Canada’s Current Accounting Standards
Canada has one of the most effective accounting systems in the world. The country has continuously modified its GAAP to ensure efficiency within all systems (Sale, 2006). Ideally, the modifications aim to identify and implement best practices in the field of accounting. Different organizations have been influenced by these accounting standards. Observably, there are professional accounting agencies and personalities constantly involved in the innovation of best practices. The Canadian government has also played a crucial role in the development and integration of basic accounting practices. Different industries are also targeted during these initiatives. Notably, there has been a critical focus on the improvement of accounting systems within small-scale enterprises.
Globalization and technological advancement have posed great challenges in the field of accounting. Despite the obvious challenges, Canada has managed to attain a remarkable step in the establishment of accounting standards. There is more emphasis on ensuring that Canada continues to enjoy the advantage in accounting and fiscal management standards (Spector, 2003). Ideally, the nation has become a center of focus. Moreover, it is also a role model to several other emergent economies around the world. With other eminent challenges in the 21st century, Canada endeavors to inculcate transformative and integral principles of accounting within its workforce.
Monitoring and evaluation practices are critical strategies in the management of accounting standards. Notably, there is a high level of compliance within most sectors in Canada. Systems are designed in an innovative manner to be transparent, dependable, and realistic. However, there are current debates as to whether Canada should continue relying on its national accounting standards (Greuning & Koen, 2001). Particularly, this challenge is imminent with an increasing focus on international accounting practices and standards. According to most professionals, the global accounting standards provide a critical springboard for effective performance within the global markets. Generally, it is one of the significant steps towards enhancing a globally competitive economy.
A harmonized international accounting system would assist Canada in several ways. For instance, such standards would ensure that all financial statements are reliable and credible. Apart from this, various beneficiaries would be able to obtain statements from diverse states. This would help to enhance internal consistency in accounting practices (Spector, 2003). The accounting standards have severe implications on different issues. It might also affect taxation, government fiscal policies, and the welfare of the general citizenry. Indicatively, the GAAP also affects economic planning of a country. Perhaps, this elucidates why Canada is keen to align its GAAP to that of an international standard.
What Constitutes the Canadian GAAP
The GAAP contains broad standards and conventions. These relate both to the general and specific accounting applications. The Canadian GAAP also has frameworks outlined to determine authorized accounting procedures. These procedures are applicable at a specific time. There are also critical pronouncements issued by different agencies. Some of these include the “accounting standards board,” (AcSB) and the “emergency issues committee,” (EIC) (Greuning & Koen, 2001). Evidently, these provisions are extremely crucial. They have great primacy in the execution of basic accounting roles and processes within Canadian society.
The Canadian GAAP offers adequate room for other organizations and business entities. Through the GAAP, they outsource or obtain guiding principles from other regulating organs. Recently, there has been an emphasis on strengthening these GAAP pronouncements to fit those within the global context. The Canadian GAAP is designed in a flexible manner. This helps institutions to adapt to the various transformations notable within different social and economic realms (Sale, 2006). The GAAP provides crucial information and protocols. These are followed during the preparation of financial statements. Therefore, the tool acts as a benchmark and reference scale for all the workers involved in financial reconciliation.
The first portion of the GAAP emphasizes the accomplishment of the basic aims of fiscal reporting. They offer important information regarding the economic resources of an organization. There are also guidelines concerning responsibilities, equity, and even net losses. The Canadian GAAP also provides information relating to the fluctuations in the performance of specific organizations. Generally, these may also include the frequency of fiscal changes. There is also information on the various qualitative features of accounting within the GAAP (Estey & Constable, 2003). These characteristics deal with issues such as understandability, reliability, and relevance. In addition, the GAAP also has financial statements. These are some of the critical information and guidelines contained within the Canadian GAAP.
Difference between US & Canada GAAP
There are differences between the US GAAP and Canada GAAP. Indicatively, there are notable disparities in the use of “derivative financial instruments.” These differences relate to the practical application of the strategy in the two countries. The disparities emanate mainly from the nature of the GAAP. Canada also treats the “deferred financing charges” in a distinct way. This is because they are regarded as long-term debts. Moreover, they are amortized with specific interest rates. Observably, the “deferred financing charges” are treated as assets in the US (Greuning & Koen, 2001). In this regard, they are amortized through the estimated life technique.
Estey, N. & Constable, M. (2003). New Standards Describe What Constitutes Gaap and Clarify “Fair Presentation in Accordance With Gaap.” Web.
Greuning, H. & Koen, M. (2001). International accounting standards: A practical guide. Washington, DC: World Bank.
Sale, J. T. (2006). Advances in international accounting. Vol. 19. Amsterdam: JAI Press.
Spector, S. (2003). Generally Accepted Accounting Principles. Web.