IFRS vs Canadian GAAP
The International Financial Reporting Standards (or IFRS) are the standards, interpretations and framework set forth by the International Accounting Standards Board (IASB). IFRS are a based on a set of principles that establish broad rules and specific treatments when dealing with every country’s financial makeup.
The Canadian Generally Accepted Accounting Principles (or Canadian GAAP) were a set of standards, guidelines, and procedures dealing with accounting. It was designed to make Canada’s financial sector more unified.
IFRS are comprised of four main components: the International Financial Reporting Standards, the International Accounting Standards (IAS), the Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC), and the Standing Interpretations Committee (SIC). Also a large component of IFRS is the Framework for the Preparation and Presentation of Financial Statements, which describes the underlying principles of IFRS. The framework is the foundation of all accounting standards for any country and basically states that financial statements must provide information about the financial standing, performance, and changes in financial standing of any entity. Furthermore, they must provide the current financial status of this entity to the general public and its shareholders.
The Canadian GAAP was based on the more traditional interpretation of GAAP in that it included the basic components: regularity or conformity to the rules and guidelines of the particular company, sincerity, permanence, and continuity. The GAAP is generally used for the purpose of preparing accurate financial statements and improving a company’s adherence to tax rules and regulations –ensuring that the company’s financial objectives are met using accurate financial data.
The main difference between IFRS and Canadian GAAP is that while IFRS offer an overarching set of standards to ensure that the financial stability of a company intact and must be adhered to at all times, the Canadian GAAP was a loosely enforced set of guidelines. GAAP in general has never been a staunch set of standards by which a company must measure its financial success; however, IFRS has been established to provide a blanket set of guidelines for every country’s financial sector in order to ensure that the general public and shareholders are aware of all practices that take place.
Summary:
1. IFRS are a set of standards that establish broad rules that each company must follow; Canadian GAAP was a loose set of guidelines dealing with accounting.
2. IFRS must adhered to by each company in order to keep the general public and shareholders abreast of all financial occurrences in a specific country; Canadian GAAP was strictly used to ensure the company maintained adherence to tax rules and regulations.