IFRS Checklist for companies

By Andrew Hay.

Key Points:
Directors and executives need to ask some practical questions in order to determine their company's response to the standards.

Directors, audit committee members and other responsible officers of a company need to be asking and determining whether the new international accounting standards will have a material impact upon their financial accounts and possibly their operations. If so, the actual material impact needs to be clearly identified and any issues addressed. At the minimum, adequate disclosures need to be made to the market and/or the stakeholders of the company.

The following may serve as a useful checklist to determine whether a company will need to have a good hard long look at its current accounting systems and practices:

• Does the company have high levels of internally-generated intangible assets on the balance sheet, such as mastheads and brand names?
• Has the company been active in acquisitions in recent years, where subsidiaries were acquired at a premium but are currently under-performing or expected to under perform? Does the company engage in merger and acquisition activities?
• Does the company have high levels of research expenditure that is currently capitalised?
• Does the company have external borrowings that require it to maintain certain balance sheet ratios?
• Does the company have a staff defined benefit superannuation scheme?
• Does the company have an employee, directors or management share or option incentive scheme?
• Does the company have significant income or expenses in foreign currency?
• Are contracts written or dependent on an Australian dollar and foreign currency exchange rate?
• Does the company have a policy on payment of dividends or dividend payout ratios?
• Does the company capitalise expenditure as an asset in anticipation of future earning streams?
• Does the company use derivative financial instruments and other hedging activities?
• Does the company account for intangible assets in its financial accounts and what is the nature of those intangible assets? Is there an active market for those intangibles? Are impairment factors likely to have been triggered?