Canada's move to international accounting standards is expected to get a big boost from an influx of international banking and financial services companies into Halifax, Nova Scotia.
Peter Secord, an accounting professor at St. Mary's University in Halifax, has predicted that four companies that announced plans to set up operations in Halifax, Nova Scotia's capital city, will do their accounting based on international, rather than use Canadian or the United States' Generally Accepted Accounting Practices (GAAP) accounting standards.
Such adoption would be significant because Canada's accounting profession is in the midst of moving to international standards, and that's expected to be an arduous task. Also,Halifax appears to be evolving into an international financial services company hub; the four companies that have announced plans for that city will be relocating international operations now conducted in Bermuda or elsewhere in the Caribbean.
"The local standards of the host country are not important," Secord said while discussing the Halifax matter in a story in Halifax's Chronicle Herald newspaper. He also noted that there is a growing market inclination toward the "principles based" international standards and away from the "rules-based" GAAP standards in the United States.
Secord is chairman of the accounting department at St. Mary University's Sobey School of Businesses.
Three of the companies that Secord said will use international standards at their planned Halifax operations have headquarters of affiliate operations in the United States. They are Marsh Inc., an insurance services arm of New York- based Marsh & McLennan Cos.; Citco, which is also headquartered in New York, and a division of Olympia Capital International, which is based in Bermuda, but has a New York affiliate. The fourth company setting up Halifax operations is the Bermuda-based Butterfield Bank Group.
It would make sense for the four companies to have their Halifax operations use international standards since the operations will be international in their scope. Moreover, Secord noted there is a growing market embrace of the international standards' "purer" principles-based approach and away from the United State's rules-based approach, which, he says, can lead to "a loophole mentality."
Any expanded adoption of international standards in Halifax or elsewhere in Canada, would be good news to Sir David Tweedie, chairman of the International Accounting Standards Board (IASB). His board and U.S. accounting groups are in the process of reconciling GAAP standards with the International Financial Reporting Standards (IFRS).
In a recent press briefing in South Africa, a country that has already adopted IFRS, Tweedie acknowledged that the move to international will be difficult in Canada and in the other countries in the process of making the move. Those other countries include Israel and Chile.
"You (South Africa) are one of the first (to adopt international standards). Now you've had the pain, but the pain is over. These other countries still have to go through it," Tweedie told Moneyweb.com in South Africa.
The reconciliation of GAAP and international standards is expected to take another two years and result in a set of simplified principle-based standards. Tweedie expects about 150 countries will have adopted IFRS within the next five years.
Written by John Covaleski.