My name is James Fuerderer.  I am an audit partner with Meyers Norris Penny and I appreciate the opportunity to participate in the BoardSuite Blog.  I would like to thank BoardSuite for the opportunity and look forward to drafting future blogs.

Effective January 1, 2011, all Canadian reporting issuers and private enterprises must convert to either IFRS or PE GAAP.  Under both standards, at transition date, there is the ability to adjust the carrying value of property, plant and equipment, and intangibles (only available under IFRS) to fair market value.  This provides a one-time opportunity to write up the value of these assets for reporting purposes.  For example, companies may have land, building and equipment that may have been purchased several years ago that has appreciated in value.

By electing to increasing the value of these assets to fair market value, it helps to strengthen the balance sheet and improve debt to equity ratios.  This may make it easier for companies to raise financing and maintain financial ratios under credit facilities.  For example, term leaders will traditionally finance a percentage of the tangible asset values.  The downsize, of course, is higher depreciation in the future, increased likelihood of impairment charges and costs associated with appraising these assets.

Under IFRS, there is the ability to use a revaluation model each reporting period.  The revaluation model would require entities to adjust the carrying value of property, plant and equipment each reporting period to fair market value.

I suggest that each company review its own financial position to determine the merits of using this one-time opportunity to strengthen its balance sheet.