A new Canadian landscape

This section provides a high level overview of the current financial reporting environment in Canada. Our objective is to provide a snapshot of the issues under review in a straight forward language without drilling down into detailed technical discussions. We want to help directors identify business issues that could impact financial reporting in their organizations and to provide them with information that enables them to ask the right questions of management.

Visitors who would like to learn more about the issues are invited to consult the various resources available in the section.

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A new vision for Canadian accounting standards has arrived that affects most legal entities in Canada, which will need to adopt a new or amended financial reporting framework.

Publicly Accountable Enterprises (Part I - IFRS): The evolution of Canadian accounting standards started when the Canadian Accounting Standards Board (AcSB) decided that Canadian entities that met the definition of a publicly accountable enterprise would be required to adopt International Financial Reporting Standards (IFRS) commencing January 1, 2011.

Private, profit-oriented companies (Part II – ASPE): After significant outreach, the AcSB also determined that the specific and unique needs of private companies and the users of their statements would not necessarily be addressed by IFRS. Therefore, a new framework – Accounting Standards for Private Enterprises (ASPE) – was developed by the Canadian standard setters to address the requirements of the users of Canadian private company financial statements.

Not-for-profit organizations (NPOs) (Part III – NPO): These organizations have always had specialized accounting standards within the previous Canadian GAAP framework that addressed their unique transactions and reporting objections. The existing standards for NPOs have been updated and they form the basis of a new accounting framework for NPOs, which is supplemented by ASPE where the NPO standards do not provide guidance.

Pension plans and similar benefit plans (Part IV - Pension Plans): A new framework was established for pension plans and similar benefit plans, which provide guidance on the recognition and measurement of pension plan assets at fair value. This framework also requires these entities to follow certain IFRS standards relating to fair value measurement and disclosure.

Public Sector Government Organizations (PSAS): As part of the overall review and customization of the various accounting frameworks for certain specific categories of financial statement preparers, public sector (or government) entities took the opportunity to enhance their own framework to achieve greater consistency among the various frameworks where appropriate. These standards are established by the Public Sector Accounting Board.

Today, there are seven accounting frameworks utilized by Canadian entities, including the five frameworks noted above, the old Canadian GAAP (retained by a few specialized industries on a temporary basis) and U.S. GAAP.

Most organizations will be able to choose from at least two of the seven possible reporting frameworks. Although the new frameworks are designed to be more easily customized to an entity`s reporting needs, the application of these frameworks does complicate the audit committee’s oversight of financial reporting. An overview of each frameworks (together with who can adopt it, when and how) and a discussion of current financial reporting topics of interest to directors is presented below.

Overview

The following table indicates the frameworks an entity may be able to adopt depending on its legal structure and the nature of the organization and its regulatory oversight:

Public companies Private enterprises Private not-for-profit
organizations
Pension plans Public sector
Part I – IFRS
Part V – Pre-changeover*
U.S. Accounting Standards**
Part I – IFRS
Part II – ASPE
Part V – Pre-changeover*
U.S. Accounting Standards
Part I – IFRS
Part III – NPOs
Part IV – Pension plans
Part V – Pre-changeover*
Part I – IFRS***
Part V – Pre-changeover*
Public Sector Accounting Standards

* Only available for a limited period of time for certain public and private sector rate regulated entities and most investment companies.

** Generally only available for Canadian entities which are also SEC registrants, upon approval by the Canadian Securities Administrators. Certain rate regulated entities that are not SEC registrants have been given limited ability to adopt U.S. Accounting Standards.

*** Public Sector entities which meet the definition of a Government Business Enterprise (meaning they operate in manner similar to a profit-oriented private sector enterprise) must apply Part I – IFRS.

Each framework has its own standard-setting agenda. Part I to Part IV standards are set by the Canadian Accounting Standards Board. The Public Sector Accounting Standards are established by the Public Sector Accounting Board. Click the following shortcuts to learn more about these frameworks:

Part I – International Financial Reporting Standards

Part II – Accounting Standards for Private Enterprises

Part III – Private Not-for-profit Organizations

Part IV – Accounting Standards for Pension plans

Public Sector Accounting Standards

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