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New Directions in Research 

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Research

New Directions in Research

As CGA-Canada's Research and Standards department moves into its second year of existence, its in-depth reports have already sparked vigorous public debate about key issues affecting all Canadians.

 

CGA-Canada has launched a new direction in research and policy development over the past year and a half. The Association has traditionally worked with external consultants to produce research studies and responses to exposure drafts, but in January 2004, CGA-Canada hired Rock Lefebvre, CGA, as vice-president, Research and Standards, to articulate and implement a formal research agenda.

Now more than ever, the Association is playing a leading and influential role in public policy issues affecting CGAs and the accounting profession at large. CGA-Canada's advocacy functions include actively participating in consultations on policy, commenting on exposure drafts, and making recommendations to government and regulatory bodies through presentations, submissions, and media releases.

Under Lefebvre's leadership, the research division has grown to its current complement of five staff members. The expansion of the research department allows the Association to increase its output of high-quality research produced in-house. Based on current issues and policy concerns, the research conducted by the department is primarily of an applied nature.

Aging Population Report

In January CGA-Canada released Growing Up: The Social and Economic Implications of an Aging Population, an in-depth look at the effect the retiring baby boomer generation will have on future generations. Projections have shown that by 2021, there will be almost seven million people over 65 years of age in Canada, comprising 19 per cent of the total population; by 2041, seniors will represent a quarter of the population.

This shift in the age structure of the Canadian population also influences the workforce and corresponding labour supply patterns. The challenge does not relate solely to the number of older persons, but also to the proportion of older persons to younger ones. Growing Up calls for balanced policy that provides a minimum standard of living to all while allowing Canadians to assume fuller responsibility for their lives.

Planning for this kind of future is a mutual undertaking, involving government, communities, and individuals, with each assuming responsibility for different and complementary elements. The answer to current challenges lies in effectively harmonizing personal or private plans with the provisions of public programs in order to provide the best possible future for all Canadians.

Growing Up presents a comprehensive compilation of data from demographic experts in government, private, and not-for-profit sectors, as well as a series of recommendations around four key areas. In order to ensure Canada has an economic system able to meet the challenges of its aging population, the report advocates an inclusive framework that provides strong leadership in changing attitudes, policies, and practices.

Key recommendations include the creation of a "seniors' health account" that would allocate new money to provinces in proportion to the growth in their population age 65 years and older; the elimination of mandatory retirement; and a corresponding adjustment to pensions and other savings schemes to eliminate disincentives for older people to remain in the workforce.

In the financial area, CGA-Canada encourages the reconciliation of projected increases in public spending with future transferences of wealth and sources of increased government revenue stemming from current pension constructs. The Association also believes that Canada must capitalize on technological advances by introducing a standardized cost-benefit model of alternative assessment to evaluate cost interrelationships.

And finally, Canadians must be better educated and informed about social benefits and their limitations so they can better plan for their future: government programs, while providing a modest starting point and safety net, do not aim to meet more generous levels of comfort. CGA-Canada calls on Canadians to devote time and energy to personal financial planning beyond the provisions of public programs.

Pensions Report

Last June, CGA-Canada released Addressing the Pensions Dilemma in Canada, a comprehensive study of the pension shortfall facing Canadians. Nearly two-thirds of defined benefit pension plans in this country are in a combined $160 billion deficit position, and it is estimated that $15 billion per year will need to be injected into such plans over the next five years to make up for investment losses incurred predominantly in 2001 and 2002.

Canadian defined benefit pension plans operate in a complex regulatory environment, and there is little incentive for plan sponsors to contribute in excess of the minimum required by legislation; most plan sponsors accept mismatches between plan assets and liabilities, perpetuating the cycle of surplus and deficit. Contentious debate over who owns pension surpluses, and how they should be distributed, has led to calls for legislative or regulatory changes to better protect the interests of plan beneficiaries.

Regulators will need to assess pension surplus entitlement if sponsors are to be held accountable: an opportunity exists to put in place time-weighted formulas that take into account the contribution values of members and sponsors, and to establish rules requiring better justification from pension fund administrators on investment mix and how anticipated risk is measured and managed. CEOs and CFOs should be encouraged to pursue and adopt best practices as they relate to pension plan management, with greater emphasis placed on plan design and sustainability.

Each report generated extensive media interest at both the national and local level, and sparked public debate about important issues. CGA-Canada continues to receive invitations for interviews, speaking engagements, and comment on these topics. The complete reports are available on the CGA-Canada Web site at www.cga-online.org/canada.

Current Projects

The research department is currently surveying TSX and TSX Venture listed companies, of which there are about 3,400, to determine how these companies approach economic, environmental, and social reporting. The Association plans to release the results of the survey in the summer of 2005.

The issue is a timely one as corporate sustainability reporting is becoming increasingly common. Companies are recognizing the power of their reputations as key corporate assets and have begun to craft a wide range of social, environmental, ethical, and economic goals. Traditional financial performance gauges are increasingly seen as unable to track the wealth-creating effects of intangible assets such as human, social, and environmental capital. Sustainability reporting gives companies ways to report out on things other than financial data, such as social programs, and environmental and labour practices, which are becoming increasingly important to shareholders.

Also slated for release later this year is a paper on income trusts that will discuss the design and performance of these increasingly popular investment instruments.

Setting Standards

CGA-Canada is in the process of hiring a standards analyst who will focus on accounting, auditing, and assurance standards to expand the Association's capacity to participate in national and international standard setting. In addition, Lefebvre is working with Canada's Accounting Standards Board (AcSB) to raise the profile of CGA through an 18 to 24 month secondment to the AcSB.

The development of accounting standards is a matter of public interest as standards play an important role in influencing the economy and shaping public confidence. To this end, CGA-Canada is committed to playing an active role in discussions about the choice of accounting standards. Having a resident standards analyst will enable CGA-Canada to respond quickly and effectively to exposure drafts from accounting bodies such as the International Federation of Accountants and the International Accounting Standards Board.

Overall, CGA-Canada's expanded research capabilities are aimed at augmenting the influence and profile of the CGA designation, while capitalizing on the strength of the Association's internal knowledge base.

Media Coverage

Growing Up: The Social and Economic Implications of an Aging Population has received substantial media attention. To date, it has been covered in more than 20 print and online publications, including the Ottawa Sun and Vancouver Sun, the Winnipeg Free Press, and CBC.ca, as well as being picked up by the CanWest News Service and CP Wire.

The report was also carried on more than a dozen broadcast news outlets, including ROB TV and major radio stations in the Toronto, Winnipeg, Montreal, Vancouver, and Victoria markets. Audience reach was calculated at 4.5 million newspaper impressions, 336,000 radio impressions, and 64,000 television impressions, for nearly 5 million total media impressions.


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