Adviser alert–February 2018

The Grant Thornton International IFRS team has published the 2017 version of IFRSs Example Consolidated Financial Statements 2017 (hereinafter the “Example consolidated financial statements”).

The Example consolidated financial statements have been updated to reflect changes in IFRS that are effective for the year ending December 31, 2017. Further, they reflect an illustrative corporation’s decision to early adopt IFRS 15 Revenue from Contracts with Customers and Clarifications to IFRS 15. No account has been taken of any new developments after October 31, 2017.

Example consolidated financial statements – summary

The example consolidated financial statements are based on the activities and results of the illustrative corporation and its subsidiaries – a fictional consulting, service and retail entity – that has been preparing IFRS financial statements for several years.

The form and content of IFRS financial statements depend on the activities and transactions of each reporting entity. The Grant Thornton International IFRS team’s objective in preparing the example consolidated financial statements is to illustrate one possible approach to financial reporting by an entity engaging in transactions that are typical across a range of non-specialist sectors. However, as with any example, this illustration does not envisage every possible transaction and, therefore, cannot be regarded as comprehensive.

Management is responsible for the fair presentation of financial statements and, therefore, may find other approaches more appropriate for its specific circumstances.

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The property and casualty (P&C) insurance market had a turbulent year in 2017. This article takes a look at the potential impact of risks in 2018 and looks at options to minimize them.

In the second half of the year, extreme weather was widely covered in the media, and rightly so. It’s estimated the damages in the wake of hurricanes Harvey, Irma and Maria and forest fires in California could surpass US$135 billion and will exert pressure on the North-American re-insurance market.

After a flurry of insurance company mergers and acquisitions in the past five years, several transactions affected the Regroupement de cabinets de courtage en assurance in 2017.

Legislative changes

Bills 141 and 150 will likely change the business practices of insurers and market intermediaries, particularly in terms of the business relationships between brokers and issuers and the marketing of P&C insurance products. Federally, Bill C-45, on legalizing marijuana, is causing some concern with insurers.

According to MSA Research, first quarter underwriting revenues for Canadian insurers were down from the same period in 2016: the first quarter of 2017 posted a loss of $3.7M, compared with a $616.8M gain in the same period in 2016.

In recent years, favourable insurance market conditions allowed companies to renew their insurance programs somewhat informally—this may change in the future. The current insurance and re-insurance market is such that businesses face an increased potential of changes in rates, coverage and terms and conditions.

Raymond Chabot Grant Thornton - image

Growing risks

The year 2017 saw the emergence of new risk exposures for businesses:

  • Cyber crimes (e.g.: the Wannacry ransomware);
  • The impact of workplace harassment (e.g. the Harvey Weinstein affair);
  • Technological innovations (e.g. artificial intelligence, blockchain, drones and driverless cars);
  • The sharing economy.

To limit the dangers of current insurance market trends and offset the potential impact of emerging risks, companies will need to adopt a more rigorous process when renewing their P&C insurance program. The process should provide for:

  1. Monitoring and understanding insurance market trends;
  2. Determining and evaluating current and developing risks;
  3. Efficiently analyzing insurance coverage and the targeted risks and determining any adjustments needed;
  4. Determining uninsured risks and implementing an mitigation action plan;
  5. Assessing the insurance program claims ratio;
  6. Undertaking an in-depth and relevant update of underwriting data;
  7. Assessing the insurance provider’s financial soundness and the quality of the insurance broker’s services;
  8. Setting out renewal objectives in terms of rates, improved coverage and service quality for both the insurer and broker;
  9. Setting a renewal strategy (negotiation or call for tender) based on defined objectives.

Implementing a rigorous renewal process will improve integrated risk management by factoring in the thoroughness required to ensure that current and developing risks are adequately reflected in the insurance program.

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The February 2018 Flash Bulletin summarizes the Exposure Draft issued by the Canadian Accounting Standards Board in September 2017 entitled Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement (Proposed amendments to Sections 1591, 3251 and 3856).

It is relevant to private enterprises who report under Part II of the CPA Canada Handbook – Accounting (ASPE).

This Exposure Draft will bring significant changes to the financial statements of private enterprises for 2020 fiscal years and after.

This publication is intended to inform readers about recent changes in accounting; however, it cannot deal with all aspects of the Exposure Draft. Readers are always encouraged to refer to the original publications mentioned in the articles before making any decisions.

Download the document below.

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One significant component of wealth management is transferring your property at the time of death.

The objective of will and estate planning is to ensure that your property transfer is as straightforward as possible and maximizes the tax benefits. In practice, among others, planning serves to determine your personal and financial objectives to:

  • Protect your heirs’ financial interests;
  • Minimize taxes, administrative costs and delays;
  • Ensure the smooth settlement of your affairs.

A will is undeniably the best way to set out your objectives and intentions.

Reduce your estate’s tax burden

The terms and clauses in this document will determine the parameters of your plan to transfer your property by setting out how it will be distributed to your heirs. You can, therefore, ensure that the people you choose are financially protected while maintaining overall wealth management.

By judiciously using the provisions in tax legislation, you can also reduce your estate’s and heirs’ tax burden. Depending on the type of property you own (real estate, private company shares, partnership units, registered plans [RRSP, RRIF and TFSA], investment portfolio, etc.) and what your will states, you can define strategies to meet your needs while maximizing the tax considerations.

Questions to guide your estate planning

The following questions could help guide your estate planning thought process:

  • Do you have a will? If so, is it up-to-date?
  • Have you listed all of your assets and liabilities (current and potential)? If so, are the lists recent?
  • Have you determined who should inherit what? If so, do you want to make changes?
  • Do some of your heirs have special needs?
  • Will your estate have sufficient cash to cover the taxes payable at the time of your death and any cash legacies you may wish to make?

A careful analysis of your financial situation and defining an estate plan that reflects your wishes will avoid conflicts and confusion in settling your estate. Our will and estate planning experts can support you in the process to ensure that your planning is compliant and to provide you with peace of mind.