Differences between IFRS and CGAAP Values Widespread and Significant
by Terri Eyden on
A new report by the Certified General Accountants Association of Canada (CGA-Canada) reveals that the adoption of International Financial Reporting Standards (IFRS) has had a noticeable impact on the financial statements of Canadian-listed companies. The source of the differences in financial reporting is linked to a broad range of accounting adjustments. The study looked at 150 companies listed on the Toronto Stock Exchange (TSX), which mandatorily adopted IFRS in 2011, and used their audited financial statements as the basis of the analysis.
"Adoption of IFRS in Canada brings both good and bad news," says Michel Blanchette, professor of accounting with the University of Quebec and coauthor of the report. "The good news is that the comparability of Canadian financial statements internationally may improve, since many other countries have already adopted IFRS. The bad news is there are a number of pitfalls lurking for financial analysts and other users of financial statements."
Blanchette points out that in the short term, the outcome of trend analysis may be distorted as current IFRS statements are compared to statements prepared under pre-changeover Canadian generally accepted accounting principles (CGAAP). In the longer term, the outcome of the analysis will be influenced by the application of IFRS, which differs – to a greater or lesser extent – from that found in CGAAP.
The report makes a number of recommendations to financial analysts and other users of financial statements.
"Those involved in the analysis of financial statements are advised to accord particular attention to the trend analysis when comparing pre-adoption data computed under CGAAP with post-adoption data obtained under IFRS," says Rock Lefebvre, vice president of Research & Standards at CGA-Canada and sponsor of the report.
"Analysts should also be aware of the differences caused by a company's industry affiliation, particularly in the finance, management, professional services, real estate, retail, and transport sectors."
The real effects of IFRS adoption in Canada are likely to be even larger than those identified in the study, Lefebvre notes, as the effects observed during the analysis are likely diluted by the gradual nature of transition to the new regime and some other factors.
The report is available at www.cga.org/canada/research.
Founded in 1908, the Certified General Accountants Association of Canada serves 75,000 Certified General Accountants and students in Canada and nearly 100 countries. Respected accounting and financial management professionals, CGAs work in industry, finance, government, and public practice. CGA-Canada establishes the designation's certification requirements and professional standards, offers professional development, conducts research and advocacy, and represents CGAs nationally and internationally.
Source: October 3, 2013, CGA-Canada Press Release
You may like these other stories...
Is it time to consider a value added tax?Forbes contributor Joseph Thorndike wrote yesterday that he believes the tax reform proposal by House Ways and Means Committee Chairman Dave Camp (R-MI) was dead on arrival. But he...
Read more from Larry Perry here and in the Today's World of Audits archive.The planning phase of an audit engagement of an entity using US GAAP or a special purpose framework will, with minor differences, include similar...
Internal audit: Know when to discloseIn an excerpt from his book, Lessons Learned on the Audit Trail, Institute of Internal Auditors President and CEO Richard F. Chambers said if you analyze enough audit reports, you can...
Upcoming CPE Webinars
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.