Write
a brief essay highlighting the difference between IFRS and accounting standards
for private enterprises noted in this chapter, discussing the conceptual
justification for each.
There are only some
minor differences between IFRS and
ASPE with respect to the statement of cash flows. Primarily, ASPE has been written using
historical Canadian practice, and has not adopted some of the differences
required by IFRS . The following highlights the major
differences:
·
Cash
equivalents exclude all equity investments under ASPE. In contrast, IFRS
allows preferred shares that will be redeemed within three months from the time
of purchase to be included in cash equivalents.
·
Interest
and dividends received are included in operating cash flows under ASPE. IFRS
allows a choice for interest and dividends received to be either operating or
investing. Also, IFRS
requires that these amounts be disclosed separately.
·
Under
ASPE, interest and dividends paid are operating cash flows only if recognized
in net income; otherwise they are included in financing cash flows as a result
of being charged to retained earnings.
If these amounts are included in financing, then separate line
disclosure is required. Under IFRS , companies have a choice to report interest
and dividends paid as either operating or financing cash flows and these
amounts must be shown as separate line items on the statement.
·
IFRS requires that income tax
paid be disclosed separately. ASPE does
not have this requirement but requires supplemental disclosure.
·
Under
both ASPE and IFRS , the amount of
restricted cash must be disclosed. IFRS requires additional disclosure explaining the
restrictions. ASPE does not require
this, as the goal is to reduce disclosure in private enterprises’ financial
statements.
