IAS 36 Impairment of Assets is not a new standard and, while many of its requirements are familiar, an impairment review of assets (either tangible or intangible) is frequently challenging to apply in practice. This is because IAS 36’s guidance is detailed, prescriptive and complex in some areas.

The Insights into IAS 36 series has been written to assist preparers of financial statements and those charged with the governance of reporting entities to understand the requirements set out in IAS 36 and revisit some areas where confusion has been seen in practice.

The final two publications in the Insights into IAS 36 series cover disclosure requirements when an entity recognizes an impairment loss and/or reversal during the reporting period and considerations for some regularly encountered issues when applying the standard:

• Presentation and disclosure;
• Other impairment issues.

The publications mentioned above follow this IFRS Adviser Alert.

Tourism is evolving and must contribute to local and regional citizens’ well-being. Here are the development avenues to promote.

Tourism is a rapidly changing industry. When its development is well planned, it offers great opportunities to contribute to citizens’ quality of life and regions’ economic vitality. To do this, it is essential that all the involved tourism and non-tourism stakeholders work together.

Municipalities must consult with citizens to implement appropriate regulations, infrastructures and guidelines that encourage people to live together in harmony while discovering a living environment. In the medium and long run, a tourism destination that neither consults with its residents, nor involves them in decision-making, dooms itself to impoverishment.

Changing needs

Ways of travelling are changing and authentic destinations are more popular than ever. Exploring a culture involves more than visiting a museum or park, or participating in an event. True, these activities are always safe bets. But today’s visitors want to follow the local drumbeat. They go to neighbourhood restaurants and bakeries, and sometimes become your next door neighbours.

What’s more, tourists are now benefiting from the flexibility afforded by telework. They are looking to reduce their travel impacts: they extend their stays, prefer active mobility and seek out local products.

With these emerging behaviours, it is necessary to adapt in a way that benefits local citizens. Specifically, a thriving tourism industry enables regions to provide high quality activities and infrastructures that would otherwise be unthinkable.

Focusing on the following actions will help apply solutions that benefit all parties.

Promote local culture to foster citizen pride

Tourists are looking for an enjoyable and unique experience. Regions need to be promoted and explained, and have their stories told. The visitor and the local culture must be drawn together to strengthen an area’s identity.

Important and historical sites—natural or urban—can be revitalized and developed to enable citizens to reclaim public spaces and revamp them in the community’s image. It is not only the residents’ quality of life that benefits: the signature experience that emerges from such initiatives also makes the destination more attractive to travelers.

Encourage mobility and sustainability

In this expanding context of mobility and telework, it is paramount to implement certain infrastructures, including a high-speed Internet offer.

To be attractive, destinations must play a leadership role in sustainable development, as proposed by the Québec government’s tourism department in its Plan d’action pour un tourisme responsable et durable (Action Plan for Responsible and Sustainable Tourism).

For example, working through their tourism office, municipalities need to make their tourism ecosystem aware of this issue, propose practical solutions and inform tourists of sustainable products and services.

Businesses must also implement sustainable development actions by putting forward eco-responsible practices and promoting local purchasing.

Promote the development of a balanced offer

In six years, Québec’s rental property offers have exploded by 200%. They include cottages, luxury residences, condos and even temporarily rented principal residences.

This new accommodation offer is changing the industry’s relationship with travellers, who can settle in relatively long term—including in regions and neighbourhoods that used to receive few, if any, tourists.

It is important to preserve a balance that ensures that citizens and visitors live together in harmony. In Québec, the Tourist Accommodation Act covers short-term tourist accommodation and allows municipalities to exercise greater control over their accommodation offer.

Highlight a region through local purchasing

The proliferation of tourist residences makes it easier for visitors to discover communities: it takes them off the beaten track and allows them to live like a local.

This type of temporary resident will mix more with local people by living like them, sharing their daily lives, buying from public markets, for example, as well as going to local cafés and bistros—all of which contributes to the vitality of a community at various times of the year.

Under certain conditions, as telework becomes the norm, stays could even keep stretching longer. Local infrastructures, regulations and business development must be adapted to factor in this new situation.

Enrich the cultural life of citizens and attract visitors

A year-round diversified tourism and cultural offering is a considerable asset for attracting citizens and tourists alike. Promoting the improvement of infrastructures and original events will enhance destinations’ quality of life and attractiveness.

By seeking first to offer a better quality of life, cities and regions ensure they are respecting their core values and are being authentic. That is exactly what attracts visitors and contributes to a community’s vitality.

This article was written in collaboration with Ingrid Langevin, Director of the Business Transformation Consulting Group at Raymond Chabot Grant Thornton.

Businesses may not have control over the economic environment, but they do have a tool that can help: improving efficiency.

In recent months, companies have seen their operating costs rise to varying degrees as wages have escalated, input prices have soared and financing costs have increased. If they want to curb profit margin erosion, their only alternative is to become more efficient.

While influencing the cost of resources (raw materials, equipment, labour, etc.) is not within a company’s power, measuring how it uses these resources and optimizing them is possible. Unfortunately, too few SMEs analyze their processes to identify potential waste. This makes it difficult for them to get an accurate picture of their operational performance and identify areas for improvement.

Identifying key optimization opportunities

You need to review all your processes to see where there is room for improvement. For example, here are some key questions to determine operational efficiency and understand the profit shortfall:

• Are employees maximizing their work time?
• Do they need to wait for raw materials or move around the plant unnecessarily?
• Is insufficient maintenance causing equipment stoppages?
• How much are you losing because of a quality problem?

Tracking performance indicators

Achieving your objectives means using relevant performance indicators and well-designed dashboards for both internal and external comparisons. Tracking should be done regularly. The frequency depends on the indicator, it can be daily, weekly, annually or even in real time. Checking indicators at the right time significantly increases the chances of correcting the situation.

Controlling production costs

Another essential factor in reaching your business objectives is to improve your production costs. A good costing model makes it possible to calculate all the direct or indirect expenses (production costs, supply costs, administrative costs, etc.) required to produce a product or service so that a profitable price can be determined.

This exercise must be repeated at least once a year and as the company changes. Furthermore, with significant inflation, part of the increase in input costs has to be passed on to products and services. The other part should be offset by improving efficiency.

Consider a factory that is unable to operate at full capacity because it does not have enough people. Instead of spreading its costs over 10,000 production hours, it must now amortize them over 9,000 hours, which necessarily increases its production cost.

To improve its results, it will have to make choices. It may have to increase its selling price, reduce or eliminate some expenses, optimize processes, or refocus its activities on certain products or services.

The company can also measure the profitability of its customers. In one study, researchers Cooper and Kaplan showed that, on average, 20% of customers generated 225% of a company’s profits, while 70% generated no profit. The remaining 10% were much more costly, accounting for 125% of losses.

Although this study was published in the 1990s, our experience shows that this calculation is still valid and that the gaps tend to become even wider in some sectors.

In tangible terms, this means that a company with a profit of $100,000 could potentially increase its profit to $225,000 if it had a better understanding of its costs and profitability.

Using such an analysis, the company can make more informed decisions, whether it be to work differently with certain customers or renew their customer base.

By taking action on specific aspects of their activities, managers can quickly adapt to the situation and improve their performance despite a less favourable context.