A Comparison of IFRS and ASPE in Canada|
TABLE OF CONTENTS
Part I Key Differences between IFRS and ASPE1
I.Frameworks for Financial Reporting1
II.Form and Components of the Required Financial Statements1
III.Revenues and Expenses Recognition2
IV.Errors, Changes in Estimates, and Changes in Accounting Policies2
V.Cash and Receivables3
VIII.Property, Plant, and Equipment4
IX.Intangible Assets, Goodwill, Mineral Resources, and Agriculture4
X.Applications of Fair Value: Revaluations, Impairments, and Non-current Assets Held for Sale4
XIV.Complex Financial Instruments6
XV.Earnings per Shares.6
XVI.Accounting for Income Taxes7
XVII.Pensions and Other Employee Future Benefits7
XVIII.Accounting for Lease7
Part II Summary of Opinion8
Reasons for Adopting IFRS over ASPE8
Pros and Cons of Having Multiple Accounting Standards9
Accounting Standards for Private Enterprises (ASPE) was developed by the Canadian Accounting Standards Board to address the need for less complex accounting standards for smaller, privately held enterprises. In contrast, IFRS was adopted by the International Accounting Standards Board (IASB) with the commitment to narrow down differences of financial statements that are prepared and presented by many entities around the world. For fiscal years on after January 2011, Canadian public companies are required to adopt IFRS, but private companies in Canada can choose either ASPE or IFRS. Consequently, the CICA Handbook covers these two standards separately: Part I for IFRS and Part II for ASPE. Although the two standards are based on similar underlying principles, there are still significant differences found between the two. This report first addresses the key differences between IFRS and ASPE, focusing on the guidelines of each standard for a selection of items from the CICA Handbook. Later it discusses the possible reasons for adopting IFRS over ASPE as well as the advantages and disadvantages of having multiple standards in a society.
Part I Key Differences between IFRS and ASPE
I. Frameworks for Financial Reporting
IFRS is more specific in describing objectives of financial reporting, so the professional judgment has a lesser role in it. In contrast, ASPE emphasizes the use of professional judgement in selecting the appropriate accounting policies as it uses general and broad terms in establishing objectives for financial reporting.
As for the qualitative characteristics, for IFRS, being relevant and faithfully represented must be both presented to meet the requirements of providing good information for the users. ASPE, on the other hand, recognizes the trade-off between relevance and reliability. Under ASPE, representational faithfulness is a sub-characteristic of reliability. II. Form and Components of the Required Financial Statements The measurements of different entities provide useful information and assist managers to make better operational decisions or foreseeable future of the company. Therefore, comparing financial statements of different companies is very important. The entity’s performance may be manipulated and enhanced when different accounting policies are used in different periods. Under IFRS, entities are required to contain the financial position in the balance sheet and the performance in the income statement (income and expense). Under ASPE standards, entities are asked to include two types of elements which are obligations and equity of an entity that show the economic situation of the company. The statement of changes in financial position is not required by ASPE. Meanwhile, ASPE records the transactions primarily based...