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Financial reporting standards conversion slated for January 2011

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Human resources professionals need to pay close attention to the ways International Financial Reporting Standards (IFRS) will affect compensation plans, training and retention of key resources, Ernst & Young says.

"With IFRS conversion slated for January 2011, it's time to start thinking about these crucial issues now," says Bruce Sprague, Ernst & Young Human Capital partner. "In many business sectors, IFRS will change earnings, earnings per share, and financial position; which will impact the entire organization."

Incentive thresholds might be met (or become unachievable) as a result of IFRS adoption simply because reported metrics could change, including those used for incentive compensation thresholds such as income, revenue, and net asset value.

So, where should human resources start? Ernst & Young suggests the following five key areas to help HR professionals get going on IFRS.

1. Compensation committees will need to work closely with accounting and management functions to understand the new processes' potential impact on remuneration.

2. A shortage of trained IFRS resources is another significant challenge companies will face. Since comparative data will be required as early as 2010, companies need to act now. Does your organization have enough manpower to handle IFRS conversion? Numerous areas of the company, including information technology, may need additional people on hand, especially over the next few years. And IT specialists are already at a premium in Canada, especially those who understand accounting implications.

3. The next generation of accountants and finance specialists will need to speak fluent IFRS. Universities are adapting their curriculum - but are companies offering the training required? It's time to start integrating IFRS seminars and professional development into the finance departments of Canadian companies.

4. Human resources committees might also want to develop succession plans for key IFRS-trained technical resources, and revisit the company's compensation strategy. This could help reduce the risk of losing key finance people.   

5. Last but not least - human resources should be working with their communications counterparts to ensure any HR changes resulting from IFRS get the talk time they need now, and that everyone understands what's happening, and why.

The new standards are quickly becoming the reporting benchmark in many parts of the world. To date, more than 100 countries either require or permit the use of IFRS, including Canada. It's a major change management project that can reach into all corners of a business. The best advice regarding the timing of the conversion project is to start as early as possible.

To learn more about what human resources teams need to do now to prepare for IFRS conversion, visit

www.ca.ey.com

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