Adopting Ifrs In Canada

EXECUTIVE SUMMARY

Canada is on the edge of a substantial change that will change the way companies

financially report to their investors and stakeholders. Adopting international accounting standards will impact Canadian investors and businesses, and change the way financial information is reported in Canada.

In Canada the accounting standards are set by the Accounting Standards Board of Canada (AcSB). AcSB establishes financial accounting and reporting standards for use by Canadian companies and not-for-profit organizations. The international standards are set by the International Accounting Standards Board (IASB).

By 2011, all of Canada's 4,500 publicly accountable enterprises will be required to prepare their financial statements according to International Financial Reporting Standards (IFRS). In addition, by the end of 2008, all public audits in Canada will be conducted according to International Auditing Standards (IASs). Canada's conversion to the International standards will take place over the next four years.

The AcSB will pursue separate strategies for each of the three major business entities in Canada. For public entities, the AcSB's objective is to move to a single set of globally accepted high-quality standards. The transition to convergence with international financial reporting standards (IFRS) will take place over a five year period (2006 to 2011), with full convergence by the end of 2011.

For private entities, the AsCB has presented three options: A top-down approach based on IFRS for public entities; adoption of the IFRS-SME with or without modifications; an independently developed set of standards. There are many pros and cons of each of the options and all three entail significant changes and would require different implementation times for a smooth transition.

For Not-For-Profit organizations, the AcSB will continue to apply those elements of GAAP for profit-oriented enterprises that are applicable to their circumstances, and develop other standards dealing with the special circumstances of the not-for-profit sector

To ease the transition of converging with international standards, the Canadian Institute of Chartered Accountants is providing education and training programs that include a variety of courses, conferences, self study programs, and other learning tools to help stakeholders achieve the level of knowledge and expertise in the new standards that they will require to successfully manage the transition.

I. INTRODUCTION

A. PURPOSE

The purpose of this report is to inform the reader of the direction Canada is taking in its future of accounting standards. This report will provide insight in the future of accounting standards in Canada.

B. BACKGROUND INFORMATION

In March 2004, the Accounting Standards Board of Canada (AcSB) began a review of its strategies for setting accounting standards in Canada. An invitation to comment was issued in May 2004 seeking public inputs. The invitation to comment several issues one of which was the issue of whether Canada should maintain its own Generally Accepted Accounting Principles (GAAP) or adopt either the US GAAP or International Financial Reporting Standards (IFRS). The invitation to comment received many written responses along with oral comments from public roundtable meetings.

On the basis of the input received from the above invitation to comment, the AcSB developed a Draft Strategic Plan that reflected what the AcSB felt would best serve the public interest. The directions proposed in the Draft Strategic Plan included the convergence with international standards for public companies and whether different strategies should be applied to the different categories of reporting entities (public, private, and not-for-profit). In 2005 an invitation to comment on the Draft Strategic Plan was issued. Like the 2004 invitation to comment, this one also received both written and oral responses.

In 2006 the AcSB released its strategic plan which outlined the directions for financial reporting in Canada. The plan included the adoption of IFRS for public entities and an intention to pursue separate strategies for private and not-for-profit entities. Currently the AcSB has begun the process of ratifying its plan for private entities. In 2007 an invitation to comment was issued on three options being proposed in developing a plan for the standard setting for private entities. This invitation to comment is open until October 2007.

C. SCOPE

This report consists of four main sections:

1. The Standard Setters

- This section informs the reader of the boards that are responsible for setting the standards in Canada and internationally.

2. The Future of Accounting Standards in Canada

- This section will provide the reader with an insight into the direction Canada is heading in setting accounting standards.

3. The three major business entities in Canada

- This section is broken down into three categories: public, private and not-for profit. This section is focused on the plan of financial reporting for each of the individual categories.

4. Comparison of Canada's accounting standards with International standards

- This section discusses briefly some of the similarities and differences between the standards in Canada and internationally.

D. LIMITATIONS

The information in this report regarding the accounting standards for private companies is as stated in the proposal stage. The three options discussed are options being considered and the Accounting Standards Board (AcSB) has issued an Invitation to comment on the future of financial reporting for private enterprises. The Invitation to Comment is open until October 31, 2007. This report is written in the point of view that one of these three contenders will be the end result of financial reporting for private companies and thus this report has not considered that neither of these will prevail.