The Accounting Standards Board (AcSB) has approved the final accounting standards for private enterprises in Canada. The new standards will be issued by the end of the year and will be available for 2009 reporting for companies that choose to adopt them early.
Private companies must adopt either the new standards or the International Financial Reporting Standards - a more complex set of rules designed principally for use by public companies. Companies must choose for years beginning on or after January 1, 2011. The vast majority of private companies are expected to select the new private enterprise standards, which significantly simplify existing rules.
Private enterprise standards were developed through a lengthy consultation process that ensured that private companies of all sizes across Canada were able to provide input, the AcSB said in a statement. Consultation was the key to producing new financial reporting standards that respond to the needs of both private enterprises and the users of their financial statements, it added.
"The new standards provide Canadian private enterprises, many of them small and medium-sized businesses, with standards that are robust, yet more straightforward to implement," the AcSB said in the statement.
Notable changes include simplifying recognition, measurement and presentation in areas identified as being overly complex, particularly accounting for financial instruments. The simplified accounting requires less use of fair values. The new standards also significantly reduce the burden of disclosure requirements.
"As part of its overall strategy, the Accounting Standards Board concluded that when it comes to financial reporting standards, one size does not fit all," said Tricia O'Malley, chair of the Accounting Standards Board, in the statement. "We are pleased to have completed the project and given Canadian private enterprises the standards that they and their users need to function effectively and efficiently."
"These new standards offer Canadian private enterprises and users of their financial statements genuine improvements. In analyzing the needs of private enterprises and addressing their needs and concerns, the Accounting Standards Board was careful not to make changes simply for the sake of change," said Brian Drayton, AcSB member and chair of the Private Enterprise Advisory Committee. "Rather, the AcSB took the opportunity to address specific areas that were brought to our attention, such as disclosures, that unnecessarily overloaded preparers without providing benefit to users. Stakeholder interest was very high and their comments and input were tremendously helpful in developing strong standards for private enterprises."
Private businesses should be preparing to ensure a smooth transition to the new standards, following the same three-stage process that many publicly accountable enterprises are using to get ready for IFRS.
- Review the new sections of the Canadian Institute of Chartered Accountants (CICA) Handbook
- Assess what changes apply to your company
- Identify the impact of the changes on your company's financial statements and systems, and evaluate the various accounting options
- Then, choose the options best suited to your enterprise
- Implement the system changes and apply the new standards to your accounting
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