The Canadian Securities Administrators, the body which co-ordinates certain activities of the various provincial and territorial securities regulators in Canada, has issued a Discussion Paper seeking public comment on the advantages and disadvantages of changing the rules governing financial statements.
Canadian securities regulators wish to determine whether Canadian and foreign issuers should be allowed to file financial statements according to U.S. Generally Accepted Accounting Principles (GAAP) or International Accounting Standards (IAS), recently endorsed by the International Organisation of Securities Commissions, rather than Canadian standards.
To assist in assessing the issues, the CSA is seeking responses to 17 detailed questions set out in a discussion paper available on the websites of the Ontario Securities Commission, the Alberta Securities Commission and the BC Securities Commission.
While the main concern of many publicly-listed companies in Canada is their desire to use U.S. GAAP as their primary basis of accounting, rather than Canadian GAAP, the CSA Proposal has important for foreign issuers wishing to enter the Canadian securities markets. The ability to use IAS financial statements without reconciliation to Canadian GAAP would be a significant cost savings to such a company.
The CSA has a number of overriding concerns:
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Comparability – Having three or more different sets of accounting standards for reporting issuers would make it more difficult for Canadian investors and analysts to compare results for different issuers. For some Canadian issuers, however, the peer group to which they are usually compared is foreign companies that do not prepare Canadian GAAP statements.
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Professional capacity – Canadian accounting professionals have limited knowledge of U.S. GAAP and virtually no experience with IAS. A significant effort would be required for issuers, auditors and regulators to build sufficient expertise to handle increased use of these other sets of standards while maintaining high standards of compliance.
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Other Statutory Requirements – Even if the CSA exempts Canadian issuers from filing Canadian GAAP financial statements, they may still be required under corporate or tax statutes. The desired cost savings would be achieved only if these other requirements can be removed.
Comments are requested by 30 June 2001 and should be sent to either the Ontario Securities Commission or the Commission des valuers mobiliиres du Quйbec.