Royal Bank of Canada: Financial Reporting and IFRS Application Report

This report provides an analysis of the Royal Bank of Canada (RBC) and its adherence to International Financial Reporting Standards (IFRS). The report begins with an overview of RBC, a major Canadian multinational financial services company, and then examines the national reporting and regulatory environment in which it operates, focusing on compliance with the Canadian Bank Act and IFRS issued by the International Accounting Standards Board (IASB). The report then delves into the consistency of application of IFRS, specifically addressing IFRS 16 (Leases) and IFRS 17 (Insurance Contracts), and how RBC plans to adopt these standards. The enforcement of IFRS use in Canada is also discussed, highlighting the requirement for publicly accountable organizations to use IFRS. Finally, the report evaluates the comparability of RBC's accounts with those of its key global competitors, concluding that the use of IFRS facilitates such comparisons. The analysis is supported by references to relevant academic and industry sources.

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Overview of the Company.....................................................................................................2
National Reporting and Regulatory Environment..................................................................3
Consistency of Application....................................................................................................3
Enforcement of IFRS use in Canada......................................................................................4
Comparison of Company’s Accounts with Key Global Competitors....................................4
Conclusion..................................................................................................................................5
Reference....................................................................................................................................6

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Introduction
International Financial Reporting Standards is referred as the set of the accounting
standards, which is developed by the independent as well as not-for-profit organization that is
known as International Accounting Standards Board. It is the single standard that provides
the investors with the cohesive view of the finances. IFRS has the goal for providing the
globalized framework for the preparation as well as disclosure of the financial statement by
the public companies (Ifrs.org. 2019). Hence, under this assignment, discussion will be done
on analysis of the company “Royal Bank of Canada” that will be followed by the explanation
of the national reporting as well as regulatory environment within which the company
operates. Moreover, discussion will be on the two specific items of accounting from the
accounts of the company and their application of consistency of relevant international
accounting standards. Lastly, evaluation will be done on the comparison of accounts of firm
with that of the key global competitors (Cai, Rahman and Courtenay 2014).
Discussion
Overview of the Company
The Royal Bank of Canada is the Canadian multinational company in the financial
services and it is one of the largest bank by market capitalization, listed in the Toronto Stock
Exchange as well as New York Stock Exchange. This bank was founded in the year 1864 in
the Halifax, Nova Scotia, while it is headquartered in Montreal, Quebec as well as in
Toronto, Ontario. This bank serves the client over 16 million as well as it has approx. 80,000
employees that operates in more than 40 other countries apart from Canada. RBC has been
added to the list of Financial Stability Board of the systematically important banks globally.
Hence, RBC as well as its subsidiaries provides the diversified financial services that includes

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commercial and personal banking, treasury services, wealth management, products and
services of capital market and insurance (Rbcroyalbank.com. 2019).
National Reporting and Regulatory Environment
The consolidated financial statements of the Royal Bank of Canada are prepared by
the management that are responsible for the fairness as well as integrity of presented
information, which includes many amounts that are based on the judgements and estimates.
The preparation of the consolidated financial statement are prepared according to the Bank
Act of Canada as well as International Financial Reporting Standards that are issued by
International Accounting Standards Board. The financial information that are appeared
throughout the analysis as well as discussion of the management are consistent with the
consolidated financial statements. The consolidated financial statements of RBC complies
with the Subsection 308 of Canadian Bank Act (Okafor, Anderson and Warsame 2016).
Consistency of Application
The accounting items specified in the consolidated financial statements of Royal Bank
of Canada is consistent with that of the international accounting standards, which can be
explained in the following points:
IFRS 16 Leases: IFRS 16 has been issued by IASB in the year 2016 that sets the
principles for recognition, measurement, presentation as well as disclosures of leases.
This standard removes lessee’s current requirements for classifying the leases as the
operating leases or the financing leases by introducing the single leases model of
accounting, which requires recognizing leases assets and liabilities on balance sheet
for most of the leases (Liu and Sun 2015). It also recognizes the expense of
depreciation on lease assets and expenses of interest on lease liability in income
statement. RBC plans for adopting IFRS 16 at November 1, 2019, after adjusting their

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consolidated balance sheet. The company are prepared for the IFRS 16 transition as
well as continues for monitoring the interpretations of the industry to the new
standard and they expects for adjusting the implementations accordingly (Ifrs.org.
2019).
IFRS 17 Insurance Contracts: IFRS 17 has been issued by IASB in May 2017 for
establishing the comprehensive global insurance standard that provides the guidance
on recognizing, measuring, presenting as well as disclosing the insurance contracts.
Hence, this new standard will be effective for the company on November 1, 2021.
RBC continues for monitoring the developments of IASB. The company is currently
assessing impacts of the adoption of this standard on their consolidated financial
statements (Nobes and Zeff 2016).
Enforcement of IFRS use in Canada
The requirement of Canadian Accounting Standards Board for the publicly
accountable organisations for using the IFRS in order to prepare all the interim as well as
annual financial statements. The individual, new as well as amended standards of IFRS for
the adoption in Canada as the Canadian GAAP for the enterprises that are publically
accountable. Most of the private companies are also having the option for adopting IFRS in
order to prepare the financial statements (Annualreports.rbc.com. 2019).
Comparison of Company’s Accounts with the Key Globalized Competitors
Yes, the accounts of the firm are comparable with that of the other key global
competitors. It is because the accounts of the company are prepared according to the
standards of International Financial Reporting Standards. Hence, following IFRS provides
uniformity of the standards, which in return provides the scope for the comparison of the
accounts with that of the major global competitors (Ifrs.org. 2019).

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Conclusion
Hence, it is concluded from the analysis of the Reserve Bank of Canada that the
company’s consolidated financial statement should be prepared according to the Canada’s
bank act and the international financial reporting standard that are issued by the IASB.
Moreover, the analysis of the two accounting items of the company such as leases and
insurance contracts specifies that the company is follows, recognizes, measures, presents and
discloses the item in accordance with the standards of IFRS as well as if they are any
amendments to the standards, the company also adopts the amendments. Further, it has been
analyzed that the IFRS has been enforced in the Canada country. Lastly, it has been analyzed
that the accounts of the firms are comparable with that of the global key competitors.

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Reference
Annualreports.rbc.com. (2019). RBC AR 2018 . [online] Available at:
https://annualreports.rbc.com/ar2018/ [Accessed 8 Jul. 2019].
Cai, L., Rahman, A. and Courtenay, S., 2014. The effect of IFRS adoption conditional upon
the level of pre-adoption divergence. The International Journal of Accounting, 49(2), pp.147-
178.
Ifrs.org. (2019). IFRS . [online] Available at: https://www.ifrs.org/use-around-the-world/use-
of-ifrs-standards-by-jurisdiction/canada/#profile [Accessed 8 Jul. 2019].
Ifrs.org. (2019). IFRS . [online] Available at: https://www.ifrs.org/issued-standards/list-of-
standards/ [Accessed 8 Jul. 2019].
Liu, G. and Sun, J., 2015. Did the mandatory adoption of IFRS affect the earnings quality of
Canadian firms?. Accounting Perspectives, 14(3), pp.250-275.
Nobes, C.W. and Zeff, S.A., 2016. Have Canada, Japan and Switzerland Adopted
IFRS?. Australian Accounting Review, 26(3), pp.284-290.
Okafor, O.N., Anderson, M. and Warsame, H., 2016. IFRS and value relevance: evidence
based on Canadian adoption. International Journal of Managerial Finance, 12(2), pp.136-
160.
Rbcroyalbank.com. (2019). Get the Personal Banking Products and Services You Need.
[online] Available at: https://www.rbcroyalbank.com/personal.html [Accessed 8 Jul. 2019].