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New and noteworthy information you can use IFAC releases 2006 handbook The International Federation of Accountants’ (IFAC’s) 2006 Handbook of International Auditing, Assurance, and Ethics Pronouncements is now available in print and in several electronic formats. It includes all pronouncements issued by the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants through December 31, 2005. The handbook includes the following IAASB pronouncements:
The 2006 handbook features the following new standards issued by the IAASB in 2005:
In addition, the handbook contains the revised Code of Ethics for Professional Accountants, issued by the International Ethics Standards Board for Accountants in June 2005. The updated Code establishes a conceptual framework for all professional accountants to ensure compliance with the five fundamental principles of professional ethics. These are integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. The Code, which becomes effective June 30, 2006, applies to all professional accountants, including those in business and industry, public practice, the public sector, and academia. Two electronic versions of the 2006 handbook are available: a free PDF downloadable version and an online eComPress version. The eComPress version has features designed to make accessing the pronouncements more user-friendly.
Visit the IFAC online bookstore at http://www.ifac.org/Store for more information.
Profiting the Crown: National Business Book Award winner This year’s National Business Book Award winner is Matthew J. Bellamy for his book Profiting the Crown: Canada’s Polymer Corporation, 1942-1990 published by McGill-Queen’s University Press. The announcement was made in late April at an award luncheon in Toronto. In his book, Bellamy chronicles the story of crown corporation Polymer Corporation, a pivotal player in the Canadian economy as the nation’s sole producer of synthetic rubber until it was sold to the German firm A.G. Bayer. He examines the company’s profitability under the management of C.D. Howe and its role as a useful public policy tool during the Second World War. In its 21st year, the National Business Book Award is considered one of Canada’s most prestigious and respected literary awards. Co-sponsored by PricewaterhouseCoopers LLP and BMO Financial Group, the National Business Book Award honours the author of an outstanding business-related book published in Canada with a $20,000 prize. For further information visit www.pwc.com/ca/nbba/.
Fortune 500 Boards encourage three- to five-year CEO succession planning Directors on boards of Fortune 500 companies with successful CEO succession records have reportedly increased the rigor of the succession process and agree on 10 steps essential to long-term corporate success, according to The Role of the Board in CEO Succession, a best practices study published recently by the National Association of Corporate Directors (NACD) in collaboration with Mercer Delta Consulting in the U.S. Citing increased corporate governance pressures and CEO departures, directors reported CEO succession as the number one concern of their boards today, reflecting an evolving shift away from a CEO-led board concurrence process to a board-run CEO-input process. A majority interviewed prefer to see the board actively involved three to five years prior to an expected CEO transition, earlier than current practice. Directors agreed this advance planning is essential to a board’s ability to develop and groom CEO-designate candidates internally, which also emerged as a best practice for succession. Reasons cited included unfamiliarity with candidates, culture and products, and lack of loyalty, all of which contribute to the high failure rate when outsiders are recruited to assume the CEO position. “Demands on leadership and increased accountability facing today’s corporate boards have undoubtedly compelled many global companies to place a premium on the way they plan for leadership change,” said David Nadler, chairman of Mercer Delta Consulting. “The constant, collaborative process is crucial to ensuring a successful transition, and counter to countless examples of failed successors, it must begin the first day a new CEO takes the helm.” Mercer Delta surveyed 23 companies that recently underwent a routine CEO succession and were selected by a panel of corporate governance experts based on their demonstrated exemplary CEO succession planning. For a list of the 10 best practices visit www.mercerdelta.com.
Canada’s pension crisis deepens Sixty-one per cent of Chief Financial Officers (CFOs) say the pension crisis in Canada is widespread and likely to persist beyond the next few years, a dramatic increase compared to just two years ago, according to survey findings recently released by The Conference Board of Canada and Watson Wyatt Worldwide. The preliminary findings of the third annual Watson Wyatt Worldwide-Conference Board of Canada Survey on Pension Plan Risk, released at the 2006 Pensions Summit: Time for Action in Toronto, were based on responses from 187 organizations. Regarding the state of the pension crisis, the key highlights are as follows:
“CFOs are increasingly coming to the realization that the pension deficits of recent years have not yet turned around and they are less optimistic that plans will rebound any time soon,” said Gilles Rhéaume, vice-president, policy, business and society for the Conference Board. “With the potential of labour shortages looming in the near future, due to the aging workforce, organizations and governments will have to examine ways to meet these challenges.” “Canadian organizations continue to divert funds from other business activities into stabilizing their pension plans, increasing the urgency of managing pension risk for most CFOs and human resource (HR) executives,” said Ian Markham, director of pension innovation, Watson Wyatt Canada. “Many organizations are also making significant changes to their defined benefit plans to scale back benefits and shift more responsibility to plan members.” A summary report of the findings should be available this summer. For more information visit www.conferenceboard.ca.
Managing the labour shortage: where to start? While most of Canada’s C-suite is well aware of escalating labour shortage implications, many are still struggling with where to start managing the issues amidst a number of misconceptions and myths, according to a recent Deloitte study. The impact of the labour shortage is real, both immediate and longer-term. While 83% of Canada’s medium-to-large companies are already experiencing a shortage of skilled labour, more than 60% expect the problem to become more pronounced in the future. The three common market misconceptions about the problem are:
There is no ‘one-size-fits-all’ solution to the dilemma, but Deloitte points to six questions every CEO needs to address as a starting point:
For more information visit www.deloitte.com.
Forces reshaping capital markets: middlemen will feel the squeeze Insiders are forecasting a fully connected and transformed financial markets industry by 2015, as three rapidly emerging forces combine to create a rate of change unseen since the 1970s. And, in a notable new twist, it’s the individual investor who stands to gain power and prestige. In a recently released global survey, IBM, in cooperation with the Economist Intelligence Unit, spoke to more than 400 executives who run 296 of the world’s largest exchanges, broker/dealers, asset managers, custodians, hedge funds and regulatory bodies. These executives overwhelmingly believe that more profit will flow to investors in an increasingly transparent marketplace. Traders, analysts, fund managers — all who stand between investors and their money — will come under withering pressure to deliver or depart by 2015. Although merger-mania among the world’s exchanges grabs headlines today, three forces more primal than consolidation are expected to rearrange the structure of global capital markets by 2015. Complete marketplace transparency, instantaneous and uniform global networks and a growing need to commit to a permanent state of risk are the underlying forces bubbling up to shape the new single market for the world’s capital. The trader is dead, long live the trader! A financial markets renaissance is the name of the new study. “Power will shift from the traders who have benefited from merely facilitating transactions to the buyers and sellers who take positions on either end of the trade,” said Sarah Diamond, head of IBM’s financial markets consulting practice. “Ultimately, firms will need to reexamine their relationships with risk to uncover new ways to grow in the next decade’s renaissance.” The full research results and whitepaper are available at www.ibm.com/services/fm2015.
Impact of Basel II sinking in Data management issues are creating unique and unexpected challenges for Canadian banks, as national and global financial institutions alike focus on meeting the requirements of Basel II, an international accord created to promote greater consistency in the way banks and banking regulators approach risk management. Survey results published recently by Ernst & Young LLP under the title Basel II: The Business Impact, indicate that financial services institutions worldwide are taking Basel II seriously as bankers believe compliance will bring several important benefits, including more dynamic portfolio management, greater use of hedging and derivatives and an increased use of risk-based pricing. In Canada, among the major banks, the age and complexity of older, so-called “legacy” banking systems — combined with the information demands resulting from the sophistication of more recent risk analysis and reporting tools — has resulted in Canadian institutions taking longer to execute Basel II than originally anticipated, according to Paul Battista, a partner who leads Ernst & Young’s financial services advisory practice in Toronto. “Although Canadian banks are more advanced with their implementation of the Basel II accord than our American neighbours, like their global counterparts banks here underestimated the initial time and effort needed to meet the accord’s requirements,” says Battista. “The difficulty of extracting and cleansing inaccurate or inconsistent data from a myriad of source systems is a key reason why most of the Big 5 banks in Canada have incurred Basel II implementation costs well in excess of the global average of million.” Looking beyond the immediate implementation challenges, the major Canadian banks are beginning to turn their attention to how the technology, risk and process changes driven by Basel II can benefit their organizations. “The investments required to support the accord’s implementation were non-negotiable as they were demanded by the Canadian banking regulator OSFI,” says Battista. “But with the bulk of these significant investments made, there is increasing focus on how to find ways of strategically using the new risk data and reporting to improve the business.” For more information visit www.ey.com.
High tech Storage portability If you’ve been working with the same computer system for any length of time, finding enough backup storage inevitably becomes a challenge. Maxtor OneTouch III Mini Edition is an attempt to better manage that challenge in a portable format. It has a 100GB capacity — ample room to store videos, photos, graphics, music, and more in one location. It offers portable storage with software for simple backup, sync and security for your files on the go. Weighing less than 8 ounces, the Mini Edition is a useful tool for anyone who needs an easy, secure way to carry their up-to-date digital portfolio. It also features automated backup scheduling, Maxtor DriveLock and Encryption for two levels of additional security, as well as automatic synchronization of data between two or more computers. The system includes a USB 2.0 interface and is PC compatible. For more information visit www.maxstore.com.
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