What Are the Canadian Accounting Standards?
The Accounting Standards refers to a set of publicly accepted standards specifying how events, transactions and occurrences are to be measured, categorized, recorded, and presented before being disclosed within financial statements.
There are three options in Canada that profit-oriented businesses can choose from. The NON-GAAP refers to Cash Accounting or Accounting for Tax Purposes, the ASPE or Accounting Standards for Private Enterprises and the IFRS, which refers to the International Financial Reporting Standards.
It is wise for a business to think about its vision and its’ goals when deciding which reporting standards to adopt. For instance, if a start-up is considering in the near future to plan an initial public offering, it may choose IFRS since this is the accounting standard that is required for Public Companies. However, since the USA does not use the IFRS, they rely on their own standards known as U.S GAAP. If a new business is hoping to attain American investment, this needs to be additionally considered.
We work with small and medium companies throughout the Okanagan Valley. These companies are not obligated to choose any of the three above standards; having the flexibility to follow the standards they choose.
The majority of private companies may consider ASPE, which is known as private GAAP. This may be the best option for your Kelowna company. This can help make your business credible down the road if you decide to arrange financing, to sell, to raise equity capital, or comply with the norms of the industry. It is important to facilitate a tailored approach for your Kelowna business and consider all of the options.
Smaller businesses that are managed by their owners and that will not undergo a review engagement and are not required to be audited may find advantages in preparing their financials with tax purposes. In this instance, financials are prepared in the same structure and format as would be on a sole proprietor return or a corporate tax return. Occasionally these kinds of statements overlap with GAAP and there is minimal disclosure for external users. Tax preparation may be more expensive to change your financial statements to ASPE in the future.