Accountable for your promises

Article Abstract:

The Canadian Institute of Chartered Accountants' (CICA) Accounting Standards Board has released new standards for financial reporting of non-pension employee future benefits. Section 3461 of the 'CICA Handbook - Accounting' requires the accrual of the cost of employee benefits other than pensions in an entity's financial statements, effectively putting an end to the cash basis or pay-as-you-go accounting method in Canada. The new standards apply to benefits to be received by employees upon their retirement, including severance benefits, disability income benefits and compensated absences. Salaries, fringe benefits, wages, occasional sick days and vacation days are not covered by the standards, as are benefits arising from stock-based compensation schemes.

Reporting & Disclosure, Retirement Benefits, Accounting and auditing, Corporation reports, Company reports

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GAAP's standard role

Article Abstract:

The standards set by the Canadian Institute of Chartered Accountants handbook are being criticized by financial statement users because of the intensifying convolution of the interpretation of operating statements. A move to adapt standards that are similar to the US Generally Accepted Accounting Principles (GAAP) is being considered. The GAAP, which is considered more regulatory, conservative, and standardized than the Canadian model, allows accountants and auditors to exercise more judgment in making balance sheets and income statements.

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And the answer is...

Article Abstract:

Comparison of the US and Canadian Generally Accepted Accounting Principles reveals differences in terms of debt/equity ratios, shareholder's equity, and long term debt. Using financial information from Air Canada further illustrates the point. Figures from 1995 to 1996 show profits to be at $101 million using US standards and $149 million using Canadian standards. Other striking differences include analysis of income tax, convertible debt securities, and retirement benefits, which account for a difference of millions of dollars.

Methods, Financial analysis, Leverage (Finance), Leverage

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