"Record-Setter for Longest Time to Live with Bullet in
Head Dies at 103." – Recent obituary
For Canadian rate regulated enterprises, the path to IFRS has
been a rocky one, full of near death experiences.
Recall that the Canadian Accounting Standards Board gave RREs
until 2012 to transition to IFRS, rather than forcing them to move
over in 2011 like almost everyone else. The RRE deferral came about
because of the IASB's last minute decision in 2010 not to
provide clarity on whether IFRS allows an RRE to set up assets and
liabilities as the result of a regulator's rate order, as old
Canadian GAAP does. Many hold the view that IFRS doesn't permit
setting up assets or liabilities at all. We don't agree, but
even under our view, you won't always get the same answers as
old Canadian GAAP.
In 2011, Canadian provincial securities commissions responded to
RREs concerns about the impact of IFRS by giving those listed on
exchanges the option of following US GAAP instead. This generally
requires the same accounting as old Canadian GAAP. There's a
catch, though. The CSA's relief is only good through to the end
of 2014. Then companies will have to either switch to IFRS or
register with the SEC to maintain the right to follow US GAAP that
exists under current Canadian securities legislation. The CSA
hasn't said why it imposed this limit but the best guess is
that they were trying to avoid setting a game changing precedent by
allowing an entire industry to use US GAAP and at the same time
allow for an IFRS-based solution to develop.
If so, it might just work! In May, the IASB announced a decision
to consider whether to put RRE accounting back on its agenda. While
a final standard wouldn't be in place in time for 2015
reporting, some members of the IASB also have raised the
possibility of introducing interim measures that would allow
Canadian RREs to continue their existing basis of accounting.
Seizing on this possibility, the Canadian Board promptly extended
the date of mandatory transition to IFRS for RREs until 2013. This
decision mostly benefits nonpublic ones (such as entities in the
public sector) unable to take advantage of the US GAAP reporting
option available to public ones.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Over the past year, we have watched the Canadian dollar drop relative to its U.S. counterpoint impacting Canadian businesses. U.S. goods and services are now more expensive, U.S. sales make a premium and errors when recording foreign exchange transactions can cost you more money.
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