"How should we expect the transition to IFRS to impact our audits? Specifically, the revaluation implications concern me as to how I can get my auditors comfortable with all the necessary valuations."
This question was asked at a recent webinar, now available on-demand:
"IFRS First-Time Adoption Made Easy"
Please add your thoughts about it below. Thanks!
I assume you are referring to the option to account for property, plant and equipment under the revaluation model rather than the cost model (IAS16). Under the revaluation model, fixed assets are periodically revalued; revaluations should be carried out regularly, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date. It is an option, and is used primarily by companies in economies that are experiencing significant inflation.
If you did adopt the revaluation model, you would follow the guidance at IFRS13 "Fair Value Measurement" which is very similar to the US GAAP guidance at ASC 820. The process will be the same as for many other fair value measurements - e.g., fair values of assets acquired and liabilities assumed in a business combination.
Most companies that adopt the revaluation model will use third-party experts for the periodic valuations, as most companies typically do not have in-house expertise. The auditors will follow the auditing standards relating to evaluating work of experts. Accordingly, it would be a good idea to consult with your auditors prior to engaging valuation experts so that you know in advance whether the auditors are likely to accept the appraiser's work.
