It might be quite a challenge to try to capture all of that on a very simple level. Essentially, you set your financial plan based on your federal budget and your final financial performance through your reporting on an accrual basis. The supply process in between is on a cash or near-cash basis, and it needs some gymnastics to be able to reconcile all of that. So whether the preparers try to reconcile all of that for you or you try to see how they all come together is really the question between the two sides.
The question has been studied a number of times by various committees, including this one. I believe the government operations committee has also studied it a fair bit, and I believe you were on that committee, Mr. Chair. There are definitely some obstacles and risks involved.
We're not saying that this is a natural thing to do and we should just go into it without giving it due consideration. Certainly we have to give government credit for thinking through the various implications, risks, and impediments.
Coming into this hearing I was looking at it again, and I think there are three points that may be useful to highlight. First and foremost, the subject matter is quite complex. Trying to implement it is not without risk, so there is a risk of not implementing it properly. I think some of the international experience Mr. Ralston is referring to falls into that particular vein. Seeing how people have implemented it incorrectly and some of the risk areas and going into it with our eyes wide open is extremely important, should the government choose to proceed.
Second, as Mr. Ralston said, it's a different way of doing business. Right now we have a ways and means that all parliamentarians and most preparers are familiar with. We're voting on a cash basis. Everybody understands it that way. If we move to an accrual basis it is absolutely paramount and imperative that both the preparers and the users understand what the new numbers represent. Then when you vote on it and make decisions you're making decisions with the right frame of mind.
A somewhat parallel example is what happens in the accounting world when we switch over to IFRS. It affects the bottom-line calculation in some cases. As far as performance bonuses, remuneration, and all of that, boards of directors need to understand what those implications are. So not quite from a profit or loss perspective, parliamentarians need to understand what this new way represents. If you're voting on a capital asset that has a long tail and involves certain costs, we're not allocating and approving ceilings each year for the cash outlay. What does it mean? So all of that has to be well understood before we put through the full implementation. If we proceed, we need to proceed slowly to make sure everybody's there.
The final point I would make is that it's a big change in management. It is machinery that has been there for a long time, and it's not without problems. People see problems from time to time, and they pop up here and there. But people are more comfortable dealing with the devil they know than the devil they don't. It's a change management philosophy. There's an inertia there. If people don't want it, it will not succeed, so the will has to be there.
For some of those reasons, even though we have a strong view and we feel that the accounting profession is with us in all of that, we make the point, but we don't actually impose it on government and say “thou shall move that way”. It is important that the government feels comfortable and wants to proceed down that road, because those are critical success elements.
Thank you, Mr. Chair.