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May 12, 2010

Simplified standards don’t limit lending: KPMG

Canada’s new accounting standards for private enterprises (ASPE) will not limit a company’s ability to raise capital or debt as long as they provide additional disclosures when required, new research has found.

The Accounting Standards Board of Canada finalised the ASPE in September last year. The ASPE provide private Canadian companies with an alternative to IFRS, which Canada is adopting as of 1 January 2011.

The ASPE has significantly fewer disclosures than existing Canadian GAAP and IFRS. A 2009 study, conducted by Financial Executives International (FEI) Canada and KPMG Canada, had raised concerns that simplifying accounting standards for private enterprises (ASPE) could lead to difficulties in accessing credit.

But new follow-up research from KPMG and FEI found lenders support the reduced disclosures, as long as the preparers of financial statements exercise sound professional judgment and provide additional disclosures where circumstances warrant.

The report, The Role of Disclosures in the Financial Statements of Private Business in Accessing Credit, surveyed senior financial executives in private companies in Canada between 22 February and 17 March 2010. It also includes insights obtained at a research forum held in March.

 

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