IFRS: Canada’s Decision Harvard Case Solution & Analysis

IFRS: Canada's Decision Case Solution 

Introduction

Canadian accounting standard setting board, AcSB,was considering major changes in their accounting standards. The chairman of the AcSB Board, Paul Cherry,explained the situation as a serious issue for the Canadian businesses. Many international businesses were intimidating AcSB to implement the US GAAP accounting standards in the country while Canada’s accounting standards were itself well developed however, they were based on the principles approach while the US GAAP required the rule based approach, therefore multinational companies faced increased costs of compliance with both standards and wanted Canada to adopt the US GAAP. Although US GAAP was widely used in Canada however, adopting US GAAP completely was not an easy task for the board as the US GAAP required formal procedures to be developed and the existence of several factors that allowed the effective implementation of the standards, which were not currently available in Canada. Therefore, the board wanted to develop standards that could be an accepted brand and multi nationals would not have issues in compliance with them. It was considered important by the board that the standards should be implemented in such a way that not only companies but the whole accounting profession can accept this major change. One of the main points at which both the standards were having conflicts was the share based payments, as US GAAP required a disclosure for this transaction and no other treatment was required, whereas the Canadian Standards required this transaction to be treated as an expense and the AcSB members were not ready to allow for disclosure only.

Problem Statement

The future of the accounting system that would be use in the country was expected to change drastically, therefore the AcSB was considering the route that should be taken to achieve the optimum results. The options to standard setters were to either continue with what they were doing and therefore ending up adopting the US GAAP as they were very popular amongst the international businesses of the country or the other option was to transfer to the International Financial Reporting Standards. There are many implications of adopting any set of standards and the board needs to consider what was right for the business as well as the profession.The board was faced with considerable issues in making a clear decision regarding the adoption of standards of accounting and reporting in the country. Moreover, these problems have been discussed in the case to be analyzed about how they could be reduced.

Analysis

In order to assess whether the transition from Canadian Accounting Standards to International Accounting Standards performed by the country is based on the decision of AcSB, we can compare the two accounting standards or we could also analyze the approaches upon which these standards are prepared. Moreover, we could perform an analysis to identify the issue that might have affected the standard setting board to converge to IFRS. ....................

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