Skip Ribbon Commands
Skip to main content

IFRS or Private Enterprise GAAP - Which Road Will You Take?

12/02/2010


When faced with an unexpected fork in the road, deciding which direction to go in can be challenging. If choosing between International Financial Reporting Standards (IFRS) or Private Enterprise Generally Accepted Accounting Principles (PE GAAP) is weighing heavily on you, it is important to consider these three factors to help you choose the right path.

Privately owned enterprises that are profit-driven can determine which set of accounting standards they should adopt by reviewing their future strategy and objectives.  “Every business should ask themselves what their objectives and goals are now and for the future. Business owners will put off their decision if they don’t understand how each set of standards will affect their operation financially and in other ways,” says Tony Smith, Leader of MNP’s Business Owner Services practice.

By conducting an analysis of each framework, you will be more clear on what each has to offer, their advantages and disadvantages and the costs associated with each. This exercise will also help you get a better idea of which framework is more effective to the overall operation of your company.

It is important to consider what type of reporting framework your competitors are using. If you apply the same framework as your competition–analysts, bankers and potential investors can compare the financial position of your business to similar organizations with greater ease. This is important if you are planning to sell, source capital or perform a competitive analysis.

The final factor to consider when selecting either IFRS or PE GAAP is what the needs of your financial statement users are and the specific type of information they require. “If you plan to go public or stay private, sell your business or expand or would like access to foreign capital–these decisions affect the type of reporting framework you should adopt. By answering these questions, you will know who will be relying on your financial statements and this will guide you towards the right set of reporting standards,” says Sean Du Plessis MNP’s IFRS Specialist.

Whether you choose IFRS or PE GAAP, both will likely have a significant impact on your financial reports, internal processes and accounting policies. To help ease the transition to either accounting framework, it is important to ask the right questions so you have the best information to help you choose the most appropriate path. If you are still unsure of which direction to go in, consult a business advisor. They will steer you in the right direction and ensure all aspects of your unique situation are considered, so you can effectively transition to the new framework.

If you would like more information on IFRS or PE GAAP or need assistance with your transition to either framework, contact your local MNP advisor.