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Feature How new accounting standards put a greater burden on lawyers and the implications for solicitor-client privilege. By Luis Millan A s Canadian organizations making the transition to International Financial Reporting Standards (IFRS) begin preparing their annual financial statements this fall, Fred Headon is paying close attention to see how lawyers will grapple with the new ground rules. “The changes takes us beyond what was previously expected of lawyers,” noted Headon, who leads Air Canada’s in-house labour and employment law team at its head- quarters in Montreal. “Both in-house counsel and external lawyers face more work, tighter timelines, and need to keep in mind that the thresholds have changed.” Both the accounting and legal community are cautiously optimistic that joint efforts to come to grips with the legal conundrums following the changeover to IFRS will prove to be valuable. As of January 1, 2011, Canadian publicly accountable corporations and government business enterprises began reporting their financial results under IFRS, joining their counterparts in more than 120 other countries. (The new standards are optional for pri- vate companies and some not-for-profit organizations.) Concerns arise particularly from the way that unresolved legal claims, or “contingen- cies” in accounting speak, must be reported under IFRS. Under IFRS, unresolved legal claims are subjected to International Accounting Standard 37, Provisions, Contingent Liabilities and Contingent Assets (IAS 37). Developed over a decade ago, IAS 37 differs sig- nificantly from the way that unresolved legal claims are interpreted under Canadian Generally Accepted Accounting Principles (GAAP). Quite simply, IFRS imposes a high- er threshold for identifying claims, takes a different approach to estimating the expected value of a claim,and has more extensive disclosure requirements.That has lawyers worried as the new accounting standards may be onerous, possibly prejudice defence in litigation AUTOMNE 2011 CCCA Canadian Corporate Counsel Association 37