As many accountants and actuaries know, come January 1, 2011, the International Financial Reporting Standards (IFRS) will be implemented, which will drastically affect how Canadian companies report their employee benefits. And these changes aren’t to be taken lightly.

Kevin Sorhaitz, principal and actuary consultant with Buck Consultants along with company president and CEO Cameron McNeill outlined the significant changes that will occur from the convergence from the current standards to IFRS, at a seminar on Thursday morning.

“This change [to IFRS] is likely to have a major impact on your organization,” said Sorhaitz. “The truth of the matter is, this move to the international accounting standards is a serious one.”

The duo drew light to some of the key changes, which included:

Measurement dates: There will no longer be a three-month lag. IFRS will require companies to value all employee benefits at the balance sheet date. “That means the whole process has to be a lot slicker,” said McNeill. “We have to start talking to administrators, to actuaries, to fund managers to make sure they know your time scale and everyone is good to go.”

Assets: There will be no more smoothing of assets. The IFRS will call for the market value of assets. “You will see a lot more volatility,” he added.

Benefit improvements (Prior service costs) : If the benefit improvements are already vested, then the prior service cost is expensed immediately. If benefits are not vested, then they are recognized over the vesting period. This change could have an impact on collecting bargaining agreements.

Balance sheet: Net assets will be limited to employer future benefit from the surplus, plus unrecognized losses and prior service costs. Also, amendments may be made that will no longer allow some losses to be recognized in the profit and loss account.

Although the changes won’t take place for more than two years, both Sorhaitz and McNeill stressed that companies can’t just sit back and wait. Now is the time to start preparing.

“We need to start communicating with everyone involved. There are many, many people that usually support a benefits plan. Everyone needs to be on board,” said Sorhaitz. “I would start those discussions today.”

To comment on this story, email april.scottclarke@rci.rogers.com.