Accounting Standards for Private Enterprises (ASPE)
The number and complexity of accounting standards has increased significantly over the last few years, mainly due to the introduction of more complex financial transactions and the increasing demands of the capital markets for transparent financial information. The Accounting Standards Board (AcSB) finally realized that “one set of standards did not fit all” and as a result they decided to pursue separate financial reporting strategies for public and private enterprises and non-for-profit organizations.
In February 2008, the AcSB announced its strategic plan to move publicly accountable enterprises to International Financial Reporting Standards (IFRS) for fiscal years beginning on or after January 1, 2011. The AcSB has defined publicly accountable enterprises as:
a) Entities that have issued, or are in the process of issuing, debt or equity instruments that are, or will be, outstanding and traded in a public market,
or
b) Entities whose primary business is to hold assets in a fiduciary capacity for a broad group of outsiders such as banks, credit unions and insurance companies – including auto, crop, health and workers’ safety.
While there are a few thousand public companies in Canada, there are millions of private enterprises and these small, medium and large sized private entities are very important to the Canadian economy. As a result of the announcement of a move to IFRS for publicly accountable enterprises the numerous private enterprise stakeholders immediately began to ask where the strategy for private was and when it would be released.
The AcSB realized that private enterprises have fewer users of their financial statements and require less disclosure since their users generally had access to further information. In addition, through numerous roundtables, the Board heard from stakeholders in the private sector that stated that they wanted quality private enterprise financial statements, with relevant and reliable accounting information, delivered in less complex ways. In response to the demands from private enterprises stakeholders, the AcSB pushed forward to develop standards specifically for private enterprises. After consulting extensively with users of private enterprises financial statements and publishing various proposals, in December 2009, it issued a new Part to the Canadian Institute of Chartered Accountants (CICA) Handbook - Accounting” entitled Part II - Accounting Standards for Private Enterprises.
A private enterprise is defined as a profit-oriented entity that is not a publicly accountable enterprise. All private enterprises who wish to report under Canadian generally accepted accounting principles are required to adopt either IFRS or ASPE for years beginning on or after January 1, 2011. Therefore, the first annual financial statements impacted by the conversion will be those of December 31, 2011.
ASPE is based on the Canadian accounting standards that will be in effect until the conversion; however there have been changes. Management of every private enterprise will have to revisit their accounting policies, determine if the new standards will affect any banking covenants, discuss with their BDO advisor if there are any transitional issues they may incur on first-time adopt, and assess if it is to their benefit to make use of any transitional elections.
Our professionals are ready to help you prepare for the transition to ASPE.
For more information, or to speak with a BDO professional, please contact us at aspe@bdo.ca
For APSE conversion services, please contact your local BDO office.
