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For years, there has been a cry for simplified financial reporting standards by the millions of private entities in Canada, their auditors and stakeholders. In 2002, the Accounting Standards Board (AcSB) approved the existing Differential Reporting model to address the concerns of private enterprises. However, this model only allows private entities and other qualifying enterprises to apply a limited number of specified reporting options.
With the significant change in current Canadian GAAP, especially due to the shift to converge Canadian GAAP with the International Financial Reporting Standards (IFRS), the Handbook has evolved to encompass numerous complex standards and significant disclosure requirements that are less than relevant to a user of a private entity’s financial statements.
The Future for Private Enterprise Standards
With the shift to IFRS for publicly accountable enterprises, the AcSB identified a need for a separate financial reporting approach for private enterprises. In May 2007, three different approaches were explored (i.e., a set of standards based on IFRS, with some significant differences; adoption of the proposed IFRS for Small and Medium-sized Entities standard; and an independently developed set of standards). A year later, after significant consultation with stakeholders and extensive deliberations, the private enterprise approach was born.
The private enterprise standards will be based on the existing CICA Handbook – Accounting and will be available for use by all private enterprises. The main focus of the Private Enterprises Advisory Committee is to identify problematic areas in the existing Handbook and assess based on cost/benefit considerations, how these areas may be simplified.
Significant problem areas that are being tackled include:
The Advisory Committee is also reviewing the extensive disclosure requirements in the Handbook and expects to significantly reduce this amount to focus on those matters most important to users in the private sector. It is anticipated that the full set of private enterprise standards will be available by the end of 2009, with an option for private entities to apply for their 2009 fiscal years. Canadian GAAP, as it stands, would no longer exist after 2010.
For detailed information on tentative decisions made by the AcSB with respect to the private enterprise standards, refer to AcSB Decision Summaries located on the CICA website (www.cica.ca > Standards > Accounting > Decision Summaries (September 23-24; November 12; and December 3-4, 2008).
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