3. Who was affected by the adoption of IFRSs? | Chartered Accountants of Canada

3. Who was affected by the adoption of IFRSs?

PRIVATE SECTOR:
IFRSs are required for publicly accountable enterprises (PAE) and optional for private enterprises and non-for-profit-organizations.

PAE: Generally speaking, a PAE is an entity other than a not-for- profit organization that:

Has issued, or is in the process of issuing, debt or equity instruments that are, or will be, outstanding and traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
Holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.

In some cases, determining whether an entity is a PAE requires professional judgment. Click here for the full definition of PAE. There are about 4,500 such entities in Canada. The adoption of IFRSs will also affect their stakeholders: shareholders, employees, lenders, auditors and advisors.

Pension Plans: When PAEs adopted IFRSs, the standards applicable to pension plans were based on the new accounting standards for pension plans issued by the Accounting Standards Board (AcSB) rather than the IAS 26 Accounting and Reporting by Retirement Benefit Plans. The new Section 4600, Pension Plans, found in Part IV of the CICA Handbook – Accounting, is based on Section 4100, Pension Plans. Modifications include: a requirement to present pension obligations together with the net assets available for benefits and the resulting surplus or deficit on the face of the statement of financial position; a requirement to measure investment assets at fair value, not on an actuarial asset value basis; and more extensive disclosures.

Investment Companies, Segregated Accounts of Life Insurance Enterprises and Rate Regulated Entities Exemption: Recent projects of the International Accounting Standards Board (IASB) have affected investment companies, segregated accounts of life insurance enterprises and entities with rate-regulated activities. The pace and outcome of the IASB’s activities put each of the groups of publicly accountable enterprises at a significant disadvantage in terms of their ability to adopt IFRSs by January 1, 2011. The Accounting Standard Board provided qualifying entities in these groups with the option to defer their changeover to IFRSs by one year to January 1, 2012 for investment companies and segregated accounts of life insurance enterprises and by one year to January 1, 2012 for rate-regulated entities. However, in January 2011, the AcSB agreed, that for investment companies and segregated accounts of life insurance enterprises, the option to defer would be extended to January 1, 2013 because of a delay in the timing of IASB’s project. This change by the AcSB is expected to be issued into the CICA Handbook – Accounting in March 2011.

Private enterprises were given the option of adopting IFRSs or the new Canadian standards designed to address issues specific to private business. The new accounting standards for private enterprises are available in Part II of the CICA Handbook – Accounting.

PUBLIC SECTOR: Public sector entities that are government business enterprises (GBEs) adopted IFRSs following the same transitional provisions as PAEs in the private sector. The classification of government business-type organizations (GBTOs) has been eliminated. Some of these government organizations would now be categorized as other government organization (OGOs) and can follow IFRSs if it is determined to be more appropriate considering their objectives and circumstances.

NOT-FOR-PROFIT: Effective January 1, 2012, Canadian private not-for-profit organizations will have a new financial reporting framework. These mandatory standards will be available as of December 1, 2010, as Part III of the CICA Handbook – Accounting. Early adoption is permitted. Given the diversity of the private sector, not-for-profit organizations will also have the option of choosing International Financial Reporting Standards (IFRSs) for a January 1, 2012, changeover.

Until transitioning to a new financial reporting framework, not-for-profit organizations should continue to follow the existing accounting standards in the CICA Handbook – Accounting (now called Part V).

Government Not-for-Profit Organizations
Effective January 1, 2012, Canadian government not-for-profit organizations will be directed to follow the CICA Public Sector Accounting Handbook (PSA Handbook), which will now include the 4400 series as taken from the CICA Handbook –Accounting substantially as it is. The transition to the PSA Handbook will be mandatory for all government not-for-profit organizations, with standards becoming available as of December 1, 2010.

Until transitioning to a new financial reporting framework, government not-for-profit organizations should continue to follow their existing accounting standards in the CICA Handbook – Accounting (now called Part V).