Explain why Canadian accounting changed its accounting standards to International Financial Reporting Standards (IFRS), and also why the United States is considering adoption of IFRS.
In Canada for profit businesses have three main options to choose from when selecting the accounting standards on which they will base their financial statements. These three options are:
1) IFRS
2) Accounting Standards For Private Enterprise(ASPE)
3) Non-GAAP reporting
of these three the first two are types of Generally Accepted Accounting Principles(GAAP) in canada
startups may find IFRS beneficial if they plan to list their stock on Candian stock exchange in the next year or two (as all public companies in canada are required to report using IFRS and having historic financial statements prepared under IFRS can be advantegeous).
ASPE come in to effect in Canada in 2011 (at the same time IFRS was adopted in Canada) .It is a change from the previous canadian GAAP and is many ways similar to IFRS.However where IFRS was intended to be used in Canada by public companies
the U.S is considering to adopt IFRS because by adopting IFRS a busness can present its financial statement on the same basis as its foreign competitors , making comparison easier
adoption of IFRS by U.S will help save cost for US multinationals that have subsidiaries and branches scattered over the world .
IFRS is simple to understand apply whereas US GAAP is very complex and too detailed also IFRS has strong institutional support in US.
IFRS adoption will boost business in America
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