(Source: Business Wire)
Brookfield Properties Corporation (BPO: NYSE, TSX) announced today that
it has been granted exemptive relief from the Canadian securities
regulatory authorities to prepare its financial statements in accordance
with International Financial Reporting Standards ("IFRS") for financial
periods beginning on or after January 1, 2010, one year ahead of the
mandatory conversion date for Canadian public companies. In light of the
relief granted, the company intends to adopt IFRS commencing with its
interim financial statements for the three months ended March 31, 2010.
Those financial statements will also include comparative results for the
periods commencing January 1, 2009.
IFRS Conversion Plan
Brookfield Properties has prepared a comprehensive IFRS conversion plan
which addresses changes in accounting policies, the restatement of
comparative periods, various education and training sessions on the
adoption of IFRS, as well as required changes to business processes and
internal controls. The company's finance and accounting staff have been
informed of the company's preliminary policies and procedures as they
relate to IFRS. As a result of the training program and the preparation
of a reconciliation of the company's historical Canadian GAAP financial
statements to IFRS financial statements, the company believes that its
applicable personnel have obtained an appropriate understanding of IFRS
as it applies to the company's financial reporting. While new controls
are being put into place to address certain unique IFRS accounting and
disclosure requirements, Brookfield Properties does not anticipate
comprehensive changes to its current accounting and consolidation
systems, its internal controls nor its disclosure control process as a
result of the conversion to IFRS.
Impact of Adoption of IFRS
IFRS are premised on a conceptual framework similar to Canadian GAAP,
although significant differences exist in certain matters of
recognition, measurement and disclosure. While the adoption of IFRS will
not have an impact on the company's reported net cash flows, the company
does expect it to have a material impact on its consolidated balance
sheets and statements of income; the company is continuing to evaluate
the impact of IFRS to the presentation and classification in its
statements of cashflow. In particular, the company's opening balance
sheet will reflect the revaluation of substantially all properties to
fair value. In addition, a significant portion of the company's
intangible assets and liabilities will no longer be separately
recognized. Also, the company's US Office Fund and certain other joint
ventures which are currently consolidated or proportionately
consolidated will be recorded as investments accounted for following the
equity method. Finally, all changes to the opening balance sheet will
require that a corresponding tax asset or liability be established based
on the resultant differences between the carried value of assets and
liabilities and their associated tax bases. The company currently
expects that the impact of all of these differences on its January 1,
2009 opening balance sheet under IFRS compared to its December 31, 2008
balance sheet under Canadian GAAP will result in an increase in common
equity from $3.4 billion to approximately $5.5 billion or $14 per share.
IFRS 1: First-Time Adoption of IFRS
The company's adoption of IFRS will require the application of IFRS 1, First-time
Adoption of International Financial Reporting Standards ("IFRS 1"),
which provides guidance for an entity's initial adoption of IFRS. IFRS 1
generally requires that an entity apply all IFRS effective at the end of
its first IFRS reporting period retrospectively. However, IFRS 1 does
require certain mandatory exceptions and permits limited optional
exemptions. The following are the optional exemptions available under
IFRS 1 which are significant to the company and which the company
expects to be applied in preparation of its first financial statements
under IFRS:
a) Business combinations
IFRS 1 states that a first-time adopter may elect not to apply IFRS 3, Business Combinations ("IFRS 3") retrospectively to business combinations that occurred before the date of transition to IFRS. Brookfield Properties intends to make this election in order to only apply IFRS 3 to business combinations prospectively (i.e. to those that occur on or after January 1, 2009).
b) Cumulative translation differences
International Accounting Standards ("IAS") 21, The Effects of Changes in Foreign Exchange Rates, requires an entity to determine the translation differences in accordance with IFRS from the date on which a subsidiary was formed or acquired.