related to the various accounting frameworks. This presentation is bringing clarity to an

IFRS world, IFRS quarterly technical update. I am Jon Kligman, your host for this webcast.

I am joined by others from our National office. Before I tell you about our agenda, a couple

of housekeeping items. If you would like a copy of the slides for reference, they are

available for download on the same webpage that you access the webcast. You can direct

colleagues to the webcast link by referring them to Deloitte Canada Center for Financial

Reporting, which is accessible at iasplus.com. Simply select Canada English from the dropdown

menu at the top right of the webpage. Now let’s get onto our agenda. First you’ll

hear from Kerry Danyluk, who’ll provide some year-end reminders and discuss feedback

and commentary received from the regulators. After Kerry, Alexia Donoghue will discuss

financial reporting implications, various economic developments that we have been experiencing.

After Alexia, we’ll turn the presentation back over to Kerry, who’ll provide an update

on upcoming IASB projects. I would like to remind our viewers that our comments on this

webcast represent our own personal views and do not constitute official interpretive accounting

guidance from Deloitte. Before taking any action on any of these issues, it’s always

a good idea to check with a qualified advisor. Please note that we are not issuing professional

development certificates for this webcast. Please check with your institute or order

regarding potential continuing professional development credits. I would now like to welcome

our first speaker, Kerry Danyluk. Kerry joined Deloitte as a Partner in 2006 with over 20

years’ experience in public practice, standard setting and industry. Kerry is currently a

Partner in Deloitte’s National Assurance and Advisory Services and specializes in a

variety of areas of IFRS, ASPE and not-for-profit accounting. Over to you Kerry.

Thanks Jon. Well if we move into the first slide here on the year end reminders and regulatory

feedback, I guess the first bit of good news, hopefully it’s good news, is that for this

year end there really are not a whole lot of amendments or at least not large amendments

that are effective, that people need to worry about adopting for this year’s financial

statements. There are really instead kind of a series of fairly narrow scope amendments.

We have a list of them, a summary of them provided in Appendix A to this presentation

for your reference and we also went through in some detail related to these amendments

in the first quarter webcast and the link is provided there on your screen. So, one

of the things that we did want to talk about and again this is a little bit of a repeat

from the third quarter webcast, but we did want to just remind people for year end, some

of the things that the Canadian securities administrators have gone through in their

staff notice that they issued in July. So, this slide just has a series of little summaries

of some of the different areas that the regulators focused on.

  So, first of all the operating segments. So,

what the regulators were noting here is that there were some failures to disclose revenue

by geographic area and by major customers. So, as you know IFRS 8 includes both of these.

So, on top of just the regular disclosure of the operating segments and the reportable

segments, there are some requirements to also provide revenue by geography and some disclosures

surrounding major customers if there are some and the regulators noted that in some cases

filers were being deficient in this regard. So, just a little reminder there. In terms

of business combinations, the observation there was it was sometimes unclear whether

intangibles have been separately identified in the purchase price allocation and as you

know you have to separately identify all the identifiable intangibles separate from goodwill,

goodwill does not get amortized, whereas the intangibles would tend to, so that kind of

makes bit of a big difference and I guess just another reminder that there is an allocation

period that’s allowed under IFRS 3 the Business Combinations standard. So, if you have done

a business combination late in the year and you didn’t have a chance to finalize the

purchase price allocation, just a reminder that there is a little bit of a time period

that you are allowed up to one year to finalize and gather all the information that you need

to fair value all the separately identifiable items that were required in the business combination.

The next point relates to fair value measurement in IFRS 13. So, IFRS 13 is a reasonably new

standard and the regulators are still observing some areas of comment regarding the description

of valuation techniques and inputs used especially for the Level 3 fair value measurements and

so, you’ll recall that Level 3 fair value measurements are the ones that have the most

subjectivity to them. They are the ones that would have some significant inputs or data

points that are not market observable. So, the standard really requires you to go a little

bit further in terms of describing those non-market observable inputs and perhaps also providing

some sensitivity analysis around that and so the observation there is that may be people

were not being fully compliant with all of those requirements or at least those were

the questions being raised. And then the last point on the slide is impairment

of assets, which has of course been a bit of a theme for the last couple of years now

and so the points here are there are disclosure requirements when an impairment loss has been

recorded and so just to keep in mind that compliance with all of those situations, the

things that gave rise to the impairment and so on, how the impairment was calculated,

some of the assumptions there and the significant areas of judgement. And also remember that

there is a requirement to, of course you know goodwill will tend to be tested every year

for impairment, but for other assets it’s an indicator based test and so just making

sure to keep in mind the indicators and making sure that testing is done when indicators

are present, which might even be in the quarters as well as year end.

So on the next slide, something we haven’t talked about before is some observations coming

out of the SEC and these are SEC comment letters out of the US for companies, foreign private

issuers who file using IFRS. So, these would include certainly Canadian filers who are

SEC registrants and use IFRS. So, the SEC comment letter, Deloitte’s report on that

came out in October 2015 and I think in a couple of slides we have a link, to where

you can find that report if you are interested in going and looking at it, but just for now

a couple of observations regarding some of the commentary that has been raised by these

regulators about companies using IFRS. So, the first comment relates to the situation

where expenses are presented by function. So, as you could see on the slide, we have

got cost of sales, we have got administrative expenses and so on. So, basically kind of

a typical example of functional presentation. So, IAS 1 does require that when this functional

presentation is used that also some disclosure should be provided in the notes regarding

the cost by their nature and so an example of nature would be depreciation, employee

benefits expense and so on. So, when you follow this type of presentation you are supposed

to be providing information about those costs in the notes to the financial statements and

so, just a reminder because the SEC has observed that, that is not always happening. 

On the next slide, the point is the use of the line item operating expenses. So, under

IAS 1, you are not required to have this line called operating expenses in the income statement,

but it is a fairly common presentation and if you do use it, there are some parameters

that you can find in IAS 1 in the basis for conclusions, we have quoted the paragraph

reference there on the slide. So, the point here is that we should not be excluding things

that are of an operating nature from the operating activities part of the statement. So, for

example, if we had restructuring expense, it should be up above the operating activities

line, inventory write-down. So, there are a couple of examples that are actually given

in the standard of things that you would not expect to be excluded from that income from

operations line and so, beyond the examples that are given in the standard, there is some

judgment involved of course. Oftentimes, for example, we do see finance expenses below.

So, it is a matter of judgment about where things appear in the financial statements,

but I guess the point is if things are being excluded from the operating activities line,

in other words presented below that, it is possible that, that presentation will be queried

if the reviewer feels that things of an operating nature have been moved too far down, i.e.

below the operating activities line on the income statement.

The next area of comment was around consolidation disclosures. So, a couple of points here.

So, first of all, the IFRIC, so the interpretations committee of the IASB issued a rejection notice

in July 2015, which is noted on the slide and what this means is that they were posed

a question and decided not to provide further clarification in the form of a project to

develop may be some new standards in this area or clarifications to the standards, but

when they did report on this and the reasons for not taking on this issue, the question

that was raised by the person submitting the issue was basically to what extent can we

summarize our disclosures around joint ventures and associates. So, this is getting at IFRS

12, which again is a reasonably new standard where there are some disclosure requirements

regarding material joint ventures and associate. So, basically the investees that you would

equity account for and so the question was can we add them together, aggregate them if

we have got more than one and really the IFRIC rejection notice makes it clear that the expectation

is that if they are material they should not be aggregated and the information should be

disclosed separately for each one. So, that’s one point to keep in mind.

The other area is towards the bottom of the slide and talking about some examples of judgments

that need to be disclosed related to consolidation. So, for example, if you concluded that you

had control over an investee even though you held less than 50% of the voting rights that

would be an accounting judgment that would trigger some disclosure and similarly if you

concluded no control and you hold over 50% of the voting rights that would also be another

disclosable accounting judgment. So, just keep in mind that you have paid attention

to all the accounting judgment disclosure and make sure that the key judgments are being

disclosed in the financial statements, that’s basically the nature of the comments in this

area that the SEC has observed and then just finally on this slide, the next slide is just

a little wrap up of the summary of some other commentary that they have raised.

  So, first of all, the first line is about

presenting additional line items where such presentation is relevant to the user’s understanding.

So, the point here is again from IAS 1 and it is fairly judgmental and not really prescriptive

at all, but what it is saying is that if you need to provide or you should be providing

some additional information in the income statement or elsewhere in the financial statements

in order to help with the understanding, if that’s important information, then those

line items should be added and so that was the observation on this point. The next one

relates to mining and mineral properties and potentially oil and gas as well where the

company is following IFRS 6 and has exploration and evaluation expenses or assets and so,

the commentary here from the regulators is requesting some clarification for accounting

policies regarding the types of expenditures that are included in that E&E category and

then finally just some more points on consolidations and around the judgments and in particular

whether joint arrangements qualified as joint ventures rather than joint operations. So,

if you have those kinds of investments, joint arrangements, you are probably familiar with

the judgments that might get made there and if there are such judgments, they should be

recorded and disclosed in the financial statements. So, Jon, with that I’ll turn it back over

to you. Okay, thanks Kerry. I would now like to introduce

our second speaker, Alexia Donoghue. Alexia is a Senior Manager with the National Assurance

and Advisory Services of Deloitte Canada. In this role, she is responsible for monitoring

quality standards for Deloitte’s public company client filings. Alexia also provides

consultative advice to attest and non-attest clients on general securities filings and

financial reporting matters. Over to you Alexia. Thank you Jon. We are now going to spend some

time looking at some of the trends in the current economy and how this may affect your

financial reporting. So, our first topic is foreign currency and though I am going to

discuss the next couple of slides in the context of the Canadian dollar, the comments are applicable

to a number of other currencies as well. So, over the last year or the last 12 months,

the Canadian dollars declined significantly with an average conversion of 0.797 USD compared

to 0.914 USD for the 12 months ended November 2014. This volatility is expected to yield

significant foreign exchange movements through the statement of income and/or the statement

of other comprehensive income or loss depending on the currencies in which companies operate.

It’s not all bad news with regards to the depreciation of the Canadian dollar. For example,

there may be some entities with US dollar local currency transactions where when they

are converting to Canadian dollars will see an uptick in the carrying value of their net

assets. Given the movement in the Canadian dollar and the volatility, it is expected

that entities will update their IFRS 7 financial instruments disclosures to address new and/or

increased risk associated with foreign currencies and the impact that it has on their financial

results. It is also expected that entities will be revising their MD&A disclosure and

based on the review of some recent MD&A disclosures, in my opinion some of the most effective communication

of the impact of foreign currency changes has been disclosures that have isolated the

foreign exchange component when discussing period over period results.

In addition, we would just like to remind listeners that functional currency is the

currency of the primary economic environment in which an entity operates and it is determined

in the context of the primary and secondary indicators that are set out in IAS 21 and

is done on an entity by entity basis. So, to the extent that you are a company that