The Accounting Standards Board has published its comments to the Canadian Securities Administrators’ discussion paper concerning Financial Reporting in Canada’s Capital Markets. The comments suggest that the AcSB is willing to accept the use of international accounting standards in Canadian markets.
The AcSB says that, “the issues raised in this discussion paper are of fundamental importance and deserve thorough analysis and evaluation with full opportunity for public input. The questions raised in the CSA Discussion Paper have very significant implications for the role of Canadian ‘generally accepted accounting principles’ and the Canadian accounting standard setting function at a crucial time in the development of international accounting standards.”
In its comments, the AcSB notes that it has two fundamental focuses: harmonization with U.S. GAAP; and, convergence with the highest quality of U.S. and international accounting standards.
“The essential question in the AcSB’s view is not whether Canadian GAAP have relevance to Canadian investors, but whether U.S. (or IASB or other foreign GAAP) may be considered to be more relevant for some companies or in some situations, or whether certain cost-benefit considerations may be considered to override the usefulness and relevance of Canadian GAAP.”
It says it does not express an opinion on whether the CSA should relax its requirements to allow some or all reporting issuers to provide financial information on U.S. GAAP, IAS, or other foreign standards in place of Canadian GAAP. But it does have concerns from an accounting point-of-view.
The main areas of concern to the AcSB relate to:
- cost and comparative advantage claims;
- comparability and information value to Canadian investors;
- maintaining the high quality Canadian accounting standards if some Canadian companies are allowed to adopt U.S, GAAP;
- education and competency requirements for U.S. GAAP, IAS, or other foreign standards; and
- potential legal difficulties.
“Assessment of these issues involves difficult cost-benefit trade-offs and there would seem to be little hard evidence on which to base them,” it says.
The AcSB says that it is of the view that IASB standards have now been developed to the point that they may be considered to be of acceptable quality for use by foreign companies making public offerings in Canada. It notes, however, that “There are important questions with respect to the limited knowledge of IASB standards on the part of Canadian users, and with limited experience in applying and regulating IASB standards..”