CSA releases tentative views on IFRS transition issues under Canadian rules
Version françaiseThe Canadian Securities Administrators (CSA) published Concept Paper 52-402 (Concept Paper) on February 15, 2008 to discuss ramifications for securities rules as a result of the impending transition from Canadian GAAP to International Financial Reporting Standards (IFRS, as issued by the International Accounting Standards Board (IASB)). As the Canadian Accounting Standards Board (AcSB) has adopted a transition plan to move to IFRS for years beginning on or after January 1, 2011, the CSA must now consider implications of this move on securities laws and regulations.
The purpose of the Concept Paper is to set out some of the issues that arise as a result of the impending transition, including the alternatives available to address them. The CSA caution that the review of issues presented is not exhaustive and that the conclusions set out in the paper are tentative only. The following is a summary of some of the issues raised in the Concept Paper, along with the CSA's tentative proposals to address them:
Early adoption of IFRS by domestic issuers
The CSA propose allowing domestic issuers to voluntarily move to IFRS prior to January 1, 2011. Some of the reasons cited for this tentative conclusion include early adoption benefits for:
- domestic issuers that are subsidiaries of foreign-based parents that must comply with IFRS;
- domestic issuers with significant foreign operations and foreign-based subsidiaries who must comply with IFRS;
- domestic issuers who are SEC registrants and wish to take advantage of the SEC's recent decision to allow foreign private issuers to comply with IFRS (without US GAAP reconciliation); and
- Canadian entities considering an IPO in Canada and the U.S. prior to January 1, 2011.
Use of US GAAP by domestic issuers
With respect to domestic issuers who currently rely on the exemptions under National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency in order to prepare financial statements in accordance with U.S. GAAP, the CSA propose to eliminate such exemptions (thus requiring Canadian GAAP filing) for financial years beginning on or after January 1, 2009. This effective "early transition deadline" would not apply to issuers who currently file or will have filed U.S. GAAP financial statements for the most recent year ending on or before December 31, 2008: such issuers would have a five year transition period for moving to IFRS, spanning from 2009 to 2013.
Other issues addressed by the Concept Paper include how the CSA will deal with references to Canadian GAAP in various securities rules. The CSA's tentative conclusion is that all such references will be changed to refer to IFRS as issued by the IASB. This is notwithstanding the fact that the AcSB's strategic transition plan proposes to import IFRS into Canadian GAAP and continue to then refer to such standards as Canadian GAAP.
Comments on the Concept Paper are requested by April 13, 2008.
