Most of Canada’s publicly-held companies will be required to use International Financial Reporting Standards beginning in 2011. The Canadian Accounting Standards Board (CASB) announced the change this week, noting that IFRS will replace Canada’s current generally accepted accounting principles for “publicly accountable profit-oriented enterprises.”
The change affects listed companies and other for-profit enterprises “that are responsible to large or diverse groups of stakeholders,” according to the CASB. The official changeover date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.
Private companies and not-for-profit organizations are not required to file financial statements using the international standards, but are permitted to adopt IFRS in 2011. “With the date firmly established, enterprises can plan for the changeover with certainty about the timetable,” said Paul Cherry, chairman of CASB. “A significant challenge lies ahead but it will be made far more manageable if business leaders prepare early,” he added.
The CASB originally proposed the 2011 start date in January 2006 when it announced plans to adopt IFRS. Officials at the standard setter said the group confirmed the date “after a rigorous review of Canada’s readiness for changeover, including consultations with the public, regulatory authorities, and the independent Accounting Standards Oversight Council.”
CASB explained that companies will have to provide comparative IFRS information for the previous fiscal year. That means that companies must prepare comparative information a year prior to the 2011 changeover date. “This clearly demonstrates why planning for the transition to IFRS must begin now,” stressed Cherry.
The move to IFRS will place Canada on the same financial reporting playing field as more than 100 other countries, including the U.K. and other EU nations, as well as Australia, according to the announcement. “Canada has always shown leadership in promoting the cause of international standards,” said David Tweedie, chairman of the International Accounting Standards Board. “Its confirmation of the changeover date is welcome news, as it brings another country with a well-established capital market one step closer to the adoption of International Financial Reporting Standards.”
Earlier this month, U.S. Securities and Exchange Commission chairman Christopher Cox announced that the regulator is working on a road map for transitioning U.S. companies to the global rules. The announcement came just a few months after the SEC began accepting IFRS-prepared financial statements from some of its foreign registrants without requiring them to reconcile those filings to U.S. GAAP.
In December the U.S.-based Financial Accounting Standards Board issued
revised M&A rules, which essentially brought U.S. standards in line with most business combination provisions of IFRS. The newly minted merger rules are part of an ongoing joint effort between IASB and the American standard setter to converge global standards.