The accounting rules known as Canadian GAAP are destined to disappear, Canada's accounting standards setters announced yesterday.
The Accounting Standards Board (AcSB) yesterday ratified a new strategic plan for the future of Canada's accounting, including a key decision to adopt international accounting rules for Canada's publicly traded companies.
After the end of an implementation period, Canadian Generally Accepted Accounting Principles (GAAP) will cease to exist as a separate basis of financial reporting for public companies, replaced by the International Financial Reporting Standards (IFRS).
AcSB chairman Paul Cherry said the decision came after extensive consultations with Canadian companies and investors who overwhelmingly indicated they don't want Canada to copy "rules-oriented" U.S. accounting standards, known as U.S. GAAP.
"We have done a lot of debating and questioning whether we should be aligning ourselves closer to U.S. GAAP or to international standards," Mr. Cherry said.
The European Union and Australia have already adopted IFRS, and other countries have convergence programs under way.
The new AcSB plan calls for Canada to align its standards with the international rules over a period expected to take about five years.
The AcSB said it will develop and publish a detailed implementation plan later this year. It said Canadian public companies that wish to use U.S. GAAP can continue to do so if they continue to meet the current requirement that they be registered with the U.S. Securities and Exchange Commission.
The new plan applies only to publicly traded companies. The AcSB said it is developing different strategies for private companies and not-for-profit organizations, and has begun a review of the financial reporting needs of private businesses "as a matter of urgency."
"Our fundamental premise and experience is that one size does not necessarily fit all," Mr. Cherry said. "For example, developments in global capital markets are important for public companies and their investors, but not so important for private businesses and not-for-profit organizations."
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