If you are not required to use GAAP in your financial statements (i.e., if you are not having an audit or a review), you will likely have your accountant compile financial statements solely for tax purposes. Many of the standards in ASPE provide options for companies that are meant to be simpler to implement and more relevant and adaptable to the size of the business.Īs a result, ASPE is often the best choice for a Canadian-based private company, unless there is a specific reason to use IFRS or non-GAAP reporting. However, where IFRS was intended to be used in Canada by public companies, ASPE was intended as an alternative for private enterprises in Canada. It is a change from the previous Canadian GAAP and is in many ways similar to IFRS. Accounting Standards for Private Enterprises (ASPE)ĪSPE came into effect in Canada in 2011 (at the same time that IFRS was adopted in Canada). Anyone choosing to adopt IFRS should carefully evaluate the decision from a cost-benefit perspective. These accounting standards may also be useful if a startup is looking to be acquired by a company that is already reporting under IFRS.
Startups may find IFRS beneficial if they plan to list their stock on a Canadian stock exchange in the next year or two (as all public companies in Canada are required to report using IFRS and having historic financial statements prepared under IFRS can be advantageous).
This means that a Canadian company trying to attract US investors would often be better served reporting under US GAAP than IFRS. Additionally, while IFRS is well recognized globally, the United States (US) has not yet adopted it. For example, IFRS might suggest an annual valuation performed by an actuary for a specific type of asset. As a result, many of the standards can be quite costly and onerous for small companies to implement. Because its historical basis comes from large and complex organizations, IFRS was designed to deal with complicated situations faced by multinational and public corporations. IFRS originated in Europe and was largely influenced by multinational corporations that wanted a reporting system that remained consistent across the multiple jurisdictions in which they were reporting (e.g., businesses with operations and reporting requirements in Germany, France and Switzerland). International Financial Reporting Standards (IFRS) When choosing which accounting standards to adopt, the specifics of your business and the intended goals of your financial reporting should be considered (including who will be using your financial statements, both internally and externally). However, this is not necessarily the case. Many people conclude that they should immediately adopt IFRS as their accounting standards, and that in doing so, they will increase the credibility of their reporting. Of these three, the first two are types of Generally Accepted Accounting Principles (GAAP) in Canada.