The future of Canadian Accounting Standards

1
The future of CanadianAccounting Standards

• Financial Management Institute of Canada
• May 29-31, 2005
• Ron Salole, Vice-President, Standards
• The Canadian Institute of Chartered Accountants

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Session outline

• Public sector accounting standards
• New strategy
• Main outcomes
• Private sector accounting standards
• Significant changes
• Proposals
• Implications on public sector

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Public Sector

• Strategy approved
• Outcomes
• PS Handbook (GAAP) is comprehensive
• Governments follow GAAP
• Auditors report that GAAP is followed
• Users and other stakeholders support use of
  Handbook
• Performance reporting followed

4
How we got here

• Task Force on Standard Setting- 1998
• Key recommendations
• PSAB keep on trucking
• AcSB
• Harmonize with US
• Help to develop global standards

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Circumstances Have Changed

• Crisis in investor confidence
• Certification
• fairness not evaluated solely using GAAP
• SEC registrants can adopt US GAAP
• International GAAP becoming a real option

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2004 Invitation to Comment

• Four fundamental questions
• Do we need/want a standard setting capability?
• Yes, but structure/resources must adapt

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2004 Invitation to Comment

• Do we need/want distinctive Cdn GAAP?
• Public companies No
• Private companies Yes, but..
• eliminate stigma of differential or second
  rate
• system should be open to ALL private companies

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2004 Invitation to Comment

• What should our policy be on US GAAP and
  International standards (IFRS)?
• Move beyond harmonization
• For public companies, do not need a made in
  Canada solution

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2004 Invitation to Comment

• Do we want differential reporting?
• Public companies - No
• Private companies - General support but divergent
  views on approach

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Public Companies

• If we dont want distinctive Cdn GAAP, what do we
  want?
• Only two logical contenders
• US GAAP
• International standards (IFRS)

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The Case for US GAAP

• Costly, but high quality
• Integration of US/Cdn markets
• US GAAP already used in Canada
• needed by SEC registrants
• Significant US GAAP resources already exist in
  Canada
• why waste this investment?
• could be a competitive advantage?

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The Case for IFRS

• Harmonization with US is wasteful if IFRS is end
  goal
• US GAAP too burdensome for most
• IFRS fit better with Cdn approach
• less rules-oriented than US GAAP
• IASB more receptive to Cdn input than FASB/SEC

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Growing Support for IFRS

• EU listed companies- big bang 2005
• Australia/NZ- all companies 2005-07
• FASB/IASB- convergence projects
• Norwalk Agreement
• Japan/IASB- recent announcement

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Public Companies

• Cdn GAAP for public companies IFRS
• SEC registrants may use US GAAP
• This decision rests with regulators/legislators
• AcSB will assist in development of IFRS
• IASB has ultimate authority
• Deviations from IASB decisions to be rare

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Private Companies

• Fundamental re-examination of appropriate basis
  of reporting
• Free- standing
• Not differential
• Not necessarily linked to GAAP for public
  companies
• Exempt private companies with no external users
  of their financial statements

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Standards Overload

• Major issue in all scenarios
• Make standards clearer, more concise
• more implementation guidance
• Manage pace of change
• more lead time

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Timeline public companies

• Detailed AcSB work program June 06
• Checkpoint review Apr-Sept 08
• Changeover to IFRS April 2011

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Timeline private companies

• Exempt if no external users April 08
• Research completed April 09
• New standards in place ?????

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Impact on public sector

• Governments
• Government business organizations
• Other government organizations

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QUESTIONS??

• PSAB website www.cica.ca/PublicSector
• AcSB website www.acsbcanada.org