Monday, January 16, 2012

Canadian IFRS adoption - some inconclusive evidence

What, if any, are the potential economic consequences or benefits of the Canadian IFRS adoption?

As the activities of preparing and auditing the first set of complete annual reports using international financial reporting standards (IFRS) are in full swing, it is easy to identify some costs of transitioning from Canadian GAAP to IFRS. So it is an appropriate time to ask, why are we going through this transition? Are there benefits that my company, my clients or the country as a whole might expect to realize from IFRS adoption?

Recent academic literature has examined IFRS transitions, mainly the European Union (EU) transition, which occurred in 2005, and provides evidence that some benefits have accrued to some IFRS-adopting firms. Here, these benefits are summarized, cases where the evidence to date appears to be relatively inconclusive are highlighted and some cautions about generalizing from the EU transition experience to Canada are noted.

(For more information, read the article “Inconclusive evidence” by David Godsell and Michael Welker in the January/February 2012 edition of CAmagazine online.)