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2.4 – Accounting Standards (formerly known as GAAPs)

2.4 – Accounting Standards (formerly known as GAAPs). Guidelines established by the Accounting Standards Board (AcSB) a governing body established by the Canadian Institute of Chartered Accountants (CICA).

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2.4 – Accounting Standards (formerly known as GAAPs)

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  1. 2.4 – Accounting Standards (formerly known as GAAPs) Guidelines established by the Accounting Standards Board (AcSB) a governing body established by the Canadian Institute of Chartered Accountants (CICA). • The AcSB consults the International Accounting Standards Board (IASB) who develop the International Financial Reporting Standards (IFRS) to establish accounting regulations for Cdn companies

  2. IFRS – International Financial Reporting Standards • All publicly traded companies must now follow International Financial Reporting Standards (IFRS) • This allows international companies to have consistent financial reporting.

  3. ASPE – Accounting Standards for Private Enterprises • Private businesses that are not listed on the stock exchange must follow these guidelines • Or they can choose to implement IFRS • There are not a lot of differences between APSE & IFRS • In this course we will focus on ASPE reporting

  4. Purpose of Accounting Standards • To ensure that financial statements are consistent • To make it easier for users (like you) to read the statements and understand what is happening in the company. • To allow you to compare 2 different companies if you know that they have followed the same standards.

  5. A few Accounting Standards: • Business Entity Concept • Only those items related to the business can be included on the company’s balance sheet. Ex. The car the owner drives to work belongs to the owner; therefore, does not belong on the balance sheet.

  6. A few Accounting Standards • The Continuing Concern Concept • Assumes that a business will continue to operate unless it is known that it will not. • Ex. If a company had a bunch of business cards and stationary with the company name printed on it and it cost $500 (value on B/S) but the company was not going to exist past the December than this asset isn’t really worth $500. • *sometimes referred to as the Going Concern Concept

  7. A few Accounting Standards • Cost Principle - APSE • Requires accountants to record the value of assets at their historical cost price. • Ex. Land was purchased 20 years ago for $40,000. Today the market value of the land is $180,000. The accountant must list the land on the balance sheet at $40,000.

  8. A few Accounting Standards • The Revaluation Model (IFRS) • This allows for modification of the cost principle. • Allows accountants to change the value of a particular asset based on market conditions • Ex. A custom sports car was purchased for $21,850 and the market value has risen to $30,000, the business could increase the value of the asset.

  9. IFRS & Balance Sheet Format • Currently on the right-hand side of the balance sheet, the liabilities are listed first and the equity second. • If a company has moved to IFRS, than the Balance Sheet could be rearranged to list equity first and the long-term liabilities second and then the current liabilities. • Instead of Balance Sheet, it is now called Statement of Financial Position.

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