IFRS en Bombardier

7/29/2019 IFRS en Bombardier

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Implementation of IFRS at Bombardier:

A practical experience Jean ParMexico, September 30, 2010


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Introduction to the IFRS Project

Planning phase

Design and solution

Overview of Bombardier

Implementation roll-out

Conclusion


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Bombardier - Consolidated overviewFields of activity

(as at January 31, 2010)

Aerospace

Revenues: $9.4 billion(48% of total revenues)Backlog: $16.7 billion

Employees: 28,900

Transportation

Revenues: $10.0 billion(52% of total revenues)Backlog: $27.1 billion

Employees: 33,800


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Europe48%

United States23%

Other4%

Asia-Pacific20%

Canada5%

Bombardier - Consolidated overviewBreakdown of revenues by geographical region

(fiscal year 2010)

$19 billion


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Europe49%

United States12%

Canada32%

Other4%Mexico

3%

Bombardier - Consolidated overviewBreakdown of revenues by geographical region

(as at January 31, 2010)

63,000


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Planning phase

Design and solution



Conclusion


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Timeline and impacts of the change in Canada

IFRS required for public entities in 2011

Opening balance sheet as at beginning of 2010 Canadian Securities Administrators allowed early

adoption (very few Corporations took this opportunity)

Increasing regulatory MD&A disclosures

More use of fair value measurement

Volatility from the impairment model

Likely reduction of equity as a result of IFRS 1 choices


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Dec. 312011

Dec. 312008

Update on progress andtimeline

Status on key elements

Dec. 312009

Dec. 312010

IFRS

Opening B/S

Reporting underIFRS

Update on progress, timeline andkey elements

Describe major differencesidentified, including assumptions

Decisions made on accountingchoices available

Quantified impact of IFRS oneach line of F/S

Public disclosure requirements

Certain procedures may have to be implemented as of the opening B/S date


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Project is split in four phases

May 1, 2007 Sept 30, 2009 Feb 1, 2010

Detailed assessment

Design and solution development

IFRS openingbalance sheet

(transition date)

Initial awareness


First reportingunder IFRS

Apr 30, 2011

Follow-up on IFRS underreview by the IASB


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Mostly conducted by existing finance staff

GAAP expertise

Internal and external financial reporting responsibilities

Project management expertise - external hiring

Assisted by internal experts from various functions

Finance lead initiative

Provides on-the-job training


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Planning phase

Design and solution



Conclusion


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Initial critical decisions

What do we want to achieve with the project?(Three possible approaches)

1. Minimize differences

This approach minimizes costs and resources by always selectingthe accounting treatment closest to current Canadian GAAP

This is the preferred approach when there are significant timeand/or resource constraints

Approach selected by many European companies

2. Adopt best practices accounting treatments

When choices are available, this approach allows for validating

accounting policies, improving quality and optimizing financial

information

Requires significant time and resources, and is therefore morecostly

Likely unrealistic for most companies, unless an early start is

planned with significant dedicated resources


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3. Mixed approach

Selection of approaches 1 and 2, based on a cost/benefitanalysis wherever a choice is available

Final position in the range of possible alternatives under themixed approach depends in great part on resource

availability and time constraints

Mixed approach was selected to ensure a proper

balance between costs (available resources) andbenefits (best practices)

Initial critical decisions (contd)


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Senior management buy-in on project

Management at upper levels of the organization must supportthe project

Organize a meeting with senior management:

Explain that the conversion is mandatory

Broad outline of proposed project conduct

Raise awareness of resources required for the project



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Approach to identification of differences andchoices

Build the teams responsible for technical analysis

Analyze standards and identify differences between LocalGAAP and IFRS and identify required and optional changes

Detailed comparison of the two GAAPs (no reliance on astandard checklist)

Avoid simplistic conclusions: a detailed review raises asurprisingly large number of issues (e.g. long-term contractaccounting)

Lack of detailed guidance unlike US GAAP

Obtain auditors agreement



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SteeringCommittee

SteeringCommittee

Aerospace ProjectManagementAerospace ProjectManagement

Validate and quantifydifferences and options

Inform and submitfor decisions

Monthlymeeting *

Weeklymeeting

Transportation ProjectManagementTransportation ProjectManagement

Timelyrequests& training

* More frequently if required

Operations:Division ControllersProject ControllersHeads of Finance

Heads of AccountingGroup Finance

Shared Services:Legal DeptTax DeptIT Dept

ProcurementHuman ResourcesStructured Finance

Other stakeholders

AuditorsExternal Advisor

Overall Project ManagementCorporate Project

Define the project organization structure


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Transportation Project Organization Structure

Transportation ProjectManagement

Support Staff(4 individuals)

PPC TTSServices LRV LOC

BOG LUL RCS AUS HOF / HOAGroupConso

MLN

Otherstakeholders:Taxes, Legal,

Procurement,SOX, IT, HR

Transportation Extended Team

Define the extended project team


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Composition

CFO

V.P. Finance:

Corporate

Aerospace

Transportation

Corporate V.P. Financial Reporting

Steering Committee

The key decision-makers for financial matters must bemembers of the Steering Committee, including the CFOof the Corporation


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Operations

Provide opinions when choices are available

Collect data and quantify proposed changes Prepare required documentation

Shared Services

Participate in the project for special requests (e.g. related taxmatters)

Assist with data collection for some specific topics (e.g. complexcontract accounting analysis or issues related to securitization)

Review implications on related matters such as debt covenants,employee benefit arrangements and investor relations

All levels

Implement process and system changes

Role of other internal stakeholders


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Assist in ad hoc requests on interpretation of standards

Review documentation of differences in GAAP: To confirm their relevance and completeness

In certain cases, to provide their views on industry

practices

Potentially assist with respect to IFRS training sessions

Audit the adjustments

Role of the Auditors


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Identifying issues related to on-going changes to IFRS

Final scoping of the project is difficult due to expectedchanges to IFRS during the conversion period (the finalscope of the project is a moving target)

The difficulty in monitoring the proposed changes toIFRS is compounded by the fact that relying on thecontent of an exposure draft may lead to inefficiencies ifits content is modified before final adoption

Other decisions (contd)


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Dual GAAP reporting period

The Corporation remains a Canadian GAAP reporting

issuer until its conversion to IFRS

More than 100 legal entities currently report underCanadian GAAP for consolidation purposes (localstatutory accounts are reconciled to local GAAP,sometimes manually)

Systems cannot capture data under two measurementbasis and the closing schedule requires measurement inthe reporting GAAP (i.e. no time to reconcile manually)



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Decisions to be made under IFRS 1

Allows limited fresh start measurement of selected balancesheet items (may have a major impact on the project)

General principle is retrospective application by restating the

financial statements using the latest version of IFRS Fourteen optional exemptions to this general principle

(e.g. business acquisitions, employee benefits)

In addition, entities must comply with certain mandatory

exceptions to the retrospective application rule(e.g. hedge accounting)

Key decisions under IFRS 1 must be made early

IFRS 1 provides a required framework for first-time adopters, whichsupersedes the transitional provisions of individual standards



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Planning phase

Design and solution



Conclusion


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Core teams identify all differences and optional changes inline with decisions made

Extended teams

Receive focused training Perform data collections with respect to selected changes (only

after having received the targeted training)

Prioritize the tasks to address early on those that require the most

time to implement

Develop and test methodologies to measure the differences inGAAPs

Core and extended teams must raise opportunities for

improvements. For example:

Align financial year ends of subsidiaries

Standardize procedures across the operating segments andfunctions

Design and solution


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IFRSConversion Universe

Internalstakeholders

IT Systems

SOXDocumentation

ExternalMD&A, F/S

and AIF

Creditors

Analysts

Investors

Board andAudit

Committee

Credit Rating

Agencies

Covenants andOther

FinancingClauses

CompensationPlans

Internal F/S,Budgets and

Forecasts

Accounting

Policies andProcedures

Taxes

Internal Audit

Treasury

M&A/StructureFinance

Risk

Management

InternalControls and

Processes

Legal

HR

IT

Financial reporting

Externalstakeholders

Internal processes

Manage IFRSConversion

Investors

Relations

ExternalAuditors

Line up the rest of the organization


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Other tasks

Design and develop financial reporting processes, business-related processes and operational systems

Prepare a model of the IFRS financial statements

Identify all additional disclosures and their impact on systemsand processes

Design tools to prepare IFRS comparative information

Provide selected training across the organization Assess impact and define a plan of action for the following

related topics:

Budgets/forecasts and compensation plans

Debt covenants or other relevant financing clauses

Fair value measurement will bring a higher degree ofearnings/balance sheet volatility


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Other tasks (contd)

Assess impact (contd):

Relationship with credit rating agencies

Update accounting policy database

Need to inform/train other stakeholders such as Boardmembers, investors and analysts (consider the benefit ofhaving information on the corporate Web site)

SOX documentation, internal audit, etc.

System changes

Work may be better allocated to pre and postimplementation phases

External and internal reporting and disclosure processes (F/S,MD&A and AIF as well as shareholder, investor and employeecommunications)


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Test roll-out systems and processes

Perform data gathering and prepare IFRS opening balancesheet and comparative financial statements

Prepare full IFRS financial statements

Communicate impact and new policies to externalstakeholders


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Planning phase

Design and solution



Conclusion


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Important Decisions: Summary

1) Start the project early in order to:

Reduce risks related to late decision (e.g.: missingrequired implementation procedures at the transition date)

Maximize benefits from the project (a unique opportunityto improve accounting practices).

2) Enroll the organization in the project:

Establish an internal organizational structure dedicated tothe project.

Obtain support from senior management at the launch ofthe project, including the Audit Committee.

Ensure cooperation from all concerned departments anddetermine the level of collaboration from externaladvisors.


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Implementation of IFRS at Bombardier:A practical experience

Jean Par

Mexico, September 30, 2010

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IFRS en Bombardier