THE CONCEPTUAL FRAMEWORK

Overall objective of financial statements is to provide

information that is useful to users in making
decisions
In general, users desire financial statements prepared
in accordance with GAAP
CICA HB is authoritative through legal statutes
CBCA, securities commission
Development of GAAP is a political process, involving
both preparers and users

THE CONCEPTUAL FRAMEWORK

Conceptual framework
Describes principles and assumption underlying the
preparation of financial statements
Provide framework for the development and
issuance of other financial accounting standards
Judgement is the ability to make a decision in
situations where the answer is not clear-cut
selection of accounting policies, estimates and
writing notes

INTERNATIONAL ACCOUNTING
GAAP varies from country to country
Differences in measurement historical cost,
asset revaluations, price-level adjustments,
valuation of goodwill
Differences in presentation ordering of
assets, liabilities and shareholders equity
Differences in disclosure segment reporting,
financial forecast reporting

INTERNATIONAL ACCOUNTING
Greater attention to differences in
accounting standards
World economic changes EU, NAFTA
Advances in computer and
communications technology
Shift to global marketplace and capital
markets

INTERNATIONAL ACCOUNTING
Factors that may influence a countrys
accounting standards
Role of taxation differences between
accounting and taxable income
Level of development of capital
markets public trading
Legal system role of standard setters

INTERNATIONAL ACCOUNTING
Factors that may influence a countrys
accounting standards
Ties between countries affect of
home country, EU
Inflation levels usefulness of
historical cost model

INTERNATIONAL ACCOUNTING
A truly global economy will require some
sort of harmonized accounting
standards if it is to function properly

INTERNATIONAL STANDARD
SETTING
International Accounting Standards
Committee IASC, formed 1973,
issued IAS
March 2001 IASC restructured to form
International Accounting Standards
Board IASB which issues IFRS

INTERNATIONAL STANDARD
SETTING
Objective of IASB
Develop a single set of high-quality, global
accounting standards that require
transparent and comparable information in
general-purpose financial statements
To cooperate with various national
accounting standard-setters in order to
achieve convergence in accounting
standards around the world

INTERNATIONAL STANDARD
SETTING
EU, Australia and New Zealand
EU effective January 1, 2005, all EU countries
whose shares are traded on stock exchanges would
be required to use IFRS
Australia (2005) and New Zealand (2007) adopted
IFRS through issuing equivalent domestic
standards
Develop a single set of high-quality, global
accounting standards that require transparent and
comparable information in general-purpose financial
statements
To cooperate with various national accounting
standard-setters in order to achieve convergence in
accounting standards around the world

INTERNATIONAL STANDARD
SETTING
IFRS versus U.S. GAAP
FASB indicated support of global standards, but also
believed that its standards were the best in the world
FASB pronouncements are rules based, IFRS are
principles based
September 2002 Norwalk Agreement pledge to
make reporting standards fully compatible as soon
as practicable
Differences were identified in the Short Term
Convergence Project end of 2009 both FASB and
IASB issued some new standards to converge

INTERNATIONAL STANDARD
SETTING
IFRS versus U.S. GAAP
Joint work projects resulted in some
new standards
SEC has changed requirements for
foreign registrants allowing use of IFRS
with no reconciliation to US GAAP
SEC Staff report July 2012
recommends further analysis no
decision

CANADA
Effective January 1, 2011, CICA adopted
IFRS for publicly accountable entities
Since corporations Acts require use of
GAAP, IFRS comprise a separate part
of CICA Handbook

CANADA
CICA Handbook
Part I IFRS applicable to publicly
accountable enterprises effective January 1,
2011
Part II PE (Private Enterprise) Standards ASPE
Part III NFPO Standards
Part IV Pension Plans
Part V Standards constituting Canadian
GAAP before mandatory effective date for
adoption of above Parts - CGAAP

CANADA
IFRS SME not adopted in Canada as
not considered consistent with former
differential reporting under CGAAP
IFRS has no NFPO standards
Adoption = replace CGAAP with IFRS
Convergence = roll IFRS into GAAP
US approach