadian Tire managing the conversion process?
Canadian Tire has a dedicated internal team that is managing the process as well using external consultants to
ensure that all issues are addressed and employees are fully trained for January 2, 2011. We have an internal
team of experts on staff to ensure that we are able to retain the talent and information learned during the
conversion process to continue reporting under IFRS post-implementation.
12. Will Canadian Tire be providing training or information on IFRS to analysts?
Yes – Canadian Tire will host an IFRS education session for all interested parties on December 6, with a
question-and-answer session hosted by Marco Marrone, CFO and EVP Finance. As well, the presentation,
conference call Q&A and transcript will be posted on the Canadian Tire Investor Relations website at
http://corp.canadiantire.ca/EN/INVESTORS/IFRS.
13. What are Canadian Tire’s peers doing?
We don’t comment on our peers.
14. Are all companies in Canada converting?
All publicly accountable companies in Canada will convert to IFRS by January 1, 2011. Privately held
companies are not currently required to convert to IFRS.
15. How will the conversion to IFRS impact Canadian Tire’s financial results?
We commented on what we believe to be the most important impacts in our Q3 2010 MD&A and we will discuss
further the impacts to our financial results at the IFRS education session on December 6, 2010 and again (likely
in early April 2011) when we release our IFRS-restated 2010 financial results which will be used for comparative
purposes in 2011.
16. Will the conversion to IFRS impact Canadian Tire’s debt covenants?
Under IFRS, the Company still has sufficient operating room within our existing debt covenants and
Management is satisfied that the Company will continue to have significant financial flexibility. We will continue
to monitor our debt covenants with further developments under IFRS and address any issues as they arise.
17. How will the conversion to IFRS impact Canadian Tire’s credit ratings?
While some credit metrics may change, we do not expect the conversion to IFRS to affect our credit ratings with
Dominion Bond Rating Service and Standard and Poor’s .
18. How will this affect the stock price?
Canadian Tire is a publicly listed company that is actively traded on the Toronto Stock Exchange. The price of a
publicly-traded stock is set by supply and demand and is a function of many external factors including current or
forecasted economic and/or political events and general market conditions along with analysts’ and investors’
assessments of a Company’s financial and operating performance. As such, we cannot comment on how the
stock price will be affected pre or post-implementation.
19. With regards to real estate – are you required to mark to market?
No. On page 62 of the 2009 Annual Report MD&A, in the property, plant and equipment section – we’ve
disclosed that we will continue to use the cost model under IFRS. We will be required, however, to disclose in
the notes to the consolidated financial statements the market value of certain of our properties (investment
properties) although this is a small proportion of our total portfolio.
20. Will CTC provide guidance under IFRS?
The move to IFRS reporting will not change Management’s decision-making process related to providing
guidance on the Company’s financial results.
21. How do I get more information? Who do I contact?
The Canadian Tire Investor Relations website at http://corp.canadiantire.ca/EN/INVESTORS has a dedicated
IFRS page where there are documents available for downloading and you will also find a link to the webcast of
our IFRS Education Session which will be held on Monday, December 6, 2010 at 2:00 pm.
You can also contact Karen Meagher, Associate Vice-President, Investor Relations, at
[email protected] or our general investor email at [email protected] for more information.