Understanding the difference between IFRS (International Financial Reporting Standards) and ASPE (Accounting Standards for Private Enterprise’s) is important for businesses as it can have implications.
Business in Canada are allowed to choose to follow either IFRS or ASPE. This decision will be ultimately based on whether a business is a private company or a publicly traded company. Accounting standards have been developed to ensure that companies prepare their financial statements following the same rules, that financial statements are transparent and users have confidence in the information presented.
ASPE is more suited for private companies as publicly traded companies are not permitted to use these set of standards. The reason for this is that the financial statements of private companies are generally prepared for the benefit of the owners or stakeholders of the company. They are less complicated and more cost effective for private companies. Under ASPE financial statement preparation and disclosures are less demanding compared to IFRS.
A private company can choose to follow IFRS which may be beneficial if the company is planning on going public in the future. Adopting IFRS early on while leading to higher costs will ultimately save it from having to convert its financial reporting from ASPE to IFRS. This process can be complicated and costly.
Implementation and maintenance of IFRS is more complex compared to ASPE. Publicly traded companies are required to prepare their financial statements in accordance with IFRS and cannot choose to follow ASPE. The reason for this is that IFRS principles have been developed based on the fact that the public will rely heavily on the financial statements to make informed decisions regarding the business. IFRS standards are uniform across the world which makes comparisons between companies more meaningful and beneficial for investors.
At the end of the day, the choice of IFRS vs ASPE comes down to whether a companies is private or publicly traded. A private company with no intention of going public should choose to follow ASPE.
Disclaimer: Information provided may not be complete or accurate. It should not be considered financial advice.