What is the Difference Between IFRS and Canadian GAAP?
🆚 Go to Comparative Table 🆚The main difference between IFRS (International Financial Reporting Standards) and Canadian GAAP (Canadian Generally Accepted Accounting Principles) lies in their approach and enforcement. Here are the key differences between the two:
- Approach: IFRS is principles-based, while Canadian GAAP is rules-based. This means that IFRS provides broader guidelines and leaves more room for interpretation, whereas Canadian GAAP is more detailed and prescriptive.
- Enforcement: IFRS is not mandatory for private companies in Canada, but publicly accountable enterprises are required to follow IFRS in Canada since 2011. On the other hand, private companies can choose to follow Canadian GAAP or IFRS.
- Disclosures: IFRS requires fewer disclosures than Canadian GAAP.
- Inventory Valuation Methods: IFRS allows for more flexibility in inventory valuation methods compared to Canadian GAAP.
In summary, IFRS is a principles-based, internationally recognized standard, while Canadian GAAP is a rules-based standard specific to Canada. Publicly accountable enterprises in Canada must follow IFRS, but private companies can choose to follow either Canadian GAAP or IFRS depending on their business needs.
Comparative Table: IFRS vs Canadian GAAP
Here is a table comparing the differences between IFRS and Canadian GAAP:
| Difference | IFRS | Canadian GAAP |
|---|---|---|
| Rules vs. Principles | IFRS tends to be more principles-based, requiring judgment and interpretation. | Canadian GAAP is more rules-based, with industry-specific rules and guidelines. |
| Inventory Methods | Both IFRS and Canadian GAAP allow First In, First Out (FIFO), weighted-average cost, and specific identification methods for inventory valuation. | No significant difference |
| Enforcement | IFRS is not required by law, but it is recommended. | Canadian GAAP is required for companies in Canada. |
| Source and Scope | IFRS is used worldwide and is set by the International Accounting Standards Board (IASB). | Canadian GAAP is used only in Canada and is set by the Accounting Standards Board (AcSB). |
| Disclosures | IFRS requires fewer disclosures compared to Canadian GAAP. | Canadian GAAP requires more disclosures. |
| Historical Cost of Assets | Canadian GAAP is more focused on the historical cost of assets. | IFRS allows for more flexibility in asset valuation. |
Please note that this table is not exhaustive and only includes some of the main differences between IFRS and Canadian GAAP. For a more comprehensive understanding, it is recommended to consult the full text of IFRS and Canadian GAAP standards.
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