Canadian GAAP and IFRS both have line items that need to be presented, but IFRS requires more disclosures, as detailed in IAS 1, paragraph 54. In general, IFRS has less specific guidance than Canadian GAAP, and therefore relies on disclosures to provide further relevant information.
• Classification of debts – IFRS is based on conditions existing on the balance sheet date, regardless of refinancing after the Balance Sheet date. Current Canadian GAAP allows for reclassification if new financing is completed before the financial statements are published. This will change with transition to IFRS, and therefore companies will need to be cognizant of this as part of the timing of their financing arrangements. Financial ratios may be adversely impacted.
• Statement of Comprehensive Income:
• Includes additional items, and IAS, paragraph 82 – provides specific guidance.
• IFRS – Single statement or 2 statements: Income Statement, or Income Statement and other components of Comprehensive Income.
• Statement of changes in Equity reconciles Opening and Closing Equity for each significant component.
• Revenue Recognition:
• Canadian GAAP requirements for revenue recognition are detailed in CICA Handbook 3400, EIC 141, and 142, 143, 144 and contain specific guidance. IAS 18 on the other hand is much shorter, but includes some examples in the Appendix. This is one of the areas where IFRS will be less specific, but will rely on disclosures to provide further details.
• Expense presentation:
• IFRS provides a choice in classification between Nature and Function, whichever provides the most relevant and reliable information, as detailed in IAS 1, paragraph 88. Canadian GAAP permits a classification that combines both Nature and Function. This will not be allowed with IFRS.
• A good example of the impact of this change is how to report depreciation. With Canadian GAAP, all depreciation could be combined on one line item as to the Nature of the expense on the Income Statement – depreciation. With IFRS however, deprecation will need to be allocated by functional area, so that depreciation relating to sales will be reported with sales expenses, administrative depreciation with administration and so forth. This will likely result in significant changes in line item reporting as Canada transitions to IFRS.
I hope this helps. Please refer to the ongoing series of IFRS blogs on the Edelkoort Smethurst Schein CPA’s LLP web-site and contact your accounting professional for further information.