As we approach the end of March, most not-for-profit organizations are preparing for their year-end. This means a very busy time for organizations as they finalize their annual reporting and prepare for their annual general meetings. The end of this month also signals the beginning of a new financial reporting landscape for most not-for-profits. In November, the Accounting Standards Board issued Part III of the CICA Handbook—Accounting Standards for Not-for-Profit Organizations [“NPOs”].If your organization has a March 31, 2011 year-end, then first-time adoption of Part III of the Handbook is mandatory on April 1, 2012. However, as the standard requires that the impact of any changes in accounting policies be made retroactively with restatement of prior periods, the adoption timeline is as follows:
April 1, 2011 – Transition Date
April 1, 2012 – Adoption Date
March 31, 2013 – First Reporting Date
Upon transition, there are various accounting policy choices that need to be made for the organization.
So the question is: As a director or officer of a not-for-profit organization charged with financial governance, how do you ensure a painless transition?
The answer can be found by observing the transition process of the many public companies who recently completed their transition to International Financial Reporting Standards or “IFRS”. While the transition is not of the same scale, there are still some best practices that can be leveraged.
1) Don’t wait till the last minute.
Those companies who transitioned easily to IFRS took a proactive approach to the transition. They spent time up-front to become informed about the transition requirements and decisions and developed transition plans to get them from the transition date to the reporting date. This allowed them the time to modify internal processes and systems to accommodate the new accounting policies as well as ensured the users of your financial statements are well aware of changes to reporting changes.
2) Actively involve your assurance provider.
Companies who had excellent working relationships with their assurance providers had a more seamless transition. This ensured that their assurance provider was well informed for the policy choices that were being made, and adjustments were audited on an on-going basis rather than all at once. This allowed work to be completed at off-peak times of the year and ensured that audit committees were not surprised about transition adjustments.
3) Discuss transition decisions with your peers.
As there are choices available under the new accounting standards, many of the public companies found it helpful to have open dialogues with their peers in similar industries. This allowed companies to leverage off of each other’s experiences and provided management with insight that allowed for more informed decisions on policy choices.
In the end the lesson is that a smooth transition process can be obtained by proactively managing the process and engaging in open communication with all those impacted by your financial statements.